Carolyn--- I've gone to Our Store. Be back soon. Love, Scott
We called Home Depot (ticker: HD) "our store" because we spent a lot of time there back in 1990. We're house freaks. Wherever we go, we imagine living there, owning a house or condo. And we like to remodel houses. In the last 16 years we've done major work on three houses in Dallas and two houses in Santa Fe.
But I have a confession to make.
I still love my wife. But we don't shop much at Home Depot anymore. Indeed, we generally try to avoid it and grieve for the loss.
We're not alone. Last month Home Depot announced a whopping 28 percent decline in earnings for the fourth quarter. Even more striking, same-store sales were down 6.6 percent from the previous year. This had never happened before, not in all 28 years of company history. Once a growth darling, "the new Wal-Mart," and a stock that sold at twice the market multiple, Home Depot is now widely discussed as a potential private equity buyout candidate because it earns 22 percent on shareholder equity and has lots of assets to hock. Today it sells at a below-market multiple of 14.4 and offers an above-average dividend yield of 2.2 percent.
Much of the recent disappointment in the stock is due to the slowdown in housing and the reassessment many are making of homes as an investment. With home resale prices flat to declining, many homeowners are reconsidering the kind of home improvement projects that make for multiple visits and big spending. Home Depot's rival Lowe's (ticker: LOW) reported an earnings drop of 12 percent for the fourth quarter.
Some of the less recent disappointment in the stock is due to the egregious compensation of its former CEO and his high-handed treatment of shareholders.
But I'd like to suggest a much bigger reason that Home Depot has become a troubled and unloved company. I call it time abuse.
Home Depot is a consistent abuser of its customers' time. Let me explain.
Back in 1990, when my wife and I loved Home Depot, the store was staffed with well-trained, knowledgeable, and helpful people. If you had a question--- even a silly one--- it was easy to find someone who knew the answer. Home Depot had an amazing inventory. It also had a staff that helped you access that inventory and make choices. While it didn't have employees waiting at the door, as high service stores like Elliot's in Dallas and Big Jo in Santa Fe do, you could make a purchase quickly at Home Depot.
But that was then.
Today, it is difficult to find a staff person at a Home Depot. Personally, I've left the store empty-handed after a hopeless wait. During one long wait shortly before Christmas I commented to a worker that the store was so busy they must be getting lots of overtime.
"No way," the employee said.
My wife has gotten so frustrated waiting--- while trying to buy carpeting for an entire house--- that she has taken her business elsewhere.
And I know we're not alone. One of my friends started to seethe when I mentioned Home Depot. He'll buy things almost anywhere, except Home Depot. He hates having his time abused.
And that's what Home Depot does by short-staffing. It abuses our time. We can't get the help we need and we can't make our purchases quickly. The result is that a once iconic, wonderfully American store has become an aggravation rather than a blessing. (Home Depot, emailed for comment, didn't respond.)
Home Depot is not unique. Many supermarket chains and some of the large department stores appear to have decided that short-staffing is the way to meet their profit plan, hoping to drop more dollars to their bottom line by stealing our time at the checkout counter or elsewhere.
My bet is that a few years from now someone will give this a clever name, like "millennial myopia" or some other phrase suitable for the Harvard Business Review. Until then, the investment bankers will be working on different ways to solve the share price problem with financial moves.
Let's hope the board of directors at HD takes the time to learn what's obvious to ordinary people who do a lot for themselves and need to make good use of their time.
The solution is to add people to the payroll rather than reducing both.
On the web:
Sunday, October 7, 1990: Home Depot as America
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