The Home Depot Inc. (Atlanta) has acknowledged that it would consider selling HD Supply, a network of companies that provides pipes, concrete and lumber to professional builders.
The company said it had hired Lehman Brothers to weigh whether it should sell the division, spin it off or take it public.
Frank Blake, who replaced Robert Nardelli as ceo earlier this year, said it was part of a strategic review the company conducted in November. Blake said the company wants to concentrate more on its retail business.
The company said it would “evaluate strategic alternatives” that could also include an initial public offering of the supply business. Home Depot did not say how much it could fetch for HD Supply, but some analysts valued it at between $5 billion and $7.5 billion.
“We are undertaking this action today because of our desire to increase our focus on our retail business,” said Blake. “With annual revenues of approximately $12 billion, HD Supply is a healthy, growing and vibrant business, and we are undertaking this evaluation to determine whether there are strategic alternatives with respect to HD Supply that would optimize shareholder value.”
HD Supply is the wholesale distribution business of The Home Depot, and has nearly 1000 locations nationwide and in Canada.
The new business never won over analysts or shareholders, who did not understand how it would help turn around slumping store sales – and now might question how the company will replace $12 billion in revenue by selling more paint brushes and light bulbs. It would also leave Home Depot’s future with its stores, where sales have been trailing those of its rival Lowe’s Cos. Inc. (Mooresville, N.C.), in part – it has been said – because of routine customer complaints about less-than-stellar shopping experiences.
To overhaul its stores, Home Depot has set up five committees to study what it considers weak spots. One is called “shopping environment,” and another “product availability.”
The “associate engagement” committee has already scored a victory with employees: a $3000 fund for each store to be used to reward workers with holiday parties and spontaneous outings.