Lessons to Learn

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Lessons to Learn

Ostensibly, Nardelli was forced to resign his post over the controversy surrounding his lucrative pay package. However, the underlying reason had just as much to do with his handling of the transformation of the company after he took the reins from its entrepreneurial founders Arthur Blank and Bernie Marcus in December 2000. With no previous retail experience, Nardelli's gruff management style is said to have alienated several key top-level executives and his Six Sigma (a data-driven, quality control program used successfully by many manufacturing companies) approach was not easily translatable to HD's de-centralized culture. Although profits and sales soared, industry observers worried about the declining service levels at the company's core warehouse home improvement stores, the investment in lower margin businesses like wholesale building materials and the faster gains being made by HD's chief rival, Lowe's. At last May's shareholders' meeting, Nardelli angered investors when he refused to discuss his pay and limited questions to just one minute per person during a brief, contentious 30-minute meeting.

Meanwhile, HD's stock price has been stagnant, as Lowe's price per share grew 186 percent during Nardelli's tenure.

After a six-year run, Nardelli was replaced by fellow GE alumnus Frank Blake. However, he didn't leave empty-handed: he pocketed a severance package worth about $210 million, including $20 million in cash – a golden parachute that reminded stockholders of the fact that he was paid more than $245 million in salary, bonuses and perks, while HD's stock price declined about 9 percent during his term.

The promotion of Nardelli disciple Blake to the top post likely means there will be few changes in HD's overall strategy. In a "stay-the-course" type memo to employees issued his first day on the job, Blake said, "I firmly believe we are moving in the right direction as a company." However, at least for the short-term, we expect that Home Depot will be too busy fixing its core warehouse stores to spend much time and effort expanding the fledgling convenience store concept, Home Depot Fuel, which it unveiled a year ago. Despite announcing plans to build as many as 300 c-stores by 2010, the Atlanta-based retailer has opened only three so far and sources told Convenience Store News that management is not satisfied with results and is considering a new prototype designed to take better advantage of the opportunity to sell in bulk (such as 10-gal. coffee urns) to contractors who shop at the home improvement warehouse.

With total sales expected to reach $90 billion when 2006 figures are finalized, Home Depot is probably smart to focus on its core concept. We rather doubt HD will attain its original goal of 300 stores by 2010.

CSNews Parent Becomes The Nielsen Company
VNU Inc., the parent company of Convenience Store News, last month announced a global re-branding as The Nielsen Company.

“Nielsen is one of the great names in the information-services industry,” said David L. Calhoun, chairman and chief executive officer of The Nielsen Company. “For more than 75 years the Nielsen brand has stood for the highest standards of integrity and quality, for independence and objectivity, and for an unrelenting dedication to helping clients be more successful.”

Accordingly, VNU Business Media, home to more than 40 leading business publications, including Billboard, The Hollywood Reporter, Adweek and Convenience Store News, as well as trade shows, is now Nielsen Business Media.

The name-change should have little material impact on CSNews, its readers and advertisers. If anything, CSNews’ long-standing relationship with ACNielsen, which is a critical information partner for CSNews’ Annual Industry Report and Annual Forecast Study, will be enhanced as the company works to more closely integrate its information and media assets under The Nielsen Company umbrella.