Home Depot to pull plug on Expo stores

After nearly 20 years as an experimental concept, Expo Design Centers are closing —- part of the cuts announced Monday at parent Home Depot that will shed about 2 percent of the company’s work force, or 7,000 jobs.

With its shiny kitchen faucets, glittering chandeliers and stone and tile made around the world, the Expo concept just didn’t hold its own in the current economy.

Home Depot said it is pulling the plug on its high-end decor showrooms because their profitability took a startling dive into the red at the end of last year.

Starting today, the remaining 34 stores, including two in Atlanta, will begin liquidating, slashing prices 10 percent to 30 percent. The stores are expected to close by early April. Customers with pending installations will have their projects finished, or receive full refunds on products and design fees.

Felix Waldow, speaking outside the Expo store in Alpharetta, said he will miss it. Expo will not fulfill a design contract he purchased on Jan. 16, but his fees will be returned.

The mood at metro Atlanta’s other Expo store at Perimeter Center was somber. Employees hugged and many were talking on their cellphones. They learned of the closing at a hastily scheduled mandatory staff meeting at 8 a.m. Monday.

Closing Expo will stop the red ink from flowing —- Home Depot estimated the concept would lose $80 million in 2009 after an operating loss of $50 million in 2008.

“Even during the housing boom, it never reached our goals,” Home Depot CEO Frank Blake said in a call with analysts Monday.

Home Depot also announced on Monday it will close 14 specialty stores, including five YardBirds in California, and cut 2,000 store support jobs —- including 500 at the Atlanta headquarters. The cuts are in response to an expected 8 percent sales decline in 2008. Home Depot will announce 2008 results on Feb. 24.

The retail giant has been slowly trimming staff since last year, when it axed 500 headquarters positions and 970 human resources jobs nationwide and closed 15 stores.

“Our core business is $8 billion smaller than we were just two years ago and we expect additional pressure in 2009,” Blake said in a memo to staff Monday. Chief Financial Officer Carol Tome, in an interview, said her staff has shrunk to 600 from a high of 1,200.

The staff cuts, a total of 7,000 in this round, amount to 2 percent of the total work force. Ten percent of the corporate officer ranks are also being cut, or 12 to 15 people, Tome confirmed, and executives’ salaries are being frozen.

The closure of the Expo stores is another sign that the luxury retail segment is struggling in the current economy.

When times were good —- back in 2007 —- Expo benefited. But success came in fits and starts.

The Expo concept was founded in 1991 in San Diego as a way to put several showrooms under one roof, from kitchens to bathrooms to floors. “There was nothing else out there like it,” said Tome.

The idea slowly germinated —- only seven stores were built in the 1990s. Then, earlier this decade, new leadership at the company envisioned a merchandising paradise for high-end decor, and 50 Expo stores sprouted nationwide. In 2005, Home Depot closed 20 of those stores because many were too close together. In 2007, the division had its most profitable year.

“We got rid of the cost structure that was dragging down the profitability,” said Tome. “And Expo was riding the housing wave.”

Profitability hit the skids last year, as the bottom dropped out of the housing market and bank credit became scarce.

The $920 million division showed as much as a 30 percent decline in sales during one week in 2008, compared to the same week in 2007, Tome said. “Demand has just fallen by the wayside,” she said.

“What’s changed is the high end, not just at Home Depot Expo but at other luxury companies we cover,” said analyst David Schick, managing director of Stifel Nicolaus’ retail research group in Baltimore. “The rate of change is far worse at the high end.”

Schick praised Home Depot’s cuts as “rational” thinking. He said the chain had to face hard truths about slowing growth even before the economic downturn.

“We want to look at companies admitting how bad things are instead of not looking at it,” said Schick. He said it shows Home Depot is “dealing with reality, rather than hoping things get better.”

AT A GLANCE:

On Monday Home Depot announced it will close its 34 Expo design centers, plus 14 other specialty stores. As a result, the company will:

> Cut a total of 7,000 jobs, or about 2 percent of its work force.

> Trim the Atlanta headquarters staff by 500.

> Freeze executives salaries in 2009.

> Give merit raises for store employees and other workers, and maintain its 401(k) match.

> Limit growth to 12 new Home Depot stores in 2009.

> Offer severance and medical benefits to laid-off workers.

> Sell or sublease the 34 Expo store sites.

> Hire workers at flagship Home Depot stores for spring season.

FOR EXPO CUSTOMERS:

If you have just contracted with Expo —- for example, for a kitchen renovation —- the company has issued the following guidelines:

> Expo will complete any construction projects already started.

> If a product was ordered but not installed, Expo will refund the installation price and design retainer. Customers will have to arrange on their own for installation.

> In cases where a design retainer has been paid but a product has not been ordered, the customer will receive a full refund of the design retainer with a 10-percent-off coupon that can be used to buy the product at a Home Depot store.

> Special orders already made will be completed. No more special orders are being taken.

> Back orders will be refunded to the customer.

> Have questions? Call 1-800-259-1042 or 1-800-797-1745.

Photographers Vino Wong and Joey Ivansco and reporter Michelle Shaw contributed to this report.

AJC.COM/BUSINESS

See memo to employees, comment on the news