Original Story: Forbes.com
Handyman haven Home Depot HD announced Thursday that longtime CEO Frank Blake will step down on November 1. He will be replaced by Craig Menear, the company’s current U.S. retail president.
In his current role Menear oversees the company’s supply chain network, global sourcing and vendor management, as well as its marketing and digital business. Since joining Home Depot in 1997 Menear has served in various high level merchandising roles including, most recently, executive vice president of merchandising.
In a statement announcing the transition Blake noted, “Craig has taken on increasing leadership responsibility over the last several years and has excelled in all his role. As a long-time Home Depot veteran, Craig lives our values and embodies our culture. He’ll do an outstanding job leading our company in the years ahead.”
Blake, who has been chairman and CEO since 2007, will stay on as chairman of the board. Menear will immediately join the board of directors.
Shares of Home Depot ticked down slightly in after hours trading following the news, yet the small downward momentum comes after a trading day where the the stock came within a penny of its $91.81 52-week high. The transition also does not come as a big surprise to those who watch Home Depot closely. Blake, 65, was expected to retire soon and Menear led much of the company’s most recent earnings call, which took place just two days ago.
Blake is going out on a high note. In the second quarter Home Depot handily beat Wall Street expectations and even raised its full-year earnings guidance. FORBES’ Maggie McGrath wrote Tuesday,
Home Depot reported $23.8 billion in second quarter revenue, a 5.7% increase over the year-ago quarter and a figure that cleared the $23.5 billion Wall Street consensus. Comparable store sales for the quarter increased 5.8% worldwide, and within the U.S. same store sales grew 6.4%. Customer transactions increased 4.2%, while average ticket size grew 1.8% to $58.43.
The company’s net income came in at $2.1 billion, or $1.52 in earnings per share, a figure that beats the analyst consensus by 8 cents per share and marks a 22.6% improvement over the earnings per share reported this time last year.”
This also turned out to be a favorable comparison to rival Lowe’s, which reported its second quarter earnings Wednesday, a fact that must be sweet for Blake.
Under Blake’s predecessor, Robert Nardelli, Lowe’s share price lapped Home Depot’s. At this time last year Paula Rosenblum, a FORBES contributor, wrote of Home Depot under Nardelli, “A lot of opportunity was missed. Earnings were adequate, but they were riding on the back of cost-cutting, not sales improvements.” Rosenblum continued,
Today that’s certainly not the case. In fact, at least one analyst at the Smead Value Fund gave Home Depot a slightly stronger buy rating than its rival, although both stocks are expected to perform well as the housing market continues to improve.
This begs the question: What has changed under the leadership of Frank Blake? What is Home Depot doing right? The answers can be found not today, but in the doldrums of the Great Recession, which Mr. Blake’s team took as an opportunity to right a very shaky ship. Changes were steady, yet sweeping, and included marketing, technologies, stores, and human resource allocation.”
Currently, Home Depot shares are up 127% since the start of 2007, the year Blake took the reigns. Shares of Lowe’s are up just 69% over the same period.
Showing posts with label Home Depot. Show all posts
Showing posts with label Home Depot. Show all posts
Friday, September 5, 2014
Wednesday, September 8, 2010
Home Depot, Dell Drive Issuance to 7-Month High: Credit Markets
Bloomberg
Home Depot Inc., Dell Inc. and Burlington Northern Santa Fe LLC led the busiest day for U.S. corporate bond issuance in more than seven months as investment- grade borrowing costs hover near the lowest on record.
Companies sold $15.4 billion of the debt as yields fell to 3.83 percent yesterday and reached as low as 3.74 percent on Aug. 24, according to Bank of America Merrill Lynch’s U.S. Corporate Master index. In Europe, banks sold 8.5 billion euros ($10.8 billion) of bonds as lenders rushed to refinance almost a quarter-trillion euros of debt due this year.
U.S. investment-grade sales soared following signs last week the economy won’t slip back into recession. Private payrolls climbed more than economists expected and pending home sales rose from a record low, even as the unemployment rate rose to 9.6 percent last month. Treasury yields are rising from this year’s low on Aug. 25.
