January 31, 2008
Home Depot to lay off 10% of headquarters staff

By MICHAEL E. KANELL
The Atlanta Journal-Constitution



The Home Depot announced Thursday a 10 percent layoff at its Atlanta headquarters.

Roughly 500 of the 5,000 employees here were told by their managers that they would be let go as the company responds to the national chill in homebuilding and a slowing of the overall economy. The company declined to be specific about the types of jobs being cut, but said the impact would be across the organization.

"We have been pretty clear that we are operating in a tough business environment," said corporate spokesman Ron DeFeo. "We see that continuing in 2008."

Home Depot has made no significant job cuts at headquarters since shedding 300 jobs in the summer of 2006. Those departing this time will be gone by the end of the week, DeFeo said.

The news came on the same day that the federal government reported an unexpectedly large jump in the number of new weekly jobless claims, to 375,000 from 306,000. For months, layoffs seemed to be bumping along at modest -- or even low -- levels. The sudden spike raised fears that the economic slowdown of the past quarter has started to seep into companies' plans, persuading them to trim costs: And for many companies, the largest cost is the payroll.

Home Depot is one of the nation's largest retailers, specializing in homebuilding supplies and material for do-it-yourselfers. Corporate-wide, Home Depot has roughly 350,000 employees. The largest single group is at its Paces Ferry Road headquarters. Home Depot is the fifth-largest employer in metro Atlanta, according to the state Department of Labor.

The company reaped large profits from the boom in housing during the first half of the decade. But for more than a year, homebuilding has been in decline. Most experts do not see a reversal in that slide for many months -- perhaps not until 2009.

Last fall, Home Depot warned Wall Street the housing market slowdown would hurt. The retailer said its 2007 earnings per share would decline as much as 11 percent from the year before. The company is scheduled to report fourth-quarter and year-end earnings later this month.

Home Depot in November reported a 27 percent drop in third-quarter earnings. At the time, Chairman and Chief Executive Frank Blake gave a gloomy outlook.

"We started the year with a more pessimistic view of the housing and home improvement markets than many," he told financial analysts on a conference call. "It turns out we were not pessimistic enough."

Federal law concerning large-scale layoffs requires that Home Depot pay the employees for the next 60 days -- through April 4, DeFeo said. No reductions are planned at any of the company's 2,200 stores, DeFeo said. Home Depot opened nearly 100 new stores last year.

When reporting its financial results later this month, the company will announce expansion plans for this year, he said.

The 500 jobs being cut make up a tiny fraction of the more than 2 million jobs in metro Atlanta. But the cuts have an outsized impact -- for both symbolic and economic reasons, said Rajeev Dhawan, director of the Economic Forecasting Center at Georgia State University. "This is not trivial," he said. "Headquarters jobs are usually very well-paying. So any loss like this is magnified."

In recent years, metro Atlanta has lost jobs at other corporate headquarters, often because of mergers, like BellSouth's deal with AT&T, or acquisitions, such as Koch Industries' purchase of Georgia-Pacific. Delta Air Lines shed jobs when it went through bankruptcy. But Home Depot is the first local corporate icon to blame job cuts on the current economic slowdown.

People who make a decent living spend their money at stores and on housing in metro Atlanta. So each high-paying job indirectly supports about two other jobs in the economy, he said.

The Home Depot cuts are troubling, but after months of woes in homebuilding and sales, the pain was relatively predictable, he said. "This is the first major layoff we have seen from a big Atlanta employer," he said. "But it's still related to the housing market."

Optimists have argued that the housing market's troubles will be relatively contained. Moreover, they hope for a turnaround in housing within the next year.

Home Depot will be something of an indicator as to how bad the damage will be, Dhawan said.

"This is fall-out from the housing market," said Dhawan. "They are basically hunkering down. You start with 10 percent. If that doesn't do the job, you do another 10 percent."

Two additional reasons ...

(1) LOWE's has lower prices on just about all identical items they both carry ("I know because I'm redoing my crib right now!")

(2) ...