Despite a year of retooling its business model by going back to retail basics, Home Depot in 2007 suffered its first-ever decline in annual sales.
In a quarterly earnings report Tuesday, Home Depot said annual sales dipped 2.1 percent, from $79 billion to $77.3 billion. Those results included a 53rd week. Excluding that week, sales for the year declined 3.5 percent, to $76.2 billion. Comparable store sales -- which excludes revenue from new stores opened during the year -- declined 6.7 percent.
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Atlanta-based Home Depot, the nation's largest home improvement retailer, also missed earnings estimates by three pennies for the fourth quarter of 2007.
Analysts, on average, estimated Home Depot would earn 43 cents a share on sales of $18 billion, according to Thomson Financial.
Instead, the company earned 40 cents per share, on sales of $17.7 billion.
Despite the shakier results, the company still remained profitable, with $671 million net earnings for the quarter, down 27.5 percent from a year earlier, and $4.4 billion net earnings for the year, down 23.7 percent from 2006.
"I believe we'll look back on 2007 as one of the most difficult years ever for The Home Depot financially," said Frank Blake, chairman and CEO in a call to analysts.
But he emphasized the company will stay the course, by focusing solely on how to improve the retail business.
"We are proud of what we have accomplished but realistic about all the work we have left to do," he told analysts. "We are still too often perceived as lagging in customer service. And we know that in a down market, we have to work all the harder to earn our customers' confidence."
However, he warned Wall Street that 2008 will be "challenging" for the home improvement industry, as there is a substantial inventory of unsold homes; continued pressure on housing prices; uncertainties around credit availabilityand overall concerns about the economy.
For 2008, he said the company is forecasting a 4 to 5 percent decline in sales. Finally, the company will open 55 stores in 2008, of which only 35 will be in the United States.
In 2007, Home Depot opened 100 stores worldwide.
There also will be some changes for consumers.
Home Depot plans to stop selling pet products and Halloween decorations.
But the retailer plans to add some new products, such as a line of Freshaire paint that is Green Guard certified, as it is "odor free" and has no volatile organic compounds.
New lines of affordable patio sets, starting at $399 for rustproof metal frames, will also come to stores.
And as the credit crunch impacts the profitability of the Home Depot's branded credit cards, CFO Carol Tomé said there will be fewer credit promotion days in 2008.

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Comments
By Bill
Feb 27, 2008 12:21 AM | Link to this
Remember "Builders Square" they didn't make it because the tried to be everything to everybody. The orig. HD in Doraville had building supplies, tools and knowledgeable skilled tradesmen who were getting rich working at HD. HD's business model now closely resembles Builders Square(they failed). A mix of building supplies/HH Gregg/Outdoor Furniture/Party City/Walmart Garden Center/Wolfman Furniture. All being sold by unmotivated teenagers. They're doomed and someone will come along when they start closing locations and do it exactly how they did in the beginning in their own stores and be successful again. They have lost Their direction.
By Carlos
Feb 26, 2008 7:38 PM | Link to this
Ever since the greedy management took all of the big bonuses and the fat cat got the huge exit bonus I, nor my family have committed to never going inside of a HD.
By Pat
Feb 26, 2008 6:54 PM | Link to this
They make it impossible for me to shop there. Employees seem to hide when they see a customer coming! I try to shop there because it's close, but if I need any help or advice with my purchase I must go to Lowes.
By TERRI
Feb 26, 2008 6:24 PM | Link to this
Well THD earn $671 miilion profit, what else do they want. They could spend more money on the wages of the employees than just put the money in the bank or CEO's pocket. They furthmore can utilize the money and remove all those anti-American spanish signs as well. If the people cannot read English, I hope they did not drive to Home Depote. And if they drove to Home Depote then they do not need those spanish signs at the HD, those signs are a BIG EYE SORE!!!!!!
HD will most likey insource illiegals immigrants in order to boost there profits, they already have signs that implicate such practice and they are not in English!!!
Lastly why they complain about $671 million in profit, I wish I own a business and it earn a $671 Million profit. They made this profit because they made it on the poverty level salaries that they pay their staff. You are right that they need to pay more even for people who work in trades such as electrican, plumbing etc.
Thay also have such high profits because they outsource their buying of products from China etc and not promoting American manufacturing jobs. Since they cause manufacturing to go offshore they are now reaping of what they have sown, lower our standard of living so does or spending.
By Karen
Feb 26, 2008 4:07 PM | Link to this
Home Depot needs to train their employees about the products and teach them customer service skills. Every time I go into a Home Depot, no one will help me so I end up going to Lowe's, getting help and making my purchase.
By rid0617
Feb 26, 2008 1:15 PM | Link to this
I don't want to hear anything about labor costs until they do something about the CEO millions of dollars a year along with the millions of dollar golden parachute they get just for leaving. A lot of customer service could have been paid for what those folks get. In the meantime I still refuse to shop there.
By Sharon
Feb 26, 2008 12:35 PM | Link to this
Home Depot has declined in every way over the last decade. Customer service is a joke and the way they write out the staffing schedules is from the dark ages. There are times when there is only one person working in Inside Garden because HD doesn't think they need to staff that department in the winter mos. Problem is, Inside Garden is where all the seasonal stuff is merchandised. That's also when all the re-sets happen for the holiday's and one person cannot physically help everyone. During active spring and fall months, the staff isn't increased more than one part time person. Topping off the decline is also the fact that HD got rid of experienced staff like plumbers, electricians, garden specialists, etc to hire cheap workers without any knowlege of the products sold. The new workers cannot even answer a simple question related to the area I am shopping in. It is so sad to see such a Giant in the industry failing. The economy isn't the only thing that has ruined Home Depot. The management hasn't thought of the customer or staff for over eight years.
By Margaret Aurand
Feb 26, 2008 11:38 AM | Link to this
When I shop at Home Depot, I find kids, who, when I say that they are out of something I wanted to buy and they might pass that along to management, say "I don't care about this place, they don't pay nuthin," and "men" who flee when they see that an old lady who has bought 10 bags of sand needs to load her car. Those are the people who need to go down the road.
By dave
Feb 26, 2008 11:33 AM | Link to this
Don,
Sure.. labor costs the company but getting rid of smart talented people is not the answer. That in turn does not help your company. It might give wall street a smile but not your customers in the long run!!
By Don
Feb 26, 2008 11:24 AM | Link to this
Uh... ok Ed. Spoken just like someone who doesn't know anything about business. Labor costs are almost always the highest expense by far in a company. Home Depot is no different.
If you were looking to trim expenses from your personal budget if your income fell would you not look to the single largest expense you have first and see if you could cut from it? No need to answer of course.
Try starting your own business and see how life really works. Its not as easy to make payroll for "security minded people" every week like you may think. Its a little stressful. Even for larger companyies since the employees are generally siphoning 45-60% of gross....
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