Yields on investment-grade debt are “probably as low as they’re going to get,” said Anthony Valeri, a market strategist in San Diego at LPL Financial Corp., which oversees about $277 billion of assets. “This level is an ideal trade-off of investors recognizing the fundamentals of a slow-growth economy are OK for corporate bonds.”
Home Depot, the largest-home improvement retailer, sold $1 billion of debt due in 10 and 30 years in its first offering since December 2006, according to data compiled by Bloomberg.
Dell, Burlington
Round Rock, Texas-based Dell, the third-biggest personal computer maker after Hewlett-Packard Co. and Acer Inc., raised $1.5 billion in a three-part sale.
Burlington Northern, the Fort Worth, Texas-based railroad company acquired this year by Warren Buffett’s Berkshire Hathaway Inc., sold $750 million of debt in a two-part offering, according to data compiled by Bloomberg.
Issuance may set a record for the week and month, said Tom Murphy, a money manager who helps oversee more than $25 billion of investment-grade credit at Columbia Management in Minneapolis.
“You’re seeing people definitely want to be invested in the market and definitely put money to work,” Murphy said. “The first week after Labor Day is considered the beginning of the push toward the end of the year.”
Elsewhere in credit markets, the extra yield investors demand to own company debt instead of similar-maturity government bonds was unchanged at 178 basis points, or 1.78 percentage point, according to Bank of America Merrill Lynch’s Global Broad Market Corporate index. Yields averaged 3.516 percent, down from 3.585 percent.
Bondholder Protection
The cost of protecting corporate bonds in the U.S. from default rose after falling for four straight days.
The Markit CDX North America Investment Grade Index Series 14 increased 3.3 basis points, the most since Aug. 11, to a mid- price of 107 basis points as of 5:37 p.m. in New York, according to Markit Group Ltd. In London, the Markit iTraxx Europe Index of 125 companies with investment-grade ratings rose 4 basis points to a mid-price of 109.5, also the first increase after four trading days of declines.
The Markit iTraxx Asia index of 50 investment-grade borrowers outside Japan rose 3 basis points to 125 basis points as of 8:40 a.m. in Singapore, Royal Bank of Scotland Group Plc prices show.
The indexes typically rise as investor confidence deteriorates and fall as it improves. Credit swaps pay the buyer face value if a borrower fails to meet its obligations, less the value of the defaulted debt. A basis point equals $1,000 annually on a contract protecting $10 million of investments.
Most-Traded Bonds
Bonds from Atlanta-based Home Depot were the most actively traded U.S. corporate securities by dealers, with 182 trades of $1 million or more. Ranked second was New York-based Goldman Sachs Group Inc., the most profitable firm in Wall Street history, with 79 trades.
Dearborn, Michigan-based Ford Motor Co., with 35 trades, was the most active in junk bonds, which are rated below Baa3 by Moody’s Investors Service and lower than BBB- by Standard & Poor’s.
The Canada Pension Plan Investment Board and Onex Corp. plan to raise $1.6 billion of leveraged loans to help fund their buyout of Tomkins Plc. Potential lenders were invited to a meeting today in New York to discuss a six-year $1 billion term loan, according to two people familiar with the situation who declined to be identified because the matter is private.
The rest of the financing will be raised through a $300 million term loan and a $300 million revolving credit line, both maturing in five years, one of the people said.
Loan Prices
Leveraged loan prices fell, with the S&P/LSTA US Leveraged Loan 100 Index declining 0.14 cent to 89.43 cents on the dollar, the first drop after three days of increases. The index, which tracks the 100 largest dollar-denominated first-lien leveraged loans, returned 4.3 percent this year.
In emerging markets, the extra yield investors demand to own company debt rather than government bonds climbed the most in a week. Spreads widened 13 basis points to 288 basis points, according to JPMorgan Chase & Co. index data.
U.S. corporate borrowers are taking advantage of yields to raise “very inexpensive” money, said Zane Brown, fixed-income strategist at Lord Abbett & Co. in Jersey City, New Jersey.
