Home Depot Setting Stores for Renewed Sales Growth

In its last quarterly conference call, Home Depot struck a relatively pessimistic tone, with CEO Frank Blake saying that, even though 21 out of the company’s top 40 markets recorded a lower rate of comparable store sales decline, “Getting to less bad is not the same as getting to recovery.”

Blake still isn’t singing Happy Days are Here Again, but he and Home Depot’s management seemed a bit more positive at its analyst meeting this week, declaring that the end of recessionary decline might be at hand. Evidence that he truly believes this emerges from the strategy management outlined to improve merchandising in preparation for the possibility of sales growth.

Craig Menear, Home Depot’s senior vice president of merchandising, has lead efforts by concentrating on simplifying product presentation and pricing. He and his merchandising team have made a priority of providing the customer with a simpler, more coherent shopping experience, reducing individual items and ensuring product lines match local needs.

Home Depot already is enjoying positive results efforts as their efforts proceed, Blake said:

We’re seeing significant success from our new walk behind lawnmower assortment to our flooring assortment and simplified installation program. The launch of our new lower price campaign has contributed to the improved customer transactions we’ve seen. I think it has made the shopping experience with the Home Depot better by removing confusing and sometimes frustrating promotions. We know we have to do better in providing our customers an easy shopping experience.

Of course, shopping at Home Depot can be an intimidating proposition, often the modern equivalent of finding a needle in a haystack, or, in this case, a nail amid a metal-rack maze the size of a football field. Equally, the company’s web site has been difficult to navigate and coordinate with the offering in store. Blake said the company is out to fix that as well, noting, “We have a specific project team focused on both short-term improvements to the site and longer-term changes.”

Finally, Home Depot is determined to more effectively comprehend and address customer needs at the store level. “We’ve been working on a much deeper understanding of the customers, identifying their needs and providing solutions.” Blake said. “The goal here is obviously building customer loyalty.”

Menear said the company was analyzing customer data from stores based on a segmentation initially splitting professional from do-it-yourself customers, groups further divided into three and five sub segments respectively that it can address effectively based on factors such as when they buy and what departments they frequent.

Home Depot is going from a complicated promotional program to a strategy that emphasizes consistent low prices it will communicate to customers so they understand the value available. Stores will concentrate on a presentation of the number one and two brands preferred by professional customers in tool categories to address their needs and give DIY shoppers more confidence in the products. The company is refocusing the web site around those key brands. Also, Menear said, it will simplify the purchasing process by, in one example, eliminating delivery rebates and going to free delivery, adding:

The results from this multi-year effort will be all about driving sales margin and share productivity. Increasing sales from $275 a square foot to closer to $350 a square foot is part of our long-term operating target. We’ve also set gross margin expansion targets of approximately 120 basis points.