Is it so bad to say "Good riddance?"
The chairman and CEO of Home Depot (NYSE: HD ) , Bob Nardelli, resigned both positions today, undoubtedly fed up with critics harping on him and the company about his pay, the board's governance quality, and the big-box retailer's lackluster stock performance. Nardelli's taking his hammer and he's going home.
Don't let the roll-up doors hit you on the way out, Bob.
In case it can be misunderstood, I'm no fan of Bob Nardelli and his style of management. I found his display of arrogance at last year's annual meeting unconscionable, and I think his ability to run the business is overblown.
Let's look at the case for Bob. Under his tenure, sales at the Big Orange Box nearly doubled, from $45.7 billion in 2000 to $81.5 billion in 2005, or 12% growth compounded annually -- certainly a tremendous achievement, considering the size of Home Depot. Earnings per share increased more than 145% during that time period, and the company also oversaw the return of more than $20 billion to shareholders in the form of dividends and share buybacks.
Outstanding achievements all, but really, how much of that do we attribute to Nardelli and how much to forces well beyond his control? The cliched infinite number of monkeys hammering away at typewriters with one churning out Shakespeare come to mind.
Those sales increased during a record housing boom in this country. Over that same time frame, sales at Lowe's (NYSE: LOW ) grew from $18.8 billion to $43.2 billion, a compounded growth rate of 18% annually. Earnings grew 241%, or 27% annually, and Lowe's bought back billions of dollars' worth of shares and paid dividends, too.
For all that, do you even know that Robert Niblock is the chairman and CEO of Lowe's, or that last year when Nardelli was earning his $7 million bonus -- bringing his total compensation to more than $29.7 million -- Niblock's entire compensation package was $7.8 million? Probably not.
Yet which investors were better off? Lowe's stock rose 48% over the past five years; Home Depot's share price declined more than 20% in that same time.
Defend Nardelli as a brilliant operations manager if you want. Undoubtedly he's competent and maybe even very good. But those stock results achieved during his tenure at Home Depot are nothing investors ought to get themselves exercised over as he leaves his posts.
Yet there is a cause for hope at Home Depot (hope, not shining optimism). Taking over the reins after Nardelli will be another General Electric (NYSE: GE ) alum, Frank Blake, who was brought in last year to serve on the board in what was apparently preparation for today; Joseph D'Angleo will become the COO. But Blake's never run a company before, hasn't even helmed one of Home Depot's operating divisions, and the board remains essentially unchanged. It this same board that held its shareholders in such low regard that it could not bother to attend the shareholders' meeting.
New management is not preparing to change course from what Nardelli had set, so any differences that arise will happen incrementally. We should not expect to see any new trails being blazed any time soon, which is too bad. The company faces some tough challenges ahead that could require bold action: a slumping housing market; market share erosion; and a Home Depot store on every corner. Starbucks it's not, and saturation may continue to eat at performance.
So Nardelli's gone, and he's taking with him a generous $210 million severance package. It might be worth it if the new management coming aboard can repair this ailing giant.
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