March 8, 2007
Is Home Depot shafting shoppers?
By cutting back on employees, the home-improvement retailer is putting
the screws to the people it needs most: its customers.
By Scott Burns
Sixteen years ago, I sent my wife a love note. It went like this:
Carolyn: I've gone to Our Store. Be back soon. Love, Scott.
We called Home Depot "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 a condo. We like to remodel houses. In the
past 16 years we've done major work on three houses in Dallas and two
houses in Santa Fe, N.M.
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%
decline in earnings for the fourth quarter. Even more striking, same-
store sales were down 6.6% 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 (WMT, news, msgs)" 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% 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%.
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 rival Lowe's reported an earnings drop of 12% for the
Some of the less recent disappointment in Home Depot shares is due to
the egregious compensation of its former CEO and his high-handed
treatment of shareholders.
Consistent abuser of customers' time.
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
Back in 1990, when my wife and I loved Home Depot, the stores were
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.
Though it didn't have employees waiting at the door, as do high-
service stores such as Elliot's in Dallas and Big Jo in Santa Fe, 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
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.
Add people to the payroll
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 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 plans, hoping to drop more dollars to
their bottom lines by stealing our time at the checkout counter or
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
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.