Hype and speculation tend to follow an industry consolidator. The announcement last week that Home Depot CEO Bob Nardelli was ousted from his position over pay issues and lagging stock gains generated an inordinate amount of buzz. Some even claimed it is a repudiation of the Home Depot model itself and its relatively recent strategy to aggressively grow the wholesale distribution division.
Hardly. All we know versus a week ago is that HD has $210 million less to fund acquisition activities that instead went to Mr. Nardelli’s severance package (Wouldn’t you like to be chastised like that?). Now that will really slow the acquisition pace of HD Supply….
What’s lost in the shock value of the pay deal is that Home Depot’s net income in the most recent quarter, ended October 2006, was up 129% and revenue doubled from the same quarter of 2000, just before Nardelli was hired. Compare that to S & P 500 companies, whose composite income and revenue were up about 65% over that same time. As hard as it is to apply the term to a pariah who just got one of the prettiest parachutes for Christmas, Nardelli is in fact more a victim of Wall Street, not the architect of a failed strategy.
The real story for those in distribution is that Joe DeAngelo, head of the wholesale division, now takes on the responsibilities of the retail division as well. Based on the challenge at hand, which just got a blazing spotlight thanks to you-know-what, Mr. DeAngelo needs someone to continue to execute on the wholesale side. Will HD Supply lose its way because of distraction? Not likely. Their strategy and team have been well developed. The question is execution and how well HD Supply can build out its platform with the right additions. That hasn’t changed in a week.
