U.S. retailers Home Depot Inc. and Sears, Roebuck & Co. are taking their high-end home decorating superstore concepts back to the workshop after the stores failed to draw enough customers and the recession hurt sales.
Atlanta-based Home Depot, which last week trimmed its longer-term earnings and store-growth plans, has cut plans for Expo Design Center, its large designer showroom-style stores.
Home Depot, which had planned to operate 200 Expos nationwide by 2005, now says it will have 88 to 100 Expos by 2004.
"Seventy-percent growth is not a pace that we think is a healthy pace," Home Depot Chief Executive Robert Nardelli said. Home Depot said Expo, which had been aimed at households with annual incomes of more than $75,000, would broaden its product assortment in hopes of appealing to those with earnings of $50,000.
Similarly, Sears is trying to expand the customer reach of its Great Indoors superstores.
Spokeswoman Kathleen Connolly said the 13-store chain Great Indoors is trying to attract customers with household incomes starting at $45,000.
Sears opened nine Great Indoors stores this year, instead of the 11 units planned. It plans to open seven stores next year, she said.
Sears and Home Depot have not disclosed profit figures for the home-design stores. Wayne Hood, an analyst at Prudential Financial, said he thinks Home Depot's Expo, on a fully allocated cost basis, showed a loss in 2000 and may post a loss in 2001.
The scale-back is partly a response to a difficult economy. But some analysts see problems with the decorating chains' business model, saying their products may be too upscale.
"For a merchandise set that is scaled way to the high end and the service and installation that would need to go along with that, I question whether the model is really scalable," said Aram Rubinson, an analyst at UBS Warburg.
Shares of Home Depot, which has climbed in recent days as investors applauded its plans to trim new-store openings, gained $2.20, or 4.61%, to $49.90 on the New York Stock Exchange. Sears rose $1.76, or 3.95%, to $46.31, also on the NYSE.