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Home Depot CEO: 'We see a fair amount of risk and uncertainty'
Home Depot CEO Frank Blake met this week with The Atlanta Journal-Constitution editorial board to discuss the housing market, credit crunch and sluggish economy. In this edited transcript, Blake explains the Atlanta-based company's international growth and newfound opportunities with higher energy costs. Q: What are your economists saying about the market now? A: It really is going to depend on what's happening with fuel prices and where the economy as a whole is going to go. If you want to be pessimistic, you'd go OK, we've had the tax rebate that's hitting a little bit last month, comes in more this month and July. And that, in a macro sense, is offsetting the fuel increase. That rolls off in the third quarter, and if our fuel prices are still there, that doesn't bode well. We're seeing it in our products. We know our consumers are seeing it every day. Q: Are you worried about natural gas in the fall and winter? Initial reports are saying prices will skyrocket. A: Having been brought up in New England, you might be able to figure out some way you can carpool or take a bus, but heating your house isn't optional. We see a fair amount of risk and uncertainty going forward. We just have to adjust our business as best as we can. Q: In preparing for skyrocketing heating prices, is Home Depot trying to anticipate what consumers are going to want? A: Yes. We've had a lot of internal discussions about that, particularly in the northern parts of the country. Projects in the past that wouldn't have made sense before now will be pretty financially compelling, like installing new double-paned windows, higher-grade insulation and better weatherstripping. This is not common to the United States, but it's an interesting anecdote — I was out in a store on Long Island [near the Hamptons, in Riverhead], a pretty high-end area. They're selling major solar projects, so we do solar installations. It is like $45,000 to put solar panels on your house. There's a big market for that there. Again, that's not for the everyday consumer, but it's an indicator that there's a lot of interest out there. Q: Bring us up to date on China, Latin America and Europe. A: We're not doing or contemplating anything in Europe. Mexico has been just a phenomenal success for us. When we started in Mexico, [we thought,] 'Gee if we had 50 stores in Mexico by 2012, hubba-hubba.' We've got close to 70 there now and are still growing. We're learning a lot. We're now at the point of taking things we're learning in Mexico and applying them here in the United States. Products that work well in our Mexican stores we're selling here, like the cleaning stuff, Fabuloso. Q: What about China? A: There's a significant difference because the customer [in China] is very different. The customer doesn't own a house with a yard and want a lawn mower. And labor is not expensive, so you're not looking to save money by painting the room yourself. It's a very different sell. The install program is very important. Q: What opportunities do you see in the down market? Does the availability of labor benefit you? A: Great point. At the end of the first quarter, we had roughly 3,000 master trade specialists in our stores [plumbers and electricians that Home Depot has hired at a higher wage]. If we were doing that in the midst of continuing roaring home building, it probably would've been pretty difficult. It's also the case that [the labor market] helps in maintaining associates. I think we actually have a pretty high average wage rate compared to most retailers. We think our associates — they're smart people — they think this is a great place to have a job in a time of uncertainty. Q: What other opportunities do you have in a down market? A: There are two parts to do-it-yourself. One is a great sense of satisfaction when you actually figure out how to do something and you conquer something that you thought was beyond your capability. The other part is that doing it yourself is cheaper. A snapshot is the master trade specialists. I got a note from a customer to this effect: 'I could call a plumber to come to the house and it will cost me 100 bucks for the visit. If I go to the Home Depot and I talk to the plumber and they tell me what to do and literally I can save $100-$200.' That's a big financial benefit. http://www.ajc.com/business/content/business/stories/ |
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