Home Depot's (NYSE:HD) latest slogan is, "You can do it. We can help." I think I can do it, but at this point, I'm not sure how much Home Depot can help me at its stores -- or help my portfolio beat the market.
At the beginning of June, I discussed the turmoil that resulted from Home Depot's annual meeting. The tumultuous issue peeved a number of shareholders and observers, and I received plenty of feedback from Foolish readers. Some of the responders, including current and former employees, touched on an entirely new issue that hadn't received a whole lot of press until recently.
Certain readers pointed out that in attempting to cut costs, Home Depot's management had effectively replaced its more knowledgeable and experienced store staff with less seasoned employees, plunging many of its stores into relative disarray. Furthermore, these readers contended that the quality and usefulness of Home Depot's merchandise had deteriorated, as management again tried to cut costs by selling cheaper, private-label merchandise.
The company announced recently that it will no longer provide same-store sales growth statistics. Observers have wondered whether the company was trying to hide store-sales weakness, or merely concentrating more on long-term sales growth than on a fluctuating metric that some consider too focused on the short term.
Management's military-style command-and-control tactics seem to have spread uniformity across its store base, but they're upsetting the troops. Customers seem displeased, too, reporting difficulty in getting merchandise specs and locations from store associates. An article posted Friday evening on MarketWatch.com noted that management has begun to admit that conditions in the store aisles are amiss; Home Depot has earmarked $30 million to increase bonuses and incentives for employees and locations that earn high marks for customer satisfaction.
The article goes on to question whether this move will really help create more knowledgeable floor ambassadors for Home Depot's goods. It does seem to demonstrate that the company acknowledges the problem and is willing to explore remedies. Perhaps management will be able resolve the matter smoothly, and return to tackling both shareholders' concerns and a more recent informal SEC probe into its previous stock option granting processes.
The company clearly has quite a fix-it list, but at less than 13 times trailing earnings, there may be enough downside built into Home Depot's stock price to warrant investors' consideration. Lowe's (NYSE:LOW) currently enjoys a better public image and a better-performing stock price, but I'll let our Foolish readers decide the next course of action. You can do it.
Home Depot is a Motley Fool Inside Value pick. To discover more of the stock market's best fixer-upper opportunities, try Philip Durell's premium newsletter service free for 30 days.
Fool contributor Ryan Fuhrmann is long shares of Home Depot but has no financial interest in any other company mentioned. Feel free to email him with feedback or to discuss any companies mentioned further. The Fool has an ironclad disclosure policy.
