Home Depot to test convenience format stores next year: industry leader developing plans to open 4 hardware stores in northeast

The Home Depot announced it is developing plans to test a convenience hardware store format.

This format, as yet unnamed, will be designed to serve the small-project do-it-yourself homeowner and other customers who prefer a convenient location and smaller store environment for purchasing home improvement and related products.

“The U.S. home improvement convenience market generated sales totaling approximately $50 billion in 1997, but the vast majority of those sales took place outside of larger home center stores such as Home Depot,” stated Arthur Blank, president and ceo. “This test will help us determine the best products, services and methods of gaining home improvement sales we would not be able to get inside our Home Depot stores.”

The test is being developed and will be run by Bob Wittman, senior vice president of business development and former coo of Orchard Supply Hardware Stores. It is expected that the first store will open in the Northeast during the first quarter of fiscal 1999, followed by three more stores in that region later in the year.

The 35,000-square-foot stores are expected to offer only about 25 percent of the SKUs of a typical Home Depot and not stock lumber and building materials.

Blank noted that the convenience store test is one of a number of growth initiatives being developed to increase Home Depot’s presence in the $365 billion housing and building-related products market. The initiatives are also designed to foster longer-term sales and earnings growth and enhance stockholder returns over an extended period of time.

In April, Home Depot opened a store targeted at professional customers. While the company says there are no plans to roll out that concept, analysts are watching the experiment closely. (For complete coverage of this new format, see page 70.)

Home Depot currently operates 657 stores in the United States and Canada, with plans to operate more than 1,300 stores by the end of fiscal 2001. The company also offers facilities maintenance and repair products, and wallpaper and custom window treatments via direct mail through subsidiaries Maintenance Warehouse and National Blind and Wallpaper Factory.

In other news, Home Depot recently reached a definitive agreement to purchase the remaining 25 percent partnership interest held in Home Depot Canada by Malian Cos. Ltd. for $375 million (Canadian).

In early 1994, Home Depot purchased a 75 percent interest in the seven-store Aikenhead’s Home Improvement Warehouse chain that was owned by Malian. Today there are 37 Home Depot Canada stores in operation throughout Canada.

While the original partnership agreement called for Home Depot to have the option to purchase the remaining 25 percent interest after the sixth anniversary of the deal, both companies agreed to complete the transaction at this time.

Home Depot also has appointed Dennis Carey executive vice president and chief financial officer.

Reporting directly to Blank, Carey’s direct responsibilities will include finance, information services and construction-store planning.

With the recent appointment, Marshall Day, previously Home Depot’s chief financial officer, becomes the senior vice president-finance and accounting, but will continue to be responsible for all control functions, budget and financial planning, merchandise accounting and controller duties.

“Dennis’ broad base of business experience from his careers with General Electric and most recently AT&T will serve (us) well as we pursue our growth potential throughout North America and the rest of the world,” said Blank. Most recently, Carey was vice president and general manager for corporate productivity and mergers/acquisitions at AT&T.

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