“It reflects investors’ preference for risk and companies that want to take advantage of low absolute levels on yields,” said Brown, who helps oversee $53 billion of debt.
The yield on the benchmark 10-year Treasury note was at 2.60 percent at 10:17 a.m. in Tokyo today, 18 basis points higher than this year’s low, according to data compiled by Bloomberg.
Bond Issuance
U.S. investment-grade issuance yesterday was the most since $17.6 billion on Feb. 4, Bloomberg data show. There was one sale of high-yield debt as Richardson, Texas-based MetroPCS Communications Inc. issued $1 billion of notes due in 2018. It was the third-busiest day for corporate bond issuance this year with $16.4 billion of sales.
Companies sold $10.1 billion of dollar-denominated debt on the day following the Labor Day holiday last year, and $29.7 billion of notes in that week, Bloomberg data show.
Pending sales of existing houses unexpectedly climbed in July from a record low, figures from the National Association of Realtors showed Sept. 2. The index of purchase contracts rose 5.2 percent after a revised 2.8 percent drop the prior month.
Companies in the U.S. added more jobs than economists forecast in August, Labor Department figures in Washington showed Sept. 3. Private payrolls climbed 67,000 after a revised 107,000 increase in July.
‘Stay Very Busy’
“It’s going to stay very busy as long as the markets are this receptive to new issuance,” said Jim Kochan, the chief fixed-income strategist at Wells Fargo Funds Management, which oversees $175.6 billion of debt assets. “It’s been extremely busy on a trend basis all year, as yields kept coming down.”
Commerzbank AG and UniCredit SpA led the most bank bond sales in Europe in five weeks, Bloomberg data show. The cost of insuring bank debt against default rose by the most in a month on speculation the Basel Committee on Banking Supervision will propose higher capital requirements.
France Telecom SA sold $1.39 billion of bonds in euros and dollars. The nation’s biggest phone company issued $750 million of five-year notes that were priced to yield 82 basis points more than similar-maturity Treasuries and 500 million euros of 12-year bonds priced at 75 basis points more than swaps, Bloomberg data show.
Companies sold $15.4 billion of the debt as yields fell to 3.83 percent yesterday and reached as low as 3.74 percent on Aug. 24, according to Bank of America Merrill Lynch’s U.S. Corporate Master index. In Europe, banks sold 8.5 billion euros ($10.8 billion) of bonds as lenders rushed to refinance almost a quarter-trillion euros of debt due this year.
U.S. investment-grade sales soared following signs last week the economy won’t slip back into recession. Private payrolls climbed more than economists expected and pending home sales rose from a record low, even as the unemployment rate rose to 9.6 percent last month. Treasury yields are rising from this year’s low on Aug. 25.
Yields on investment-grade debt are “probably as low as they’re going to get,” said Anthony Valeri, a market strategist in San Diego at LPL Financial Corp., which oversees about $277 billion of assets. “This level is an ideal trade-off of investors recognizing the fundamentals of a slow-growth economy are OK for corporate bonds.”
Home Depot, the largest-home improvement retailer, sold $1 billion of debt due in 10 and 30 years in its first offering since December 2006, according to data compiled by Bloomberg.
Dell, Burlington
Round Rock, Texas-based Dell, the third-biggest personal computer maker after Hewlett-Packard Co. and Acer Inc., raised $1.5 billion in a three-part sale.
Burlington Northern, the Fort Worth, Texas-based railroad company acquired this year by Warren Buffett’s Berkshire Hathaway Inc., sold $750 million of debt in a two-part offering, according to data compiled by Bloomberg.
Issuance may set a record for the week and month, said Tom Murphy, a money manager who helps oversee more than $25 billion of investment-grade credit at Columbia Management in Minneapolis.
“You’re seeing people definitely want to be invested in the market and definitely put money to work,” Murphy said. “The first week after Labor Day is considered the beginning of the push toward the end of the year.”
