Summary
Old adages just keep turning up. This company is being done in by the autocratic attitude of its now ex-CEO and the continuing concentration of power in the hands of Private Equity Capital. Mr. Nardelli just wasn’t nice and when they could, the investors whined him out. His results of doubling sales and profits in 6 years sounds good to me even on a present value basis. The stock price just didn’t go up despite that. He didn’t sell his program to investors because he didn’t think he had to. He was wrong and it cost him his job.
Analysis
The legacy of the previous management looks good to me. The retail growth program was tremendous. The Pro-Desk operation is a continuing hit. The much-criticized wholesale builder business wasn’t buzzed right but its concept is tremendous in my opinion. The company is launched overseas including China and it’s a great start after an initial hiccup. Granted the new retail stores were interdicting traffic to existing locations, but the Lowe’s competition otherwise would have taken the share in many cases. It may have been that increasing store costs were not offset by better same store sales, but this is a juggernaut that will suffer from diminishing returns from time-to-time as it reinvents its market presentation. After the founders left, Nardelli didn’t continue the same company spirit in the stores because he didn’t know how to do it and didn’t feel comfortable. After all, he was a manufacturing pro at GE and what did he know about $ 10 per hour guys and gals in the stores.
Undoubtedly, the next administration will take the opportunity to write off the matters it can to sweep the floor. What this company seems to need at the top is a team that knows and feels comfortable with retail stores as well as wholesale operations and is skilled at investor schmoozing. Let’ s watch as the new program unfolds.
