Home Depot is in the midst of another rebound, partially owed to the rise in house purchases and, in turn, house repairs. What is behind this turnaround is not some magic strategy or stroke of luck. According to an article on Forbes, it was solid management, on target marketing, and listening to the customer that helped Home Depot get back on top.
From the article:
I took a look back to Q3 2005, when that housing boom was in full swing. Lowe’s reported comparable sales increases of 6.2%. Home Depot reported increases of 3.6%. In other words, Lowe’s was outperforming its larger competitor by a factor of two. In fact, according to Wikipedia, during Mr. Nardelli’s tenure, Home Depot’s stock price remained essentially steady, while Lowe’s shares doubled in price. In other words, a lot of opportunity was missed. Earnings were adequate, but they were riding on the back of cost-cutting, not sales improvements.
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.