Retailer’s Employees Build Big Nest Eggs

When Crystal Hanlon gave up on college and took a $5-an-hour cashier’s job at Home Depot, her friends scoffed and even sneered.

“Back then, I used to get teased about working at a retail store,” she said.

Thirteen years later, her envious friends are more likely to ask how much longer it will be before she becomes a millionaire.

“My friends now are not nearly as financially stable as I am,” she said. “All of them would like to be in my position.”

Hanlon, who started with Home Depot in her hometown of Houston, has risen in the home improvement retail chain and now manages a store in suburban Atlanta. But the foundation of her financial stability was built with Home Depot stock.

Without disclosing precise numbers, the 33-year-old estimates her holdings will hit seven figures not long after she hits 40.

Employee stock incentives have already created an estimated 1,000-plus millionaires at the Atlanta-based Home Depot. And the orange-aproned elite ranges well beyond Arthur Blank and Bernie Marcus, who founded the chain in 1978. Secretaries and workers still in the aisles are reaping the benefits of a stock that has risen about 80% in the past year.

Stock incentive programs have become increasingly common in corporate America in the 1990s, with an expanding economy and tight labor pool adding to the need for companies to attract and keep employees.

“Creating a good culture where people feel like they have a stake-hold in the company they work for is attractive,” said Michael Keeling, head of the Washington-based ESOP Assn., a trade group for employee stock ownership programs. “Stock compensation schemes are becoming incredibly commonplace. They are becoming conventional wisdom.”

Some of the most dramatic success stories have come in technology, where the generic term “Microsoft millionaires” now applies to many techies who have struck it rich with their fast-growing companies.

But the humble home-improvement business has contributed its share of the nouveau riche, many of them from blue-collar beginnings.

Home Depot, the industry leader, has stock option incentives for management and administrative employees as well as a discount stock-buying program open to nearly all its workers.

Its chief rival, Lowe’s, also has numerous employees and retirees who are stock millionaires. Employees with one year of seniority at the North Wilkesboro, N.C.-based company are rewarded with Lowe’s stock at the rate of 13% of pay.

Its strong earnings have made Lowe’s stock program -- which won it the ESOP Association’s “Public Company of the Year” in May -- a powerful and important recruiting tool as it continues to build new stores during a time of labor shortages.

Both Home Depot and Lowe’s recently announced 2-for-1 stock splits, just one of many over the years. In fact, a single share of Home Depot held since first issue in 1981 would be worth 113.91 shares today; One share of Lowe’s held since first issue in 1961 would be the equivalent of 240 shares.

Employee stock has been “one of the cornerstones of our success” at Home Depot, said Blank, the company’s chief executive officer.

“We’ve always wanted this to be part of our culture: that associates feel that they own the stores, that they own the merchandise, that they have total responsibility for the customers in their aisles, and that they create the value,” Blank said.

At a retail service company, rising stock value provides a regular morale boost for employees greeting customers on the front lines.

“It does create excitement,” Hanlon said. When the stock split was announced in May, “everybody was just screaming through the store.”

While stock-market dips can also quickly cut into stock wealth, Home Depot’s past performance and aggressive growth make it a generally popular long-term buy on Wall Street.

And the stock option program is an imposing obstacle to outside recruiters.

“We stay at Home Depot because we love the company, and because of the incentives. There’s really no sense in going anywhere else,” Hanlon said.

Although the company says most of its stock-made millionaires choose to keep working, some have retired early. One man who declined to be identified said that, while “not a fabulously wealthy fat cat,” he accumulated enough stock value to leave Home Depot in his 30s.

“The company was very generous, especially in the early days. And you see the stock has appreciated dramatically over the years,” he said.

The man said he didn’t want his name used because he didn’t want to be hounded by stockbrokers and people pitching investment schemes.

Anyway, he’s sticking with what has worked.

“Home Depot is still the largest component of my portfolio,” he said.