Atlanta, GA, January 3, 2006--"Improve everything you touch, and every touch point is a turning point," Home Depot chairman and CEO Robert Nardelli told a crowd in the fall at the University of Southern California's Marshall School of Business, according to the Atlanta Journal-Constitution.
Now, five years into Nardelli's reign atop the nation's second-largest retailer, the newspaper said, question raised by the ubiquitous slogan is whether he has lived up to that ideal.
There is no doubt the 57-year-old Nardelli has changed almost everything he has touched.
In swift order, he reorganized corporate headquarters, centralized divisions and brought new blood into top management. He oversaw a sorely needed store modernization and an overhaul of technology affecting both customers and workers. He shuttered 20 Expo Design Centers while also opening urban stores.
As a result, revenue and profits are growing steadily. Service also is much improved, Home Depot says, with customers spending more: The average ticket since 2000 is up 26.4 percent.
But there has been no such luck with Home Depot's stock. Today it drifts around $42, slightly lower than when Nardelli arrived. Shares of archrival Lowe's, meanwhile, have surged more than 200 percent in the past five years.
While annual revenue is up, it hasn't come close to topping $100 billion as Nardelli once boldly predicted to analysts it would be now. A figure around $80 billion is more likely by year's end.
"Obviously Home Depot fell short of his lofty goal," said analyst Michael Souers, of Standard & Poor's. "But I still think the sales gains during that time frame were impressive. Obviously, positive macroeconomic drivers deserve much of that credit."
Home Depot co-founder and board member Ken Langone has said Nardelli can stay as long as he likes and isn't leaving anytime soon.
"He saved the company," Langone said last spring, adding that the chain was "under enormous stress" when Nardelli arrived in 2000 to begin a transition away from the leadership of co-founders Bernie Marcus and Arthur Blank. Nardelli was initially hired as president and chief executive and later added the chairman's title.
Some analysts say they wonder how Nardelli, who declined to be interviewed for this article, will perform during what he has termed his "second act" at the company.
"He has squeezed out efficiencies," said fund manager Walter Todd with Greenwood Capital Associates. "But where do we go from here? Investors are unclear where the company is headed directionally, and Nardelli has another job on his hands to communicate effectively, saying 'I have a vision, and here's what it is.' "
Earlier this year, Nardelli received an award for Home Depot's transformation from Texas A&M's business school, which has a well-regarded retailing program.
In a speech at the school, Nardelli told the audience: "The rate of change internally has to be greater than the rate of change externally or else you're pedaling backward."
At Home Depot, change equals Six Sigma.
During the last five years, Nardelli has turned Home Depot's culture on its heels by bringing a formula used at General Electric into the retail business. Six Sigma is a method for analyzing processes, identifying defects, measuring the defects and coming up with a way to eliminate them.
Nardelli--a Jack Welch lieutenant at GE before moving to Home Depot--has reorganized departments, sometimes more than once. Last year, the company cut the number of divisions from four to three and recalled the division presidents to Atlanta headquarters. It was the second time the company centralized divisions in the last several years.
A former Home Depot senior vice president of merchandising, Steve Mahurin, said those reorganizations have taken a toll on the affected employees, some of whom don't land comparable positions in the shuffling and end up quitting. Mahurin quit his job after a reorganization meant he would hold a lesser title.
