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Is Home Depot shafting shoppers?
Sixteen years ago, I sent my wife a love note. It went like this: Carolyn: I've gone to Our Store. Be back soon. Love, Scott. We called Home Depot (HD, news, msgs) "our store" because we spent a lot of time there back in 1990. We're house freaks. Wherever we go, we imagine living there, owning a house or a condo. We like to remodel houses. In the past 16 years we've done major work on three houses in Dallas and two houses in Santa Fe, N.M. But I have a confession to make. I still love my wife, but we don't shop much at Home Depot anymore. Indeed, we generally try to avoid it and grieve for the loss. We're not alone. Last month Home Depot announced a whopping 28% decline in earnings for the fourth quarter. Even more striking, same-store sales were down 6.6% from the previous year. This had never happened before, not in all 28 years of company history. Once a growth darling, "the new Wal-Mart (WMT, news, msgs)" and a stock that sold at twice the market multiple, Home Depot is now widely discussed as a potential private-equity buyout candidate because it earns 22% on shareholder equity and has lots of assets to hock. Today it sells at a below-market multiple of 14.4 and offers an above-average dividend yield of 2.2%. * Talk back: Does Home Depot abuse its customers? Much of the recent disappointment in the stock is due to the slowdown in housing and the reassessment many are making of homes as an investment. With home resale prices flat to declining, many homeowners are reconsidering the kind of home-improvement projects that make for multiple visits and big spending. Home Depot rival Lowe's (LOW, news, msgs) reported an earnings drop of 12% for the fourth quarter. Some of the less recent disappointment in Home Depot shares is due to the egregious compensation of its former CEO and his high-handed treatment of shareholders. http://articles.moneycentral.msn.com/Investing/Extra/HomeDepotShaftingShoppers.aspx |
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