Home Depot Sets Big Buyback

The move to sell the supply business is one of CEO Frank Blake's first major overhauls since taking the reins at the beginning of the year. His predecessor, Bob Nardelli, was a proponent of bulking up Home Depot's nonretail operations, and he doubled the size of the business with the 2006 purchase of Hughes Supply.

"Today's decision reflects our continued commitment to enhancing shareholder value, through an exclusive focus on our retail business and the return of cash to our shareholders," said Blake. "This year alone we will spend over $2 billion in support of our top five retail priorities. We are confident in the ability to improve productivity in our retail business through investment in these priorities, which will further enhance returns on invested capital as the investments take hold."

Home Depot has been battling a sales and profit slump that has lasted more than a year, as it has been hit by competition from the likes of Lowe's(LOW Quote) and weaker demand due to the U.S. housing downturn.

Howard Davidowitz, chairman of retail consulting and investment banking firm Davidowitz & Associates, said the sale was a smart move.

"I think the acquisition was wrong-headed," he says. "They took their eye off the ball. They've got to reinvest in the store base. If they don't get these stores right, they've got no business."