Home Depot CEO Robert Nardelli Resigns
Wednesday, January 03, 2007SUZANNE PRATT: Home Depot stunned Wall Street today with a major renovation of its top management. Robert Nardelli abruptly resigned as chairman and CEO of the home improvement giant, sending Home Depot shares closing more than 2 percent higher. Scott Gurvey takes a look at what Nardelli's departure could mean for the future of Home Depot.
SCOTT GURVEY, NIGHTLY BUSINESS REPORT CORRESPONDENT: Since he was hired to run the nation's second largest retail chain six years ago, Robert Nardelli has been paid more than $240 million in salary, bonus and stock. But Home Depot's stock has been flat at about $40 a share throughout his tenure, much to the displeasure of shareholders and Wall Street analysts. They responded to today's news that Nardelli is out with positive forecasts and a 4 percent jump in the share price when trading opened this morning. Budd Bugatch of Raymond James sees more of the same.
BUDD BUGATCH, FURNISHINGS RESEARCH DIR., RAYMOND JAMES: Next year I think the stock will do well. I think the valuation of the stock should be in the 50s, so we see about a 20 to 25 percent upside from here in the relatively near term.
GURVEY: Home Depot will need to see higher valuations if it is to head off the shareholder revolt which triggered Nardelli's departure. The CEO was the only board member to attend the company's annual meeting last May, where he refused to answer questions about performance or his compensation. Those questions are certain to continue. Nardelli leaves Home Depot with a severance package worth $210 million; about half of that is deferred compensation. Incoming House Financial Services Committee Chairman Barney Frank, a critic of high executive pay, was quick to comment.
REP. BARNEY FRANK, CHMN-ELECT, HOUSE FINANCIAL SERVICES COMMITTEE: The board of directors of Home Depot finally decided that Mr. Nardelli had to go and they put their foot down and gave him $210 million and asked him to please leave. At which point, he apparently succeeded for the first time in raising the stock price, by leaving.
GURVEY: Governance issues aside, analyst Michael Cox of Piper Jaffrey says the housing slump had a great impact on Home Depot's bottom line last year.
MICHAEL COX, SR. RESEARCH INDUSTRIAL ANALYST, PIPER JAFFRAY: We continue to expect a challenging 2007. The company continues to derive most of its business from the do-it-yourself retail marketplace which, given the softness in the housing market, is going to continue to put pressure on fundamental results.
GURVEY: Home Depot's new CEO is Frank Blake, a Nardelli protege who was Home Depot's vice chairman. Scott Gurvey, NIGHTLY BUSINESS REPORT, New York.
