Home Depot Girding for an Overhaul

Howard Davidowitz, chairman of retail consulting and investment banking firm Davidowitz & Associates, says Home Depot may choose to take the business public rather than sell it at a too-low price.

"Home Depot is not desperate to do anything," he says. "I think that if they get a price that makes them look like idiots they wouldn't do it."

Davidowitz says the supply unit is less profitable than the retail business. The retail operations, however, haven't been performing that well recently either. In its most recent quarterly report, Home Depot posted its first profit decline since 2002, with a 5.1% drop in same-store sales, or sales at stores open at least a year.

In addition to being hurt by housing weakness and competition from the likes of Lowe's(LOW Quote), Home Depot has been criticized for not focusing on customer service and investing in its stores under Nardelli's watch.

"One of the craziest things Nardelli did was reduce the service," Davidowitz says. "You go into a Home Depot and you've got no one to talk to. There were short-term earnings, but he demolished the company. Now they can focus on the retail operations. I think it would be good for the stock."

Shares recently were trading up 49 cents, or 1.2%, to $41.49.