Elsewhere in credit markets, the extra yield investors demand to own company debt instead of similar-maturity government bonds was unchanged at 178 basis points, or 1.78 percentage point, according to Bank of America Merrill Lynch’s Global Broad Market Corporate index. Yields averaged 3.516 percent, down from 3.585 percent.
Bondholder Protection
The cost of protecting corporate bonds in the U.S. from default rose after falling for four straight days.
The Markit CDX North America Investment Grade Index Series 14 increased 3.3 basis points, the most since Aug. 11, to a mid- price of 107 basis points as of 5:37 p.m. in New York, according to Markit Group Ltd. In London, the Markit iTraxx Europe Index of 125 companies with investment-grade ratings rose 4 basis points to a mid-price of 109.5, also the first increase after four trading days of declines.
The Markit iTraxx Asia index of 50 investment-grade borrowers outside Japan rose 3 basis points to 125 basis points as of 8:40 a.m. in Singapore, Royal Bank of Scotland Group Plc prices show.
The indexes typically rise as investor confidence deteriorates and fall as it improves. Credit swaps pay the buyer face value if a borrower fails to meet its obligations, less the value of the defaulted debt. A basis point equals $1,000 annually on a contract protecting $10 million of investments.
Most-Traded Bonds
Bonds from Atlanta-based Home Depot were the most actively traded U.S. corporate securities by dealers, with 182 trades of $1 million or more. Ranked second was New York-based Goldman Sachs Group Inc., the most profitable firm in Wall Street history, with 79 trades.
Dearborn, Michigan-based Ford Motor Co., with 35 trades, was the most active in junk bonds, which are rated below Baa3 by Moody’s Investors Service and lower than BBB- by Standard & Poor’s.
The Canada Pension Plan Investment Board and Onex Corp. plan to raise $1.6 billion of leveraged loans to help fund their buyout of Tomkins Plc. Potential lenders were invited to a meeting today in New York to discuss a six-year $1 billion term loan, according to two people familiar with the situation who declined to be identified because the matter is private.
The rest of the financing will be raised through a $300 million term loan and a $300 million revolving credit line, both maturing in five years, one of the people said.
Loan Prices
Leveraged loan prices fell, with the S&P/LSTA US Leveraged Loan 100 Index declining 0.14 cent to 89.43 cents on the dollar, the first drop after three days of increases. The index, which tracks the 100 largest dollar-denominated first-lien leveraged loans, returned 4.3 percent this year.
In emerging markets, the extra yield investors demand to own company debt rather than government bonds climbed the most in a week. Spreads widened 13 basis points to 288 basis points, according to JPMorgan Chase & Co. index data.
U.S. corporate borrowers are taking advantage of yields to raise “very inexpensive” money, said Zane Brown, fixed-income strategist at Lord Abbett & Co. in Jersey City, New Jersey.
“It reflects investors’ preference for risk and companies that want to take advantage of low absolute levels on yields,” said Brown, who helps oversee $53 billion of debt.
The yield on the benchmark 10-year Treasury note was at 2.60 percent at 10:17 a.m. in Tokyo today, 18 basis points higher than this year’s low, according to data compiled by Bloomberg.
Bond Issuance
U.S. investment-grade issuance yesterday was the most since $17.6 billion on Feb. 4, Bloomberg data show. There was one sale of high-yield debt as Richardson, Texas-based MetroPCS Communications Inc. issued $1 billion of notes due in 2018. It was the third-busiest day for corporate bond issuance this year with $16.4 billion of sales.
Companies sold $10.1 billion of dollar-denominated debt on the day following the Labor Day holiday last year, and $29.7 billion of notes in that week, Bloomberg data show.
Pending sales of existing houses unexpectedly climbed in July from a record low, figures from the National Association of Realtors showed Sept. 2. The index of purchase contracts rose 5.2 percent after a revised 2.8 percent drop the prior month.
Companies in the U.S. added more jobs than economists forecast in August, Labor Department figures in Washington showed Sept. 3. Private payrolls climbed 67,000 after a revised 107,000 increase in July.
