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Home Depot CEO Frank Blake weighs in on the state of business and company growth.
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Get your Fox Business market -- and -- -- Jones industrials just enough flat want but look at the NASDAQ S&P and Russell all kind of recovering at least some of the gains that we've seen earlier today.
Let's pick out one name from the Dow components and also a member of our fox fifty.
Home Depot shares are falling now for a second straight day in a row after analyst firm Oppenheimer cut the company's rating.
From outperform.
To perform.
The worst thing in the world but at this time oddly enough they raise the company's price target from 61 dollars to 67.
Dollars a swarm of valuation think -- the company's done so well.
But everybody was -- of the analysts yesterday we said well let's talk to the CEO.
We are happy and finally starting to.
See some promising data in the housing market so why not bring in the CEO of this Dow component which has grown consistently.
Over the past couple of years the CEO and chairman frank Blake welcome -- I think -- -- you had a vision commute you took over back in December 2007.
UX acute that well.
And they downgrade you because you've actually done well and shown an improvement in the sudden you think about yesterday -- first.
Brian nails it is a great analysts site I've had no.
You know I don't wanna comment on on his upgrading and I think analysts.
Hello it's terrific and I think.
Look our company -- we're doing well we were able to grow in 2010 even when the housing market was down.
2011.
Even when the housing markets down and I think.
Now we're starting to actually see -- it's not a recovery but kind of thawing out.
And and hopefully a gradual improvement in the home they look at this chart -- -- look at the year over year number which is up 73%.
I think they've got a stumble.
Is home to welcome to stumble or can you prove them wrong it's our job to proven wrong.
It's our job from -- we're we're making a lot of investments in the business we've basically.
Restructured our entire supply chain.
Making heavy investments -- IT and in our people and it's our job not to stumble well tell them let me tell.
-- through our airwaves what will be the growth driver that continues to make home Depot's.
Quarter after quarter -- extraordinarily well I mean nine quarters out of ten.
You've had same store sales that have increase so how do you do that and then it's more about what have you done for me lately on my street that -- -- see it look even better.
The interesting part of Home -- -- if you go back to 2006 and look at our sales in 2006.
And then the end of 2009.
-- thirteen billion dollar smaller from 2006 to 2009.
They're very very few companies in the world that can survive that -- of loss in revenue.
And still invest in the business and be as strong as Home Depot.
And then you look on -- recovery side very few companies in the world that have that kind of an opportunity.
Just getting back to where we were -- few years ago so enormous growth potential just getting back to were were in 2000.
-- OK so you're saying that after having been dealt with the shrinking horrific recession right.
There's the opportunity that inflating back to where -- -- and even more -- you know the Fed Beige Book came out yesterday and this is that the survey of of twelve different regions.
And -- it all but did happy -- -- as far as the Fed is concerned they don't usually get excited about anything especially over the past couple of years but.
The way they put it about residential real estate was this they said residential real estate which is -- bailing out next is really your bread and butter.
In essence showed wide spread improvement.
So my question is this.
What have you seen and do you give the Fed any credit for at least having done a couple of things to the bottom in house -- -- market.
Well I'd say we see a couple of things specifically in our business so we serve about 35% of our sales go to pros and and and the other part is doing the other side other side is consumer do it yourself for.
And our pro business got hit particularly hard during the downturn.
And we are starting now for the really towards the end of last year -- now through this year.
To see our pro business recover it's not growing as fast as the consumer business but it is growing which is a positive for us okay that's news so -- trade.
The proportion that it did that the trade is starting to its Saturday when it that's start -- -- -- it started towards the end of last year British you'll remember we had some really nice weather in the back half of 2011.
So it's always a little difficult to keys how much of that tease out how much of that is.
The market recovering vs weather but now we've seen it for a few quarters consistently.
So that kind of growth is -- -- modestly encouraging factor are you worried going into the winter -- that it might.
Moderate -- -- -- so we always -- year over year comparisons that we have to plan for because you're not gonna plan for another extraordinarily warm.
-- winter but.
We're confident that we're going to be able to keep growing the business and then the other thing that we're seeing regionally is the hardest hit areas so Florida.
California Arizona are starting to recover so.
Florida and California the last quarter.
Had growth equal to or slightly better than the rest of the business so that's an encouraging factor -- those states that's news well that's and then on the Fed.
Look -- -- never been more affordable.
Than it is now if you wanna buy a house it's never going to be more affordable.
And it's just going to be a slow -- credit becomes available for consumers to be able to take advantage of the affordability fed gets beaten up for a lot of things to they have something to do with us this -- I mean I think the affordability of mortgages is -- big is going to be a big picture in.
A slowly recovering housing market and the affordability is something that we look at as -- -- Here's what's less affordable gasoline now are you starting or maybe this is a better way to phrase the question how are higher gasoline prices affecting your sales lately.
So for us we don't tend to see that much of a direct correlation between.
Gasoline prices and our sales although.
For surety impacts that do discretionary wallet of our consumers so in that sense it's it's all it's you always -- -- see lower gas prices knowledge for our consumers.
But also for we have a huge supply chain and so lower fuel costs are important for -- I would like I would think so let's get to the international picture your closing most of your China stores except for two pilot stores.
Will you ever go back into China will you read -- -- that -- Why do we won't go back into China with The Home Depot format stores that we should a couple of big box that was shot a couple weeks ago we bought a company six years ago.
That was literally set up to look like Home Depot the folks who set it up trained at Home Depot in the mid ninety's.
And we've concluded that that sort of format doesn't work well in the country and that's why were -- -- exploring other format what does the number one that.
The piece of economic data he was the CEO of The Home Depot look at is it.
New home sales -- it existing is it gross domestic product.
So for us it's still GDP.
We think until the housing market really comes back you know -- we're in this thought period this work out period.
We're going to be more correlated to GDP than -- housing numbers specifically you know with governor what.
And coming up -- -- that's no surprise to you but you have cut some business leaders are -- hi David Siegel of of Westgate resorts it came out yesterday and said I'm.
On firing Tom my employees and maybe closing down the company of President Obama wins.
You know -- yet of course you look deeper and he was already in the heavy debt way back before the president was president but.
Does it matter to Home Depot who's the president or do you feel you could still succeed no matter what do you have a horse in this race -- -- What administrations in power while affordable health care act is affecting some companies decisions will you hire fewer.
Full time employees if it cost you too much no we won't I -- -- -- intimate hiring decisions based on health care costs.
But it's obviously something that we're looking at very intensely what the impact of legislation will be on -- there -- a lot.
Variables that we still have to work well here's one interesting data point and that is that since you've become the CEO the stock is up 48%.
And this hasn't been boom times for this particular business what is the one thing you feel that you when your team did -- I didn't do best most important thing is our associates we have 300000 associates who work in our stores.
And the basic principle for our business and it was established by Bernie Marcus and Arthur Blank our founders is.
Take care of your associates take care of your customers and everything else including the share price takes care are you hiring.
Yes -- we did it varies from region and season.
So our business model is one that as sales go up so we tend to be more seasonal in the spring.
So will do more springtime hiring we're not a retailer that hires into.
The Black Friday holiday season we hiring -- that.
Spring season we look forward to watching improve the analysts from about any kind of -- we come back and visit us at absolutely frank Blake the chairman president CEO of what else can they got average up now thank you very thank you so much for joining us in this Fox Business exclusive closing bell ringing.
