Home Depot has Money for Buybacks, but not Service?

> Rant mode on:

As I mentioned previously, we moved a few months ago, selling one overpriced house and buying another. This means that I have spent an inordinate amount of my precious sparetime at Home Depot, Lowes, Sears, HD Expo, Fortunoffs, etc.

Missus Big Picture has long ago made her preferences known for Lowes over the Depot. Its brighter, cleaner, better organized, more accessible to the average non-professional/non-contractor shopper.

And while Lowes service is not bad, Home Depot is awful — almost as bad as Sears, where tumbleweeds roll by in the Hicksville store, and staff — and customers — are non-existent.

I’ve been to the 3 different HD’s within 15 minutes of the house (the cannabilization issue is best left for another discussion) — all hours, days.

The Service isn’t bad — it is simply non-existent. No one in the aisles — electrical, plumbing, lighting, etc. There’s usually someone in paint, but thats only because someone has to mix the colors with the base paint. And a handful of souls watering the plants in outdoors/gardening.

Other than that, Nardelli’s legacy — other than the half a billion dollars he made off — will have been to eviscerate the vaunted customer service of Home Depot, leaving it an orange, hollow shell.

But $22.5 billion for share buybacks? Here’s a suggestion: Undo all of Nardelli’s slash & burn firings, or you’ll have nothing left — in terms of revenue and income — except for the buybacks.

Financial engineering is all well and good, but what about focusing on what made you the pre-eminent home improvement store in the first place?


>Rant over.

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  1. A-Mack commented on Jun 20

    I couldn’t agree with you more. But what about selling HD Supply for $10b and buying back $22b of stock? Let’s see, sell future earnings, then spend that money and more (probably borrowed) taking away from future earnings again.

    The future does not look bright at home depot. HD Supply as the WSJ article today said, created a good amount of revenue and more importatnly sales growth.

    Short term gain, long term loss.

  2. LAWMAN commented on Jun 20

    I spend an inordinate amount of time and money at HD…only b/c HD is right around the corner and Lowe’s is about 20 minutes away.

    HD’s service has always sucked. In the past couple of months, though, I have actually had employees ask me if I needed help…unheard of! Of course, I don’t know if this turnaround is only store-specific, or is something more widespread.

    BTW, I really really hate the stupid self-check lines at HD. The computers are way slow, and never work properly.

  3. KP commented on Jun 20

    If have a butt load of comp tied up in options and you are fixing to haul ass…you are gonna do whatever you can to boost the price of the stock(buybacks) before you cash in those options….no?

    Greed is not exactly a fresh concept in the business or any other world!

    The company IS and WILL continue to suffer for it however. I’m sure you are not the only dissatified customer.

    Lots of corps are living life with extraordinarily short views which is no doubt going to mean REDUCED shareholder value in the long term. I blame the comp packages to execs. Lesson one in business school you get what you measure…in this case short term performance ONLY.

  4. michael schumacher commented on Jun 20

    Still waiting for a phone call back (after more than 25 have been placed) from Lowe’s regarding a large purchase. I guess business is that good when you have an order that will be filled if only your salespeople would follow through and make the call. I guess they are too busy with “other customers”…….


  5. wunsacon commented on Jun 20

    Executive compensation in this country is a disaster. Why does compensation triple for oil co execs just because the price of crude rises on their watch? (Not saying there’s anything wrong with the company’s profits. If not for rising profits, additional capital wouldn’t enter the sector.)

    >> Lesson one in business school you get what you measure

    Agree. Next step: who wants to measure properly? Apparently not the compensation committee! ;-)

  6. Isaac commented on Jun 20

    I go to Ace mostly, even though Lowe’s is closer. You walk in there and you pretty much have a personal shopper- it’s almost annoying sometimes but very helpful. Could the difference be because it’s a cooperative?

  7. The Financial Philosopher commented on Jun 20

    Imagine: A company actually having to work for its earnings! The days of “easy money” for housing-related retail business are beginning to end now.

  8. barnaby33 commented on Jun 20

    What made them the pre-eminent home improvement store in the first place, was a housing recession. In the early to mid 90’s you could walk into an HD and talk to a skilled tradesman, who couldn’t find any work, so took a job at HD. By the middle of the boom this time around HD was back to competing with Sears for employees. They weren’t willing to pay the kind of wages that would have been requiredt to keep those skilled employees. Well looks like they’ll be able to get those folks again shortly.

