Home Depot closes stores as it shifts focus
Updated: 2012-09-15 09:24
By Wang Zhuoqiong (China Daily)
Home Depot Inc, the largest home-improvement retailer in the United States, said it is closing its remaining seven big box stores in China as it shifts its focus to specialty and online outlets in the world's second-largest economy.
The move will affect about 850 employees, and the company will record an after-tax charge of about $160 million, or 10 cents per diluted share, in the third quarter, it said in a statement issued on Thursday.
Employees of Home Depot gather outside the company's Xi'an store on Friday as the home-improvement retailer declared that it will close all its seven stores in China. [Photo/China Daily]
"Closing stores is always a difficult decision," said Frank Blake, the company's chairman and CEO. "We've learned a great deal over the last six years in China, and our new approach leverages that experience."
The company said it will keep its two recently launched specialty outlets - a paint and flooring store and a home decoration shop - in Tianjin.
It is also in talks with several Chinese e-commerce websites to explore selling its products online, it said, a combination believed to be more adequate to Chinese customers' needs and shopping preferences.
The Atlanta-based seller of building materials and home-improvement products will also keep its R&D team in China, as well as the 170 workers in its sourcing offices in Shanghai and Shenzhen, the statement said.
Home Depot has 2,249 retail stores in operation globally. Excluding the charges related to the store closures, Home Depot expects its fiscal 2012 diluted earnings per share to rise 19 percent to $2.95 for the year.
The company's success story in the global market did not translate well in China, where the do-it-yourself home decoration-retailing concept has failed to inspire Chinese homeowners, industry analysts said.
The US company acquired a local peer, The Home Way, in 2006 and took over its 12 outlets in China. However, it has closed five outlets since 2009. The company has also replaced three top executives since its establishment in the country, a move that did not alter its sales decline.
Though specialized home-improvement retail is an upcoming trend, Home Depot arrived in China too early, at a time when the country's decoration culture and consumption behaviors were not ready for the concept, said Chen Lei, a retail analyst at China Galaxy Securities. Despite the construction boom, the low labor costs made the DIY decoration concept irrelevant, he said.
Chinese homeowners rarely paint houses or lay out wooden floors themselves. Rather, they prefer to hire decoration companies, which often find products with more competitive prices from local building material stores, Chen said.
In addition, the company's strengths in the United States, including its lower prices due to its global sourcing channels, have been diluted in China.
"You can always find local brands that are cheaper, and consumers in various regions have very different preferences," Chen said. "Winning the market through a price war is not going to work for a foreign retailer in China."