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Nardelli's moves to introduce elements of GE's numbers-oriented processes, along with a new slate of top executives, ruffled feathers in Atlanta's clubby business community. "No question about it," says ex-CEO Blank, who is still active with Home Depot's charitable work in Atlanta. "There was a shift in orientation and culture. Some felt comfortable with that, some didn't." Blank says Nardelli's appointment was the first real management change in a company that was still essentially run like a family business. Taylor says Nardelli's appointment was "as if my mother had come home...
When Nardelli moved with his wife and four children from upstate New York to Home Depot's Atlanta headquarters, the home-improvement retailer was going through a rough patch of its own. Its co-founder and second CEO, Arthur Blank, was under pressure to leave; the company had added stores more quickly than it could properly manage, and comparable-store sales, the crucial measure of a retail chain's organic growth through existing stores, had been declining for eight quarters. Home Depot was expanding so quickly that many executives saw nothing wrong. "You had people who were enormously proud...
...Home Depot's swaggering culture attracted creative managers with a passion for their work. "We were a little bit rebellious, a little bit dangerous," says Tom Taylor, a 21-year veteran of Home Depot. Stores were expected to respond quickly to changes in their local markets, and they did. But Home Depot never took advantage of its size to negotiate national purchasing deals, and there was little communication among store managers. As Home Depot's growth slowed, it became vulnerable to competition from WalMart's cost cutting on one end and Lowe's more polished, female-friendly stores...
Nardelli rode out the transitional bumps by defining a strategy and sticking with it: promote higher-end products and services in cleaner, better-organized stores. Nardelli has a laboratory for these ideas in the Home Depot across the street from his 22nd-floor office. (He often drives in on weekends--sometimes on his Harley-Davidson motorcycle.) Floor displays explain big-ticket items like lawn mowers and washing machines. Instead of paint cans lined up on shelves, a "color-solutions center" showcases Home Depot's color-matching technology...
None of the improvements are breakthrough retailing ideas, but by sprucing up displays and introducing higher-end products, Home Depot can get each shopper to spend a little more. Home Depot's best-selling ceiling fan used to be a $19 model; now it's a $199 model. In the first quarter, the average ticket rose 7.4%, to $55.11, a record for Home Depot, although still below the $59 average ticket of Lowe...