‘Stay Very Busy’
“It’s going to stay very busy as long as the markets are this receptive to new issuance,” said Jim Kochan, the chief fixed-income strategist at Wells Fargo Funds Management, which oversees $175.6 billion of debt assets. “It’s been extremely busy on a trend basis all year, as yields kept coming down.”
Commerzbank AG and UniCredit SpA led the most bank bond sales in Europe in five weeks, Bloomberg data show. The cost of insuring bank debt against default rose by the most in a month on speculation the Basel Committee on Banking Supervision will propose higher capital requirements.
France Telecom SA sold $1.39 billion of bonds in euros and dollars. The nation’s biggest phone company issued $750 million of five-year notes that were priced to yield 82 basis points more than similar-maturity Treasuries and 500 million euros of 12-year bonds priced at 75 basis points more than swaps, Bloomberg data show.
Tuesday, November 17, 2009
Lowe's 30% Profit Drop Still Better Than Expected, Outlook Optimistic
NY Times
The Lowe’s Companies, the second-largest home improvement chain, posted a 30 percent drop in quarterly profit on Monday as consumers put off big renovations.
Lowe’s, like its bigger rival, Home Depot, has suffered badly in the housing slump. It has also taken longer to put in place cost controls to weather the downturn.
Robert A. Niblock, Lowe’s chief executive, said he expected the housing market to start to recover by the middle of 2010, though the company has begun to see improvements in some of the hardest-hit regions, like California and Florida.
The company’s shares closed down 11 cents on Monday, while Home Depot’s rose 1.1 percent. Home Depot is expected to report earnings on Tuesday.
Sales in the quarter fell 3 percent, to $11.37 billion, slightly above expectations of $11.28 billion. Same-store sales, or sales at stores open for at least a year, fell 7.5 percent.
Lowe’s margins rose and the retailer forecast that its operating margin would increase 0.1 percent in the final quarter, mitigating the chain’s larger-than-expected quarterly losses.
Lowe’s also took an optimistic view of the fourth quarter and forecast that profits would range from 9 to 13 cents a share, which could beat analysts’ expectations of 10 cents a share.
Lowe’s said it expected total sales in the last quarter to be flat, while same-store sales would fall 2 to 6 percent.
It plans to open 13 new stores in the fourth quarter. Lowe’s opened 12 stores and closed one in the third quarter.
Lowe’s, like its bigger rival, Home Depot, has suffered badly in the housing slump. It has also taken longer to put in place cost controls to weather the downturn.
Robert A. Niblock, Lowe’s chief executive, said he expected the housing market to start to recover by the middle of 2010, though the company has begun to see improvements in some of the hardest-hit regions, like California and Florida.
The company’s shares closed down 11 cents on Monday, while Home Depot’s rose 1.1 percent. Home Depot is expected to report earnings on Tuesday.
Sales in the quarter fell 3 percent, to $11.37 billion, slightly above expectations of $11.28 billion. Same-store sales, or sales at stores open for at least a year, fell 7.5 percent.
Lowe’s margins rose and the retailer forecast that its operating margin would increase 0.1 percent in the final quarter, mitigating the chain’s larger-than-expected quarterly losses.
Lowe’s also took an optimistic view of the fourth quarter and forecast that profits would range from 9 to 13 cents a share, which could beat analysts’ expectations of 10 cents a share.
Lowe’s said it expected total sales in the last quarter to be flat, while same-store sales would fall 2 to 6 percent.
It plans to open 13 new stores in the fourth quarter. Lowe’s opened 12 stores and closed one in the third quarter.
Monday, October 13, 2008
Home Depot Learns to Go Local
Uniform Approach Didn't Cut It; Unsold Mowers in Arizona, Too Few Power Tools Out WestShortly after taking command of Home Depot Inc. in early 2007, Frank Blake found a pyramid of riding lawn mowers outside a store in Arizona, where lush lawns are uncommon. It turned out the store had sold only one such mower in two years. Then, he learned that the retailer was chronically short of Makita power tools on the West Coast, where they sell particularly well.
