More smoke at Home Depot, and it's not coming from the lumber racks
Wednesday February 21, 6:26 pm Eastern Time
Home Depot Co-Chairman Blank to Retire
By Karen Jacobs
ATLANTA (Reuters) - Home Depot Inc. (NYSE:HD - news) on Wednesday said co-founder and co-chairman Arthur Blank is retiring, an announcement that took many by surprise given the company's financial woes and the relative short tenure of Blank's successor.
Blank, 58, said he won't seek re-election to Home Depot's board this year. He cited the transfer of the chief executive role to Robert Nardelli, who was hired in December 2000 as CEO and president from General Electric Co. (NYSE:GE - news)
In New York Stock Exchange trading on Wednesday, Home Depot shares, which traded as high as $70 in the past year, fell $3.14, or 7.1 percent, to $40.95 amid a broad market sell-off. The stock has hit a 52-week low of $34.69
In an afternoon conference call with journalists, Blank, who was Home Depot CEO from May 1997 until December, said he was leaving in part to eliminate confusion about who was running the retailer, which has 1,149 stores in the U.S., Canada and Latin America.
``I felt there were a number of occasions where people were spending too much time checking the temperature of Bob, checking the temperature of me,'' Blank said. ``Their loyalty and allegiance needs to be to the culture of the company, needs to be focused on one person as the essential leader, and that needs to be Bob Nardelli.''
Blank, who co-founded Home Depot with co-chairman Bernie Marcus in 1978, said he would continue to visit stores, and had no plans to sell his Home Depot stock. ``I'm not going away to another planet,'' Blank added.
Still, some called Blank's departure a disappointment, particularly in light of the company's financial troubles.
On Tuesday, Atlanta-based Home Depot reported a 20 percent drop in fiscal fourth-quarter earnings, and said it was cutting back new-store growth, with plans to open 200 stores this year, down from the 225 it had previously planned.
Home Depot, which like other retailers is coping with U.S. economic uncertainty, has announced rare profit warnings for the past two quarters.
``It probably hurts employee morale that the company's founder is leaving during a period of disappointing sales and earnings,'' said Dan Wewer, an analyst at Deutsche Banc Alex. Brown.
John Waterman, chief investment officer at Rittenhouse Financial Services Inc., a Radnor, Pa.-based firm which owns a significant stake in Home Depot, said some managers at the retailer who were loyal to Blank may follow him out the door.
Wayne Hood of Prudential Securities said Blank's departure will focus Wall Street's eyes more on Nardelli, who had headed GE's Power Systems division and was passed over for the job to succeed GE Chairman John F. ``Jack'' Welch.
``It's going to be even more critical that Nardelli gets a few base hits to show the regions and the stores that he can make their lives easier,'' Hood said. ``If you find out two years from now that Home Depot is struggling, I wouldn't be surprised if you see them bring back Arthur.''
Blank said he and Nardelli were friends, and that Nardelli is committed to Home Depot's culture. ``He's got tremendous capacity to bring this company to the next level,'' Blank said.
Some investors said they sensed that Nardelli was beginning to make needed changes at Home Depot, seeking to wring out operating efficiencies while staying customer focused.
``There's going to be an increased focus on efficiency and things like return on investment,'' Waterman said. ``Simply driving growth through new stores'' isn't enough, he added.
Blank will serve as co-chairman until his term ends May 30. At that point, Marcus, 71, is expected to continue as chairman.
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