Home Depot better left for dead - Top Stocks Blog - MSN Money
 
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Home Depot better left for dead

Posted Mar 21 2008, 03:26 PM by Robert Walberg
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Perhaps David Batchelder, a director of Home Depot, was inspired by the Easter theme of the resurrection when he decided earlier this week to spend more than $28 million to purchase 1.1 million shares of the home improvement retailer's stock. Batchelder now owns 1.9% of Home Depot.  Not surprisingly news of the transaction sent shares of the beleaguered retailer sharply higher in Thursday's trading.

But should you follow the lead of this insider and start accumulating Home Depot stock?  Investors often perceive insider buying as a strong (re)entry signal for beaten down stocks.  Home Depot definitely fits that description, as the company has seen its share price tumble by 27% over the past year. Nevertheless, there is no reason to hurry back into the stock -- despite the bold action taken by Mr. Batchelder.

First of all, the housing market isn't getting any better as evidenced by the weakness in the most recent housing starts data. Fewer homes being built means less commercial business for granite countertops, kitchen cabinets, floor tile, etc.  Meanwhile, the lifeblood of home remodeling projects -- home equity loans -- are increasingly difficult to come by these days. Toss in the slumping economy and reduced consumer spending into the mix and it's safe to assume that the pace of remodeling efforts will remain slow for the balance of 2008 and into 2009.

Not only does the macro picture continue to look bleak, but Home Depot is still smarting from its lack of satisfactory customer service -- a problem which has plagued the company for years and sent once loyal customers to competitors such as Lowes. You might get away with mediocre customer service during boom times, but when conditions get tough such problems really begin to make a difference when it comes to market share.  Note that Home Depot's projected that sales in fiscal 2008 would decline by as much as 5% versus a modest gain for Lowes.

So what if macro conditions remain lousy and the company continues to lose share to Lowes -- that's old news you say.  Already in the price of the stock, which is why Mr. Batchelder is taking advantage of the cheap price to load up on the stock. That might be a decent argument for buying if it were true, but it's not. Despite its problems Home Depot trades at a premium to its industry and the market - even though earnings are projected to grow at a slower rate in the future. Based on its growth prospects the stock doesn't look fairly (not to mention cheaply) priced until it hits the $21-$20 area. 

As far as I'm concerned, the insiders can buy all they want because Home Depot remains dead to me.

(Disclosure: If it isn't obvious, I don't own Home Depot stock. I don't own shares of any other company mentioned in this post.)

Comments

 

I usually refrain from going to Home Depot because, being a total dufus when it comes to home repairs, I really need help.  And it is so very hard to find.

I did return Easter Sunday to pick up some stuff and got great service.  Since I was basically the only one in the store.  I actually saw 3 employees, one of which as extremely helpful.

I got lucky this time.

I just had $16000 worth of windows installed by HD. Couldn't be happier.Very professional all the way thru. Lowes couldn't come out for 2 weeks when I checked. Sears was sky high for a simular product. Talking about  bad cust. service, Verizon is at the top of my list.

Poor customer service is right.  I worked for Home Depot back in the 80´s and servicing customers was the main reason we were there.  It ain´t so nowadays.  The main reason the employees are there is to make money and go home.  Maybe HD needs to hire some of those guys and gals from the 80´s and relearn how to make customers happy.

If improving customer service is putting in more self service check out lanes in their store,they will continue to lose customers like me. Their employees act like they are running from you when you need assistance. Most employees are going to lunch or breaks constantly. Lowes is usually a little pricier but you can find someone to help. They need completely new management before someone should invest in their business.

Talk about screw ups.  How about always out of small dollars items that force you to go somewhere else.  After a while, you figure out why not go somewhere else in the first place.  I sold my HD stock last year so I would not feel guilty about going to Lowe's

I've been in sales for 40 years and I work for Home Depot part time to supplement my retirement income and to give me something to do. I give customer service to hundreds of people every week and I can tell you that there are customers who are just complainers and trash the company any chance they get. They are only a small percentage of the people I help, but they make the loudest noise about anything and everything.

The store I work at has good people working there and the vast majority of the customers go home happy. The ones that post are the complainers. They look for problems that don't exist.

Most of the people who shop at Home Depot are return customers who won't go to Lowes because Lowes is understaffed with inexperienced people who are paid much less than the associates at Home Depot.

1'st a clerk leaves to do a price check-----never returns! Next a dept. manager  tells me that they do not have time to pull an item from the top so that we may inspect it as it is lunch time. After lunch his people have an end cap to set up and if I couold give them  a time tomorrow  perhaps they could schedual it in!  It cost me $8.00 just for fuel to go to town ---I went across the street to Lowes . I've given up after sooo many occurances  such as this.

Gary

My husband and I live in Tucson AZ.  We recently had to buy some stucco patch.  As you would imagine, stucco is BIG here in the Southwest.  So to Home Depot we go, only to find out from a non-knowing floor person that "we're out".  Again, we trotted over to Lowes, and in and out we got what we needed.  We are so outraged ,and beat ourselves up every time we go to the Depot.  Next time we'll just  go to Lowes , get what we need, and save on the gas & needless steps

Their customer service suks, and the workers are just to young worker there.  I don't know why companies feel the need to hire such a group of young people that just do not want to deal with or associate with the older people.  It's the older people with the money that keeps businesses afloat, and it's time to start bringing back workers 40 + back into the work place.  They actually work, and don't spend time trying to pick up people that come in, or ignore the older people that has the money and need assistance from time to time in trying to find things.  It's just that simple; get rid of all the young jerks working there, and hire more mature, respectful, working class of people.  Also, you really need to get rid of all the illegal laborer camps sitting in your lots.  I don't shop there because i just don't feel comfortable parking my car in a loot with a bunch of illegals staking out my car.

What ever happened to Home Depot?  You went cheap, and you sank your ownbusiness in doing so.  Young, goodlooking people don't keep customers coming back or sales for your business.  Customer service and feeling appreciated does.

went there the other night and purchased approx. $1,000.00 in supplies and was exspected to go thru self-serve, there was not a cashier open. the place is a joke

trying to get help on the floor does not happen so you are on your own we will take our buissness elsewhere

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