  9. shawn commented on Jun 20

    I just discussed this with my wife yesterday. HD total cap is $80B, income about $6B/year.

    Now, they are engaging in this financial cooking with $22B buyback. Not store expansion or improvement. You got to wonder what company is this.

    Or an equally more important question –why is it doing this, and who is going to lend so much money $12B to JUST to buy back shares? Anyway you measure it by future profits, this company will probably be in deep financial trouble going forward except with its tons of useless bought-back shares.

    The same thing go to IBM when it announced huge buybacks (2x yearly earnings, and get into debt to buyback shares) 2 months back.

    The common traits among them is that, they are both Dow 30 stocks. Enquiring mind like mine is wondering are these all under then Blessing from Bernanke??

    Remember, the only thing in Greenspan and Bernanke mind is NEVER NEVER NEVER allow 2 largest asset classes of Housing and Stock Market to go bust at the same time. Else, you would have Worse Depression than Japaneese for 15 years, for a debt laden America.

    From a Big Picture perspective, I think that’s the Grand Scheme they are working on, and their actions in the past years have priven it — lower the borrowing standards to pump liquidity to housing, encourage patriotic house buying though they knew rampant speculation was going on with fake stated income. Now, the government and FED and Big bankers are trying to change the laws in the bonds to reduce ARM reset rate and sustain housing, screwing bond holders.

  10. joe commented on Jun 20

    Barry this is about the most consensus thing you’ve written in the past two years. Wait, wait, HD service isn’t any good? That’s news… HD is reinvesting an incremental 2B into the stores this year and hopefully that will start to result in experiences like LAWMAN above. The stock price fully reflects the fact that service has sucked IN THE PAST. The opportunity to to change that in the future is the exciting part. The 22.5B buyback has no bearing on reinvestment in the stores. That’s why Supply was sold, so that all of management’s attention will be on the Retail division. The truth is that HD was rightly a conservatively capitalized company during its hyper growth mode, and as it has transitioned to a mature GDP grower, the cash generation is so substantial that the cap structure was becoming hugely inefficient.

  11. babygal commented on Jun 20

    Luckily in Boston we still have an abundance of mom and pop hardware stores-it’s worth it to me to pay a drop extra for service. And they have ALL the stuff HD has.

  12. Greg0658 commented on Jun 20

    Just wondering in this chat if bankruptcy laws changed and new loans have a higher position in the stack for real estate property latch ons / leans?

  13. Eric commented on Jun 20

    I’ve been to the 3 different HD’s within 15 minutes of the house (the cannabilization issue is best left for another discussion)

    You mean they STILL aren’t stocking the equipment for growing marijuana in your basement?!

    Ohhhh, waaaiit, I get it now maaannn… 8)

    BR: Thats cannabis — not cannabil — besides, you can find all that stuff online: http://www.hydrofarm.com/

  14. yoshi commented on Jun 20

    The HD closest to me (15 minutes) has always had excellent service. There is even a 24 hour HD 30 minutes away (for say – accidentally taking out that retaining wall at 4 in the morning).

    My beef with HD has been selection of products. They went down dramatically under the prior CEOs watch. I walked into a Lowes for the first time (40 minutes away) a couple of years ago and when I got home – I bought stock.

  15. michael schumacher commented on Jun 20

    Share buybacks make great headlines, obviously they would’nt announce them if it did’nt, very few of them ever follow through with the actual repurchase of the shares. By the time someone actually looks at it (to see if it was ever done) it has dropped off the collective radar.

    And if they are actually done…try not to forget that the year is half over at this point and those year end bonus’ are tied to what???

    Stock price


    Corporations are running out of tricks to prop this thing up….


  16. joe commented on Jun 20

    Here in northern Fairfield County, we have the benefit of using very fine local, independent hardware stores and lumber yards. Investigate your own local resources…the money saved at Home Depot is more than offset by the inferior quality of lumber, poor service, and time wasted wandering through vast acreage of parking lot/store.

  17. Eric commented on Jun 20

    A few months ago I heard a story from a lawyer friend of mine that a guy went into HD, climbed a ladder to get to a item, and got electrocuted by a loose wire dangling from the ceiling–knocked him on his back. So he was suing. The talk amongst the lawyers was that HD would probably take the angle that he should have gotten an employee to climb the ladder for him– but then, they had also better prevent anyone from getting on the jury who had actually BEEN to HD recently– because anyone who’s been to HD would know very well why the guy had to climb the ladder himself!

