Home Depot finds growth in small projects

By Arielle Kass

The Atlanta Journal-Constitution

Now that his children are older, Bill Benston has more time on his hands.

An investment banker who lives in Dunwoody, Benston had always been an "outsourcer" when it came to fixing things at home. But the combination of a slow economy and more time to putz around the house means the things on his to-do list are finally getting done.

By him.

"I always have projects," he said. "With the economy, I'm more apt to do it myself than have somebody do it for me."

What that means for Benston is more trips topick up supplies for those projects. Last Wednesday, it was landscape lighting and weather-proofing stain for his deck. Benston said he often starts projects, then learns he doesn't have everything he needs to finish them. He finds himself at Home Depot at least once a week.

The Atlanta-based chain sees DIYers like Benston as its avenue to renewed growth, at least in the short run. The average amount people spend at its stores has stayed flat as higher-spending pros stay away and consumers eschew expensive purchases. But the number of transactions, or individual sales, has risen. And Home Depot is taking steps to keep that trend going.

Frank Bifulco, senior vice president and chief marketing officer for Home Depot, said the store has had an ongoing "lowering the cost" campaign and events like the current "Vanity Insanity" promotion work well to bring consumers in the store. Home Depot has also stepped up its focus on selling items like light bulbs, trash bags and paint as people pay more attention to operating and maintaining their homes, and making modest decor updates.

"We know a lot of people have less to spend," Bifulco said. "We go where we can make the biggest impact. Right now, the focus is on transactions."

In the second quarter of the year, Home Depot saw a 1.9 percent increase in transactions over the like quarter in 2009, and a 3 percent increase for the first six months of its 2010 fiscal year, as compared to the same dates a year ago. The average ticket, though, remained essentially flat over both those periods. It was $52.30 for the second quarter, up a nickel from the year-ago quarter, and $52.41 for the first six months of 2010, 4 cents less than the same period in 2009.

In a second-quarter earnings call, chief financial officer Carol Tome said Home Depot thinks "that ticket growth will not materialize and that our sales growth will come from transaction growth."

Gerald Phelan, a credit analyst with Standar & Poor's in Chicago, said part of Home Depot's transaction-focused strategy is dictated by low-spending trends in the market. They have been advertising more and stocking lower-cost products, and Phelan said it seems like the company is generally "doing the right thing."

IBISWorld senior analyst George Van Horn said since traffic is a staple for retailers, focusing on that "certainly seems like a very feasible approach" for the chain. He expects even more marketing campaigns tied to low prices and increased transaction numbers as people who had deferred doing home maintenance start to come back to the mix.

"Given that their core audience favors the DIYer, that in itself does tie in well with improving transactions," Van Horn said. "It certainly has a lot of merits to it; it probably will pay off."