Why Costello bolted Depot

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Home Depot's John Costello thinks it's time to move from CMO to CEO.

Though Mr. Costello, one of marketing's most-watched players, isn't talking about his reasons for leaving the $73 billion home-improvement company-his resignation was announced late Aug. 19-those close to the executive said that he has been approached with offers to run his own company.

At Home Depot, Mr. Costello, 58, has little chance to succeed Chairman, President and CEO Bob Nardelli, who is near in age to himself. "Bob is there for the long term," said a person close to Mr. Costello, noting that he is now looking for an "opportunity to do his own" company transformation.

Under his nearly three-year tenure as chief merchandising officer and steward of Home Depot's $500 million advertising budget-the marriage of the two consumer-facing functions under one man was a precedent-setting move-the big-box retailer underwent a transformation of sorts. The announcement of his departure comes three days after the retailer reported second-quarter sales of $22.3 billion, up 11.7%; same-store sales were up 4% for the quarter. In fiscal 2004, same-store sales were up 5.4%. Home Depot hasn't had results that good since 1999.


Mr. Costello joined Home Depot in 2002 amid stiff competition from Wal-Mart Stores and Lowe's, the latter of which continues to report stronger comparable-store sales and is growing at a faster rate than Home Depot. (Lowe's comparable-store returns beat Home Depot's, up 6.5% in the same quarter.) Reflecting the hardscrabble competition in the category, Lowe's in May put its $314 million creative and media account into review. Incumbents McCann Erickson and Universal McCann are defending.

"Our advertising and marketing programs are stronger than ever, thanks to [Mr. Costello's] efforts," said Mr. Nardelli in the announcement of Mr. Costello's departure, which the company said was to "pursue other business opportunities." Home Depot's agencies include DDB, Chicago; Richards Group, Dallas and Initiative, Atlanta.

Mr. Costello will be succeeded by Tom Taylor, a 22-year company insider and exec VP of Home Depot Stores. Mr. Taylor, 39, becomes exec VP-merchandising and marketing, and "brings decades of company and retail experience to his new role," said Mr. Nardelli. "Tom served in numerous leadership roles that have directly influenced our merchandising and marketing efforts." In appointing Mr. Taylor, Home Depot passed over former General Motors executive Roger W. Adams, 48, now senior VP-marketing, who reported directly to Mr. Costello.

Home Depot spokesman Jerry Shields said it's unlikely Home Depot will drop its current marketing direction under Mr. Taylor. "No, no, no, we don't have plans to make any significant changes," he said.

A key player in the Association of National Advertisers, Mr. Costello has job-hopped around the top marketing ranks of Sears, Roebuck & Co., and Yahoo before joining Home Depot. But he has also headed companies as president of Nielsen Marketing Research and AutoNation, and was CEO of MVP.com, which folded in the dot-com bust.

Under Mr. Costello, Home Depot embraced some opportunities for branded entertainment, such as a turn on "The Apprentice." It also adopted the tagline "The Home Depot: You can do it. We can help." A number of competitors, however, recently have been attacking the chain with ads showing customers wandering down aisles without getting adequate help.

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