How Francis Blake Saved Home Depot
Home Depot has achieved a remarkable turnaround since Francis Blake took the reins of the company after what can properly be termed an era of debacle under an administration that was handed control from the company’s founders and routinely moved the company further and further from its roots.
In 2007, when the previous administration was unceremoniously removed after issuing a $121 million parachute to its CEO, few industry experts saw much brightness in the near term for Home Depot. The common wisdom openly expressed by industry insiders was that the company had left its founder’s focus and strayed to seemingly become all things to all people. For one the company had gone on a shopping spree, purchasing several highly reputed independent and regional pro dealers. This was seemingly done to expand its very formidable DIY oriented base.
During this period the company also explored several retail formats to supplement its well established traditional stores. The EXPO Design Centers were the most notable of these and peaked in 2005 with an arsenal of over fifty stores. Most were located near a Home Depot location and were seen as a move to expand the opportunity to serve Home Depot customers.
An attempt to build a chain of large scale hardware stores, somewhat akin to Orchard Supply was suddenly scuttled after the company had well tested a couple of markets and had received praise at large promotional press events. Home Depot even began to open convenience stores in its parking lots thinking this was a natural way to augment sales to builders visiting its massive stores before returning to replenish the jobsite.
When Francis Blake acceded to the top of the company in 2007, the industry was already reeling from the early fallout of the subprime scandal. The then coming recession proved to be the worst economic storm since the Great Depression and only exacerbated the common fears that Home Depot’s recovery was nowhere in sight.
Francis Blake however took swift and stunningly strong action by rapidly disposing of the pro dealer acquisitions. Though selling at a considerable financial loss, it quickly became evident that in an industry hit by the double whammy of the subprime ax followed by the recession, the outlook for the housing market was bleak. Building was down and forecasts were gloomy. Banks were under fire and reluctant to loan money. Selling would at least gain the company some still significant funds and free the company to return to its roots.
Return it did. Under Blake the company studied where it had gone astray. In addition to selling of its pro dealer properties it quickly and surprisingly scuttled its EXPO Design Centers concept and removed all retail operations that were not traditional Home Depot including any trace of the convenience stores.
As the previous administration had significantly cut jobs, ostensibly to improve the bottom line, Blake began to recruit top line, experienced associates and returned to in-depth training programs for new and veteran employees. Ironically, Blake’s efforts were rewarded by the very economic forces that were crippling much of the industry and indeed much of the world. As industry unemployment rapidly rose, Home Depot’s thirst to improve the caliber of its work force was eased as it became a natural magnet for talented industry veterans who through no fault of their own now needed a job.
After several quarters of very troubling reports and a confused outlook on the market, Home Depot’s recent financials present the picture of a company which has managed to emerge from an internally gloomy era, survived the subprime crisis and rebuild itself during a recession that has spared few in this industry.