Home Depot Testing Smaller Stores

Home Depot Inc., the largest of North America’s home improvement centers, said Wednesday that it is testing a small-store format in a move that will take direct aim at neighborhood hardware stores.

“The U.S. home improvement convenience market generated sales totaling approximately $50 billion in 1997, but the vast majority of those sales took place outside of larger home center stores such as Home Depot,” Home Depot President Arthur Blank said.

The Atlanta-based company, the largest retailer in the estimated $365-billion housing and building products market, said it will open four hardware stores under the new format in the Northeast next year. The stores will be about 35,000 square feet and have about 20% to 25% of the selection of Home Depot’s larger stores.

“I think they are going after the independent retailer,” said Paul Pentz, president of Tru-Serv, a cooperative with 10,500 member hardware stores.

Home Depot’s test is being developed and run by Bob Wittman, senior vice president of business development for the company and former chief operating officer of Orchard Supply Hardware Stores, which Sears, Roebuck & Co. acquired in 1996.

“This is something they view as the next leg of growth . . . into the next century,” said L. Wayne Hood, analyst at Prudential Securities.

But Pentz cautioned the giant retailer.

“They are not going to get the same efficiencies out of a small store as they would a large one,” he said. “I think our stores can compete very effectively with them.”