Atlanta, GA, January 23, 2006--Home Depot co-founder Bernie Marcus on Friday said the retailer's plan to move into new businesses was "a good move" that would attract new customers, even as one analyst voiced caution.
"I think it's a good move," Marcus told Reuters after speaking at an Atlanta Press Club luncheon. "It doesn't take away from the business and, if anything, will bring in new customers."
Marcus, who founded Home Depot with Arthur Blank, retired from the retailer in 2002. Marcus donated $200 million to build the Georgia Aquarium, which opened last year in Atlanta.
Home Depot on Thursday said it would derive more sales from contractors over the next five years as it cuts the pace of store openings. The company is also looking to grow its home installation business and will test gas stations outside some of its warehouse stores.
The retailer's $3.2 billion bid for Hughes Supply Inc., announced last week, steps up its move into businesses that serve cities, builders and industrial customers.
While many analysts said the push into contractor markets promised to deliver double-digit returns over the longer term, J.P. Morgan on Friday said Home Depot was underestimating its main rival, Lowe's Cos. Inc., while acquiring businesses that have lower profit margins.
"We think Home Depot is headed for a stall," analyst Stephen Chick said in a research note.
"The company's retail business underperforms that of its No. 1 competitor, Lowe's," in sales growth at stores open at least a year and square-footage growth, the note added.
A few analysts trimmed their estimates for the coming fiscal year, citing the Hughes integration, concerns about slowing housing growth and other factors.
"Even Home Depot's generally positive meeting yesterday was somewhat marred by the release of poor December housing starts," wrote Bernstein analyst Colin McGranahan, who lowered his Home Depot profit estimate for the coming year by 1 cent to $3.07.
The Commerce Department on Thursday said new home construction fell 8.9 percent in December, led by a decline in single-family homes.
