In the wake of the housing downturn that has severely impacted their store sales, The Home Depot is pouring millions of dollars into dramatic line extensions. So, in addition to picking up some grout, two-by-fours and a brand new electric drill, shoppers can now browse for new washers and dryers, buy gasoline and sip on a caffe latte.
CEO Bob Nardelli’s move underscores the Catch-22 that virtually every chief executive of a publicly- traded company finds him/herself in today: balancing the short-terms needs of the Street with doing the right thing for the long-term, best interests of the organization.
In my mind, Nardelli blinked. By diversifying in such a bizarre, generic way, The Home Depot runs the risk of alienating its core constituency. Think about it: The Home Depot appeals to the guy’s guy. The dude who loves nothing more than to putter around in the garage all weekend long, gets off on re-grouting the bathroom tiles and is only too happy to put in a new dropped ceiling in the basement (note: I am the antithesis of the home fix-it guy). So, when these guys saunter into the local Depot and start running into all sorts of non guy’s guy stuff, I think it’s going to be a real turn-off.
I know that when I look for a guy’s guy experience, I chill with some buds at an ESPN Zone where I kick back with some wings, burgers and brews (ok, some chicken sandwiches and chards). But, the point is, I don’t want to see upscale, stylish and trendy things and people when I go to an ESPN Zone. I want to hang with my fellow Mets and Jets fans and watch either, or both, teams blow a late-game lead.
So, Mr. Nardelli, I think your short-term line extensions may prop up sales for the time being but, when the housing market improves, I think you’ll find a significant percentage of your core constituency finding somewhere else to buy their hammer and nails.