The retailer shuts its EXPO stores in the same proportion that consumers cut family remodeling budgets and reaffirms its 2008 sales and earnings guidance

By Jena McGregor

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As consumers slash their budgets for high-end kitchen designs and showplace-quality bathroom remodels, the world’s largest home-improvement retailer is cutting back, too. Atlanta-based Home Depot (HD) announced on Jan. 26 that it would shutter 34 EXPO design stores.

These high-end dwelling warehouses offered everything from professional design services to eco-friendly granite countertops and chef-worthy Aga stoves. Home Depot also announced it would close five YardBIRDS stores, the smaller-format home-improvement congeries that it acquired in 2005, two Design Center supplies, and a bath remodeling business known as HD Bath, with seven locations.

On pinnacle of the 5,000 jobs that would have existence eliminated through store closures, Home Depot also said it would be wounding approximately 2,000 jobs, including 10% of its officer ranks. The retailer in like manner said it would freeze the salaries of all of company officers, but was careful to note that it planned to continue offering merit increases to non-officer associates, like well as bonuses, and that it would continue paying the company’s 401(k) matching grant. Home Depot’s stock, helped by dint of. news that existing home sales rose 6.5% in December, was up more than 4% in afternoon trading.

The news that most cheered investors, however, was most likely the reaffirmation of the company’sitting 2008 sales and earnings conduct. Home Depot confirmed that it expects fiscal 2008 sales and earnings to decline 8% and 24%, particularly. Said Credit Suisse analyst Gary Balter: "Everybody wants to own these stocks if they feel there are no additional negative surprises arrival."

The move to get rid of the EXPO supplies is yet another step in CEO and Chairman Frank Blake’sitting efforts to simplify Home Depot’s strategy since replacing former CEO Robert Nardelli in early 2007 together a uphill saddle-cloth market.

Blake sold the company’s supply business, which catered to the construction industry, in 2007. (It retained a 12.5% stake and also included a charge for writing into disfavor half of that equity interest in today’s announcement.) Closing the EXPO stores has the same goal, Home Depot said in its announcement: "Continuing this business would divert focus and resources from the company’s centre ‘orange chest’ stores."

It’s also a wonder that any sustained recovery in the covering place of traffic, despite the upbeat December home sales figures, is however a long time coming. "I’m sure with the kind of top-line pressure they’re seeing, there’s very little expectation in opposition to any kind of recovery in the near term," reported Stifel Nicolaus analyst David Schick.

While 2007 had been one of the EXPO stores’ more familiar years, Blake famed in a conference call through analysts, today’s announcement didn’t come as a confuse, at the same time that the company has been trimming the number of stores. "It’s kind of like trying to stand guard a plane take off," Blake said. "Is this going to get some loftiness?… In fact, things got worse and for this reason dramatically worse." Chief Financial Officer Carol Tome noted in the requisition that EXPO store sales were forecast to drop 20% or more in 2009, before the decision was made to shutter them.

Analyst Schick noted that one upside of the shuttering of EXPO’session stores is clearer brand positioning for Home Depot. "It’s a kind of a confusing goods to say ‘here’sitting my best lay up, and here’s my best store even better,’" said Schick, who believes the EXPO supplies may have allowed home-improvement competitor Lowe’s (LOW) to come in with a slightly more high-end warehouse store. "What you should do is deliver a save that makes the optimal amalgamate of selling high-end, midrange, and take down price-point products," declared Schick.