Home Depot to Renovate

The company's change of heart may have been inspired, at least in part, by Ralph Whitworth of Relational Investors, who was invited to join Home Depot's board of directors after threatening a proxy fight for a change of direction at the company.

Now, it's focused on investing in its retail business and growing that business in overseas markets. Those investments weighed on its fourth-quarter profits, which fell to $925 million, or 46 cents a share, for the quarter ended Jan. 28, down from the year-ago $1.29 billion, or 60 cents share. Excluding certain items, latest-quarter earnings were 50 cents a share, matching the Thomson Financial analyst consensus estimate.

The company's operating expenses grew faster than its sales as it spent money to improve the level of service in its stores and its product mix. It also took a charge related to Nardelli's $210 million severance package. But its sales also suffered from the effects of the slowdown in the U.S. housing market.

The company's overall sales rose just 4% from a year ago to $20.27 billion, falling far shy of the $20.8 billion analyst target. Retail segment sales dropped 2% from a year ago while sales of the HD Supply business rose 64% after a string of acquisitions.

Same-store sales at its retail business, a closely watched sales gauge measuring stores that were open for at least a year, were down 6.6% for the quarter. In January, its same-store sales were down 11%.