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Revving Sales at Home Depot

CEO Robert Nardelli randomly awards pickup trucks to managers who met goals last quarter.

August 19, 2003|From Bloomberg News

Some managers at Home Depot Inc. have found that company rewards could be real pick-me-ups.

Home Depot Chief Executive Robert Nardelli has given store managers who met sales goals last quarter a four-wheel prize: pickup trucks painted orange to match the logo color of the world's largest home-improvement chain.

"It is really like a race car," said Monty Marsh of his 2003 General Motors Corp. Chevrolet Silverado, customized with leather seats and racing stripes. "I have to keep my kids out of it. They want to take it on dates."

The incentives are part of Nardelli's push to revive revenue and fend off competitor Lowe's Cos. after the former General Electric Co. executive spent most of his first year lowering expenses.

Atlanta-based Home Depot is expected to report today that sales at older stores increased for the first time in a year and profit rose to 54 cents a share, the average forecast of analysts surveyed by Thomson First Call.

"Bob Nardelli is turning things around," said Wayne Bopp, an analyst with Fifth Third Bank. "The problems at Home Depot were deeper than people appreciated."

Nardelli, who had no retailing experience before joining Home Depot, also is spending more to remodel stores, increasing inventory to ensure shelves are full, adding products such as John Deere tractors and advertising more.

His hiring in December 2000 jolted some longtime employees who had worked for company co-founders Bernard Marcus and Arthur Blank, but nowadays they are embracing changes intended to sustain growth, Nardelli said.

Signs of a turnaround have helped boost Home Depot shares, which on Monday rose 36 cents to $33.90 on the New York Stock Exchange.

Improved customer service and a $250-million store remodeling program are helping results, Nardelli said. Home Depot boosted inventory 25% in the first quarter from a year earlier after shoppers complained of merchandise being out of stock. A do-it-yourself workshop for women in May attracted 40,000 female customers nationwide.

Nardelli, 55, is making adjustments, such as hiring more full-time workers, after some missteps last year, investors said. He had increased the number of part-time employees to about half the workforce of 315,000 to have more people on duty on weekends; that led to higher turnover and hurt service.

"We have stayed very focused," said Nardelli, who also is slowing expansion and consolidating purchasing.

Home Depot is installing self-checkout lanes in 800 stores this year to cut waiting time, and employees who had worked checkout are being moved onto the sales floor to assist customers.

Store manager Marsh said his 210 employees had boosted sales of carpets, kitchens and gardening products by providing advice and keeping shelves stocked.

Marsh, who runs the Germantown, Md., store, and nine other managers who were randomly picked to receive the trucks in turn gave employees a total of 50 Disney Cruise vacations or three-day trips to Walt Disney Co. theme parks.

Marsh says he gave away five Disney vacations by pulling names out of a hat as employees screamed with gusto.

"It helps to keep the enthusiasm going," he said.

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