Home Depot eschews global growth in favor of U.S. sales

Article by: ARIELLE KASS , A tlanta Journal-Constitution
Updated: October 6, 2012 - 5:10 PM

Setbacks in China and elsewhere have shown the risks of worldwide expansion.

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Home Depot CFO Carol Tome speaks at the Women in Leadership luncheon at the Commerce Club in Atlanta, Georgia, April 21, 2010.

Photo: Bita Honarvar, Mct

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When the chief financial officer of Home Depot looks around the world, she doesn't see an endless universe of potential stores.

Instead, Carol Tome sees country upon country where the home improvement retailer doesn't belong -- because of competition, demographics or simply a cultural mismatch.

"If we look around the world, there aren't very many places in the world that are very interesting" for expansion, Tome said. "We have an obligation, first, to deploy capital in the highest-returning way. We don't have an obligation to look for growth outside the U.S."

Home Depot has made several forays outside this country, but only those in North America have succeeded. The company expanded into Canada with 180 stores and Mexico with 94. But earlier this month, it announced it was closing its seven big-box stores in China, having entered the market with 12 in 2006.

It's not the first time Home Depot has pulled out of a foreign market. In 2001, Home Depot sold four stores in Argentina and five in Chile.

In addition to differences in culture, there are logistics to consider, time zones, currency rates and a simple understanding of the calendar. Thanksgiving and its subsequent Black Friday sales do not translate into other cultures, said Mike Matacunas, CEO of The Parker Avery Group in Atlanta.

Still, Tome said, Home Depot continues to be aware of opportunities around the globe. Home Depot already has plans for another six stores in Mexico, and Tome sees a market for 25 additional stores. And in Central America, Tome said she sees the possibility for 18 to 20 stores, if Home Depot chooses to expand there.

While there are no plans to open any stores in Brazil in the next three years, Home Depot's current planning cycle, Tome said it is the "most interesting" area in South America.

Brazil is a good fit for Home Depot, said Steven Kirn, executive director of the Miller Center for Retailing Education and Research at the University of Florida. But, because China and India make up such a large portion of the global population, companies like Home Depot are simply throwing away potential customers if they don't entertain the idea of operating in those markets, he said.

Tome said the company will study India, a large market with a lot of growth and newly loosened trading restrictions, "because we should."

In China, Home Depot is keeping two pilot stores open -- one focused on paint and flooring, the other on its Home Decorators Collection. The company is also trying to improve its online offerings. Rather than creating its own website for Chinese customers, Home Depot is putting a page up in an online mall. If the China model works, Tome said, online sales may be added in other countries.