Home Depot revamps results

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As renovations go, Home Depot's marketing makeover would make the "Trading Spaces" team proud.

After two years as a fixer-upper, the hardware retailer's management beamed last week as they reported some of the best earnings and sales growth in years. The company said the results owe much to its having revamped stores, service and communication efforts in a bid to improve customer experience.

Earnings per share were up 25% from last year's numbers, and comparable store sales grew 7.8% over the year-ago period, the best quarterly growth rate since the fourth quarter of 1999. Wall Street had been expecting growth, due to the continued home-improvement boom, but the sales growth beat most estimates by three to four percentage points. Analysts credited booming sales and the economy, but more importantly they noted the growth rate is catching up to that of rival Lowe's Cos.

"We are encouraged by the significant progress in our business, the transformation and our focus on sales, service and execution," said Chairman, President-CEO Robert Nardelli, chief architect of the turnaround.

One of Mr. Nardelli's agents of change, recruited just over a year ago, is John Costello, the company's exec VP-marketing and merchandising and chief marketing officer. Since Mr. Costello joined in November 2002, Home Depot has refashioned its advertising, increased its spending, added sponsorships and entered new areas such as direct-response TV and product placement.

`trading spaces'

Home Depot has recently upgraded its sponsorship of Discovery Networks' hit "Trading Spaces," on TLC. The store is now category exclusive sponsor of both "Trading Spaces" and "While You Were Out," which is also screened on TLC. As well as advertising around the series, the store also provides products and materials for the design projects on the shows.

The day after the earnings announcement, Home Depot announced it also reupped as a sponsor of the U.S. Olympic Committee through 2008.

Under Mr. Costello's watch, Home Depot began to court women with how-to clinics, launched a holiday catalog and relaunched its homedepot.com Web site.

Advertising got a facelift too, with a new campaign from Richards Group, Dallas, tagged "You can do it, we can help." The company spent $405 million in media in 2002 and $357 million just in the first eight months of 2003, according to TNS Media Intelligence/CMR.

"There is a real effort being made by top management," said Walter Loeb, president of Loeb Associates.

The appointment of Mr. Costello last year and the consolidation of marketing and merchandising under his watch is a sign of that effort, he said. Marketing is one area where the company has gained real strength, said Mr. Loeb.

Mr. Costello, a former senior marketer at Sears, Yahoo! and Procter & Gamble, said there was more work to be done, however. "We're off to a good start, but this is a journey, not a destination," he commented.

marketing top priority

The 25-year-old company is still working off the effects of neglecting stores in the 1990s. By the end of the decade, customers were avoiding the dark, warehouse-like stores and complaining they could not find merchandise or sales help. Sales fell as rivals such as Lowe's appealed to do-it-yourselfers with brightly lit, well-staffed and well-organized stores.

Mr. Nardelli, who took over as CEO in 2000, made revamping stores, improving customer service and upgrading marketing a top priority. So far, all stores have had some level of renovations made and major work should be completed next year.

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