  18. Jason M commented on Jun 20

    I bought my house a few years ago, so I was in Home Depot a lot in 2004-2005, and I noticed the service getting worse and worse as time went on.

    I overheard a couple of employees talking about the fact that their hours were cut back so that they were no longer full time — and therefore no longer entitled to full time health benefits.

    All this in the middle of the housing boom in Los Angeles. Nice.

  19. muckdog commented on Jun 20

    Totally agree on HD, BR. I used to drive down there and consult somebody about what I needed to do. They’d provide specifics and help me choose what was right for the task.

    Good luck doing that now.

    Now, I have to research the project on the web and create a list. Then head down there and play the game of Treasure Hunt, hoping to find what I need. Also hoping I don’t have to run down a scarce HD worker asking for directions.

  20. Camille commented on Jun 20

    HomeDestructo also has poor customer service around where I live, but Lowe’s is only slightly better from what I’ve seen. I swear there are times when HD only has 3 people on the floor. The store is big enough that you would never see them.

    And the Ace Hardware that I used to live near *always* had someone there to help. They were crazy-helpful following me around the store.

  21. michael schumacher commented on Jun 20

    Harley Davidson is a great example of share buybacks that are not good for the shareholder.

    October 30 2006 to November 26, 2006 the company bought back 2,098,891 shares during this time period at an average price of $72/share. The range of share price was ~$64-$72/sh during this period. Insiders conveniently sold ~$29 million in HOG options in $70-$73 range during this same period.

    The same incident occured Jan.1 – Feb 4 as company repurchased shares at an average of $70 when the range was $69-$72. Insiders unloaded $3,500,000 in options during this period. How much does HOG purchase during March 5-April 1 period, when the price is $64-$57/share? Zero shares.

    extreme example it is however keep that in mind when you want to jump on the bandwagon of share buybacks. I’m sure the long term holders of HOG do not share the same “euphoria” that some express with the concept of share buybacks.


  22. Christopher Laudani commented on Jun 20


    This is GREAT NEWS! The 300+ acqusitions that Nardelli did over his term really paid off.

    Think of all the companies Home Depot bought that investment bankers will now be able to re-sell! This is sure to produce record investment banking revenue!

    I remember going to an investment conference and asking him why Home Depot would pay billions for a janitorial supply company and billions for a pipe construction company and he told me they wanted to become less dependent on retail sales. Needless to say I thought that was pretty funny since Carol B. Tomé (CFO) was telling me they wouldn’t be undersold in flooring.

    Too bad I’ll have to cover my HD short. I’ve had it since 2004. I’ll miss it.

  23. Claudia Belizen commented on Jun 20

    I actually get great service at HD now. Seems some enterprising local contractors troll the store looking for bewildered, beleagured shoppers — I’ve hired two of them over the past month, for work I would have done myself, but they were so attentive and helpful. So HD’s horrid service has turned into opportunity for our local licensed handy-people/contractors looking for work.

  24. Pool Shark commented on Jun 20

    The problem is that Lowes and HD are pretty literally the only games in town (at least here in California) for major home improvement supplies. There are a handful of smaller hardware store like Ace and Osh, but their selection is very limited and their prices are high. Though we have three HD’s and 2 Lowes in town, I invariably shop at HD, due to their prices being consistently better than Lowes.

    As for lack of service; I couldn’t care less. Since I have been building/renovating things since I was a kid, I rarely find it necessary to consult sales associates. When I actually do have a technical question, it is nearly always beyond the expertise of the typical sales associate (even when experienced contractors were employed by HD during the 90’s).

    Indeed, I would rather that they just left me alone and let me shop in peace. The only time I need a sales associate is to inquire on price or availability.

    The average homeowner has become quite savvy in home improvement. In the coming housing crash, they will be looking for the cheapest price on building materials. Whoever gives them the lowest price (regardless of lack of service) will do just fine.

  25. BKinDaHouse commented on Jun 20

    It seems like HD has positioned itself for the housing slump and subsequent recession that has been slow to materialize or rolling in nature.

