Home Depot will cut prices to lure shoppers

At a time when shoppers are forking over more money for everything from groceries to gas, The Home Depot Inc. is planning to put some prices in reverse.

The hardware chain is set to start cutting prices this week on as many as 1,200 items from trash bags to toilets as it kicks off its latest effort to boost anemic sales and win back customers who've ditched the home improvement retailer for its competitors.

Prices will be cut between 5 percent and 50 percent – although the company couldn't say what the average reduction will be – on about one of every 25 items on store shelves.

The discounts will begin showing up this week and will last at least through the next quarter as the Atlanta-based chain tries to retain its top spot in the sector by striking back at competitors such as Lowe's and Wal-Mart.

“We're trying to gain market share in the process,” said Craig Menear, Home Depot's executive vice president of merchandising. “Absolutely, we're trying to drive sales and productivity.”

The marked-down items include energy-saving devices such as insulation and thermostats and products deemed “project starters” such as paint and toilets that are the building blocks for do-it-yourself tasks.

The effort comes as the home improvement industry is besieged by a souring economy and an even worse housing market. During the second quarter alone, Home Depot's same-store sales, an important retail industry metric of sales at stores open at least a year, fell 7.9 percent. Comparable-store sales slid 5 percent at Mooresville-based Lowe's.

Analysts said the discounts will likely bring more shoppers into stores, but whether the effort is enough of a remedy is anyone's guess.

“Everyone's trying to drive traffic,” said Cowen & Co. analyst Laura Champine. “I think in general, there's a reason consumers aren't in stores.”

Home Depot is already working to change its merchandising efforts, eliminating products such as clothing that executives feel aren't related to core business lines. It's also eliminating multiple types of the same products that are stocked on shelves.

At the same time, the company is trying to revamp its supply chain by creating as many as 20 regional distribution centers. So far, three are open.

In August, it sold its wholesale distribution business, HD Supply, to a group of private equity firms for $8.5 billion.

Observers said the price cuts should boost sales – at least temporarily – as the economy continues to trouble the company.

“I think they need something to stimulate sales growth and I think that would be one way to do it,” said Morningstar analyst Brady Lemos. “I think that's the most important thing right now in this poor environment.”