Mr. Fix-It STEPS IN - Home Depot Inc.'s Bob Nardelli - Company Profile - Statistical Data Included

Chief Executive, The, Oct, 2001 by Jennifer Pellet

The plans appeased investors, who bid Home Depot's stock back up to its current $48 neighborhood, despite a 20 percent drop in earnings in fourth quarter 2000, followed by a disappointing first quarter that had the company reporting negative comparable store sales for the first time in its history. Second quarter results proved slightly more promising, with sales up 16 percent for the quarter ($l.4.6 billion from $12.6 billion). Although comparable store sales remained sluggish, up just 1 percent-indicating that the 115 new stores opened in the first half of 2001 accounted for most of the sales increase -a bump in profits of 10 percent for the quarter suggests that Nardelli's cost-cutting efforts may be paying off. But even as analysts applaud Nardelli's efforts, they note that hurdles lie ahead.

"This company will be made or broken based on its ability to change what has been a very successful entrepreneurial culture up until now," says Balter. "As a small chain you can give a lot of autonomy to your managers. Letting them order merchandise creates an entrepreneurial spirit, which is good. But when you get to a certain size you can boost efficiency by buying a full truckload and shipping it to central distribution."

Yet in calling for centralized buying and distribution Nardelli is treading on what has long been the sacred domain of Home Depot's regional merchants. "Wal-Mart tussled with the same stuff and it was not easy," notes Baiter. Already, several long-time Home Depot merchants have departed. Most recently the merchandising executive vice president, Mark Baker, left in June.

Such turnover is a necessary side effect of Nardelli's GEstyle approach to management, says Donald Trott, a Jefferies and Co. analyst. "With [founders] Bernie and Arthur, the approach culturally was, 'We're part of the troops like you guys and we're going into battle with you.' But Nardelli does not look comfortable in that orange apron. His body language is more 'I am the general up on the hill with the binoculars; you guys go take on the enemy.'"

"Certainly that's not the best thing in the world for employee morale," adds Trott, "so accomplishing his agenda without undermining the culture of the company will be a major challenge."

Marcus and Nardelli are quick to assert that there is no friction in the ranks at Home Depot. "We have to change a lot of things, and I think only somebody objective who came from the outside can change those things," says Marcus. "But our culture is very unique and unusual, and it's the thing that got us where we are. Bob understood that instantly and knew he was going to work within the framework. He's doing that, and when he gets finished with this company it will be more productive and efficient."

"Every time I see him I kiss him on top of the head," Marcus adds, "and tell him I'm just happy he's here."

If head smooches from the chairman and bear hugs from store employees are disconcerting after nearly 30 years at the more buttoned-up GE, Nardelli isn't letting on. "The apprehension you have with such a tight family when you are an outsider is, 'How will I be accepted?"' he says. "But these associates are marvelous. There's no hoarding of information. They are sharing and very willing for strategic direction."