    I live in Brooklyn and have 2 HD’s within a 5 mile radius of my home. They are packed everyday of the week. The skeleton staff can barely handle the crush of customers. Lines exceed 45minutes for the most simple of purchases.

    I spent Memorial Day in suburban Maryland visiting my Mom. As usual she had a list of chores(never too old), so i headed out to the HD. I was shocked. The stores were empty, even on a Memorial Day weekend. The store had the same skeleton staff as my Brooklyn HDs, but with a fraction of the customers. In just over 30minutes, I was able to order a custom patio door, had a gallon of paint mixed and bought myself the circular saw that i had tried in vain to purchase in Brooklyn.

    As a result of its Bearish positioning, HD stores in hot RE markets like Brooklyn and LI are left to suffer. That is until the housing slump finally reaches NYC.

  26. me commented on Jun 20

    Blake is from GE also, Financial engineering is all he knows. How many $Billions did Nardelli waste on buybacks?

    They are no better than Dell. When Dell decided to cheap out on service it killed them and HP hasn’t looked back since.

    I needed a water heater. I called HD and was told the woman that handles Atlanta was on vacation that day. I am still waiting for a callback. Instead I bought it at Lowes and they couldn’t be more helpful and were very good about follow up.

  27. ECONOMISTA NON GRATA commented on Jun 20

    Share buy back, LBO, Private Equity. It’s all the same… Home Depot needs a share buy back like they need a hole in the head. But it’s OK with me.

    Things are only going to get worse as the real estate market unwinds and the mortgage fiasco implodes. Home Depot’s earnings will be negatively affected by these two aspects. It is reasonable to expect that the momentum for valuation in this issue will turn negative once this tid bit of fools gold is discovered in the markets efficient pricing mechanism.

    Can anyone say anything genuinely possitive about this issue….? I THINK NOT….!

    Best Regards,


  28. Brendan commented on Jun 20

    H.D. and Lowe’s are practically across the street from each other near me. I always shop at Lowe’s. The prices are virtually identical on a basket of items (I’ve compared them many times) and the service and organization seems to be better at Lowe’s. The kicker for me was that H.D. “donates” tons of money (#2 only to Wal-Mart) to politicians (and the 3:1 to the Rethuglicans, in particular) so they can have politicians do their bidding to maintain questionable business practices. No thanks. I’ll shop at Lowe’s.

  29. wally commented on Jun 20

    I agree. Bloggers whould do what they do best and not go on Kudlow.

    Hey… just kidding.

  30. Mr. Obvious commented on Jun 20

    Sounds like WMT. JPMorgan upgrades them because of better capital discipline. Apparently, Mr. Analyst has never shopped there. They need a lot more than better “capital discipline.” I think the big box boys need to go back to basics, like the customer, for starters.

  31. Tom B commented on Jun 20

    I also hate HD, but Lowe’s isn’t much better.

    I just bought a dishwasher:
    1) they sent the WRONG model. I decided not to whine; the model they sent was my “close second” choice.
    2) They didn’t have an installation guy on the delivery truck.
    3) I had to go BACK to Lowe’s to physically request an installer person
    4) I have made two phone calls to customer service (and counting) to get one of the two $50 rebates they promised ( I HATE rebates– just give me the price break up front).

  32. Bob A commented on Jun 20

    Interesting question arises. A lot of people use Yahoo for homepage but Google for search.

    Why do they/we not use Yahoo search?

    Because the results are not better?

    I think not. For me it is the presentation.

    I just don’t like the way Yahoo search results look.

    Hear that Yahoo? Ugly search results mean people don’t use your search.

  33. George commented on Jun 20

    I’m glad I’m not the only investor to rant about Home Depot’s customer service on their blog. Last year I wrote about my Home Depot customer service nightmare as well. I agree with you that Home Depot management needs to focus on their customer service before they lose any competitive advantages that they still have. The tender offer is simply an inefficient waste of capital at this point.

  34. Bart commented on Jun 20

    more accessible to the average non-professional/non-contractor shopper.

    Oh, really. I am a trim carpenter (amongst other things) and HD is nearly useless for contractors. Most of their stores rarely carry the sizes or quantities needed to get a job done. This is most true in plumbing and electrical, but the problem is deeper and more widespread than that.

  35. Dave commented on Jun 20

    I disagree with the HD bashing. Home Depot employees are VERY helpful – IF you’re there within 20 minutes of closing time that is! They seem to direct you to exactly what you need and get you out the door in short order. They roam the aisles for customers, helping each and everyone get out of the store ASAP.