Mr. Blake ordered changes in Home Depot's purchasing system, which had favored national uniformity at the expense of local customer preferences. He got a glimpse of the results on a recent trip to Detroit, where stores in some neighborhoods favored charcoal barbecue grills, while others featured gas grills.
The shift in Home Depot's buying patterns highlights a tricky problem for national retailers: balancing local demand with national efficiency. In Home Depot's case, the new, more targeted buying has helped lower merchandise costs by reducing unsold goods.
"A lot of retailers go through this shift from localization to centralization as they grow bigger," said Stephen Hoch, a marketing professor at the University of Pennsylvania's Wharton School. But some retailers, such as Home Depot, can take it too far, he added.
When Safeway Inc. in 2001 bought Genuardi's, a small Philadelphia-area supermarket chain, it dropped several local and regional products in favor of national brands. Customers revolted and sales dropped for three years before recovering, says Burt Flickinger, managing director of Strategic Marketing Group, a consulting company.
Safeway spokeswoman Teena Massingil says some early changes "were not well received, but adjustments were made that went over well." She says Safeway revamped its organization to improve communication with stores and maintains a database to tailor offerings "on a store-by-store basis."
J.C. Penney Co., meantime, says centralized product planning helped lead to its upturn in recent years. In 2000, Penney managers thought they were losing sales to rival Kohl's because they had too many offerings, as each store bought its own merchandise. Penney consolidated its buying operations, which allowed it to bring more fashionable merchandise to more stores, and at lower prices for shoppers. Sales and profit rose, and Penney began opening new stores after years of retrenchment.
Wal-Mart Stores Inc., too, has struggled to find the right mix. Three years ago, Wal-Mart pushed into higher-priced, more fashionable apparel to appeal to trendier and higher-income shoppers. It initially stocked its cutting-edge line, called Metro 7, at 500 mostly urban stores, where it sold well. But when Wal-Mart brought the line to an additional 1,000 stores, there weren't enough shoppers interested in skinny jeans and leopard-print tank tops. Inventory piled up and earnings sagged.
Fixing such problems isn't easy or cheap. In Wal-Mart's case, it created a group of 350 people around the country to better respond to local preferences. Wal-Mart also hired experts to produce more detailed demographic information about each store's customer base.
Home Depot's inventory problems stemmed from a 2001 decision by then-CEO Robert Nardelli to consolidate nine regional purchasing offices into a centralized buying operation at its Atlanta headquarters. The move saved money by leveraging buying power and simplifying life for suppliers. But managers found they couldn't tailor merchandise for specific markets. Home Depot lost the money it saved through centralized ordering by not having the right products in the right quantities in the right stores, said Craig Menear, executive vice president of merchandising.
Mr. Blake resolved to address the issue after replacing Mr. Nardelli last year. Executives toyed with deploying expensive software to better manage inventory, but the project moved too slowly, and Home Depot was losing sales to rival Lowe's Cos. Lowe's always has had centralized buying except for plants, which vary by climate. But it tailors local product assortments according to market surveys, says a spokeswoman.
So Home Depot executives built their own system to analyze demographic information and customer preferences. Then, the company applied the data to its huge inventory. Managers examined where higher-priced and lower-priced offerings sell best. They also looked more closely on regional preferences: Aluminum windows sell better in the South, wooden ones in the Northeast. The demographic and sales information helped managers sort stores into 30 "clusters" with similar attributes.
For purchasing, Home Depot built a hybrid system. It recreated a regional merchandise team scattered around the country in about 10 cities, though the team travels as well. The team helps the chain's buyers, still located in Atlanta, choose suppliers and products.
Home Depot said it can't yet specify the impact on its bottom line. But gross margin -- the percentage of sales after paying for merchandise -- has risen in each of the past three quarters compared with the year-ago periods. That is a rare bright spot for Home Depot, whose sales and profit have slid precipitously due to the housing slowdown. The company says the more localized buying strategy seems to be boosting sales of power tools and seasonal items. "It's great to see change at work," said Mr. Menear.
By: Ann Zimmerman
Wall Street Journal; October 7, 2008
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