Want to know when irony whacks you across the noggin like a two-by-four? While Home Depot(NYSE: HD) was bowing to environmentalists by announcing a new sourcing policy for its timber, it was also assuring disgruntled investors that a slew of trees would meet their fate as lumber to fill sell-order confirmations after warning of a fourth-quarter shortfall.

Can anyone say, "Timber"?

The home-improvement retailer was already capping off a dreadful 2002, with share prices unseen since 1998. With the chain opening its 1,500th store just last month, it's clear Home Depot is going through some growing pains. The company is looking to post a fourth-quarter decline of 10% in same-store sales after a bleak December, guiding Wall Street to expect full-year earnings between $1.53 and $1.55 a share.

While it can attempt to hide behind the orange apron of a sector slowdown, rival Lowe's(NYSE: LOW) is its most obvious problem. The No. 2 home-improvement retailer is moving into Home Depot's strongholds -- and it's winning the ware war.

While Lowe's has a little more than half as many stores as Home Depot, its refined store layouts and high-end marketing campaigns are driving in new business. In November, Lowe's projected fourth-quarter comps to climb by as much as 4%, while Home Depot was already sputtering. And last month, Lowe's hiked its dividend.

It's possible rock-bottom rates have lasted so long that the refinancing bug is no longer nibbling, and homeowners are therefore putting off remodeling projects. But Home Depot may want to consider a makeover sooner, rather than later. It can learn from its competition. And it has little choice but to do so, at this point.

If you own shares of Home Depot and want to get out, or you're a potential investor attracted to this classic blue chip (now fetching an earnings multiple in the teens), think about what the company has to do to get its act together, and the potential windfall if it gets it right.