  36. Kyle commented on Jun 20

    This is the end result of the clueless, ruthless GE (mis)management by numbers dogma. Manipulate the stats to look good for Wall Street and take home the big bonus, while destroying value in the long run.

  37. Michael Donnelly commented on Jun 21

    Steve Hannaford’s blog makes some great Home Depot points today


    “Then I remember… that there are business reasons and finance reasons. If deals do not make business sense, then they must make financial sense – at least to the people who are making them.”

    If you are interested in Home Depot, this column is worth a read, and it’s pretty funny in parts as well. I like the licking the spoon analogy.



  38. Steve commented on Jun 21

    I live in the Raleigh-Durham, NC area. Here are my impressions:

    Home Depot; dirty, dark, staffed by high school students and other people who have never painted, hammered, plumbed, or cooked. All employees are busy talking to each other and look the other way when a customer dares to approach them.

    Lowes; clean, bright, fairly friendly staff who seem to know the stuff in their department. They are understaffed from a customer perspective, but if you can wait for them to help the people in front of you you get good assistance.

    Sears; clean, bright, fairly friendly staff who seem to know the stuff in their department. I’ve had great luck in my local Sears hardware and appliance sections, and they aren’t as busy as Lowes, and the prices are comparable.

  39. Jim Bergsten commented on Jun 22

    My wife went into a local Sears a while back and couldn’t find a single employee, anywhere.

    She got on her cell phone, called Sears corporate in Chicago and told them that their store was “abandoned.”

    Wonder what keeps them from being completely ransacked?

  40. Bill commented on Jun 24

    As a long time HD employee who resigned over a year ago, I find this entire discussion highly entertaining.

    Since the founders left and Nardelli/Donnavon entered the picture, HD embarked on a slash and burn approach. Pay all vendors 90+ days to improve cash flow and reduce inventory on hand values. Drastically reduce hours for the stores to improve margins. Drastically change the full time to part time ratio in the stores for same said margin improvement. Increase SKU using the cheapest products possible thereby improving margins again. On top of these trends institute multiple buy backs during the past five years to reduce shares outstanding.

    Now that the above tricks have finally come forward so to speak, HD embarks on a sale of its number one business unit, HD Supply. Plus, just to top it off it plans on borrowing $10+ billion for this stock purchase. All in a desperate attempt to boost its share price. Naturally, no concerns for the bond holders who now suffer or even a thought of a special dividend from the sale of HD Supply. A very sad point in history for what was once a most admired retailer.

    BTW: Calling Loss Prevention from a HD store because no associates can be found tends to generate amazing action quickly. Good for amusement, but ACE is still a better choice for buying what you need.

  41. Sjaak commented on Jul 10

    Had a contractor doing some work at my house. He called and asked me to pick up some stuff on way home so that he could continue with the work. Told me to go to HD, asked him “does Menards have it?” Dunno he said, so I went to HD (against better judgment based on past experience), found what I needed and then yes…. Nothing has changed.. Check out was a disaster… even clerk shook her head in disbelief. Location? Chicago on N. Kedzie Ave. HD’s management should start giving out free blow jobs, after all they are good at lip service… ;-)

  42. nathan commented on Nov 30

    i am currently employed at hd in kansas and i would disagree about a lot of your negative comments, at least in my store! so if you ever want really good serevice come to kansas and i will be your personal shopper. the only thing that i don’t dissagree with is that lowes customer service sucks. they just don’t seem to want to be there and do the job that they get paid for, by the way they are paid better at lowes than hd pays!

  43. nickalaus commented on Jan 10

    i agree with the complaints about customer service. i was employed for over 3 years at a landscape supply division of hd. we were laid off a week before thanksgiving. i believe it is sop for all major corporations to do this. of the three hundred employees from 11 stores i would say about 20% was absorbed in the hd, and the remaining oh well. however it amazes me that to two top positions in the hdls, were put back in the hd stores and given a promotion, and all their boy wonders was taken under their wings. I would not give you a nickle to see a pss ant pull a freight train down the middle of a street with hd on board. all they care about is the bottome line and the stock, because the majority ofthe big dogs at corporate hold alot of stock, fo course why do they want it to go up. theheck with the people who do all the work.

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