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Climbing the ladder of success

Tony Brown is quietly becoming one of the region's most powerful retail figures. His 11-state division of Home Depot chalked up $9-billion in sales _ equal to the national sales of the Gap or Office Depot.

Tony Brown has a problem at Home Depots throughout the Southeast: The 201 stores are out of phone jacks.

Brown calls his buyer to get the shelves restocked. "I don't want to give customers any reason to go across the street to Lowe's," barks Brown, who was appointed Southeast Division president at Home Depot Inc. in February.

Brown is known to prowl several stores each week, grabbing an orange apron before inspecting inventory or finding bolts for customers. But the scrappy son of a high school football coach is virtually unknown outside the company, even as he has quietly become one of the region's most powerful retailing figures. His 11-state division racked up 1998 sales of more than $9-billion, equal to the national sales of big retailers such as the Gap or Office Depot. Each of his 16 Home Depots in the Tampa Bay area averages $45-million in annual sales, which is more than the busiest Wal-Marts and department stores.

Brown has taken over the region at a time of rapid change for the home improvement business. Builders Square is going out of business, while Scotty's is retrenching. But Lowe's Inc. has targeted Florida as a growth market, building dozens of new stores, often across the street from Home Depots.

Home Depot has a strong lead. The Atlanta company's sales and net income have grown an average of 25 percent annually over the past decade.

Brown and other division chiefs have to figure out how to build on that. For starters, new stores must be designed to appeal to contractors and do-it-yourself consumers, as well as those who will pay a premium to hire others to fix up their houses. The chain also has to figure out a growth strategy to keep up with increased traffic. Brown's average store attracts 20,000 on Saturdays, the average attendance at Tampa Bay Devil Rays baseball games.

To keep up, Home Depot plans its most ambitious expansion: to double its size to 1,600 stores by 2002.

Growth in the Southeast has been so strong that Brown's territory will be halved this year to four Southern states and the Caribbean, with 110 stores. "Within five years, we'll be back over 200."

Still, expansion comes with risks. Rising interest rates or an economic slowdown could slow home resales and remodeling, two binges that have fueled home improvement spending. And Lowe's aggressive expansion plans give consumers more options for where to find the 40,000 products the chains stock. Both chains have had to pay higher wages and incentives to keep experienced trades people in retail jobs. And new stores cost $14-million, double the traditional price, thanks to bidding wars for the best locations.

Expanding in the region is a job that keeps Brown on the road. In June, he spent only four days in his Spartan division headquarters in Tampa During a store tour in Pinellas Park, he commandeered a lunch room so his loss-prevention chief could brief him on a theft problem in Tennessee.

Jeanne Privett, his executive assistant, often flies to airports to get his signature on documents. She arranges conference calls in frequent flier lounges. "Please don't use that pay phone," she asks other travelers in the lounge. "We're expecting a call."

The 47-year-old Brown has been noticed by Home Depot brass. "Tony's strength is he really understands the reality of running our stores," said Arthur Blank, Home Depot's co-founder and chief executive. "It's easy to get lost in the intensity there, but Tony really knows how to blend the new with the old."

Born in Roanoke, Va., Brown inherited his competitive spirit from his father, a high school football coach. His father coached a rival team. As a defensive back, Brown recalls getting knocked unconscious in the city championship match between his high school and his father's team. His father's team won 10-6.

Brown earned an accounting degree at Hampton Institute in Hampton Roads, Va. His first job was in banking, but that bored him, so he moved into retailing. His first experience with Home Depot came as manager of a Handy City store in Atlanta. Brown was the fifth customer to shop Home Depot's first store. As he moved up in Handy City's management, he learned how tough it was to fend off the new rival.

"'We spent millions overhauling every Handy City in Orlando," Brown said. "It didn't matter. We had to shut every one of them down within a year."

He joined the competition and opened Home Depot's first stores in Clearwater and St. Petersburg. Promotions required moving five times. But climbing the Home Depot ladder has its rewards. Including performance bonuses, he earns about $400,000 a year. Vested options could more than double his $2-million stake in Home Depot within two years.

The Brown family is building their fourth house in eight years. This one is an $800,000 house in Avila, a ritzy subdivision in north Tampa. Sounds like quite a house, but he describes it as not as grandiose as the $1-million "dream home" he built for his family in suburban Atlanta. Moving to Tampa meant taking a $250,000 loss when he sold the house, Brown said.

Despite living in style, Brown is at home working the aisles at Home Depot stores. He inspects four a week. On a recent visit to Pinellas Park, Brown tied on one of his dozen orange aprons to check out the store. After a few minutes of scanning the floor, Brown declared the store understaffed by about 12 people. He pitched in to wait on customers, ordered staffing reports and huddled in a busy aisle with store managers.

A customer broke up the tense meeting, asking where he could find a galvanized bolt. He was unimpressed when the division president and three store managers dropped everything to find one. "I just wanted a bolt," customer Paolo Badamo said.

Brown climbed a ladder to peel a light switch off a display for another customer. An electrical department salesperson chased him down to describe product shortages and light bulb pricing, two problems that were costing Home Depot sales. Finally, Brown erupted when he spotted an empty shelf in the power cord department.

"Somebody needs to take ownership of this department," he declared.

He knows that it is crucial that everything is stocked, especially at a time when Lowe's is expanding. Lowe's builds stores near Home Depots to lure customers away from established stores. The average Lowe's generated $26-million in 1998, $19-million less than an average Home Depot in the Tampa Bay area. "Lowe's could live well just on our overflow," Brown said.

The rivalry with the North Wilkesboro, N.C., competition runs deep. Home Depot store managers have sent black roses to new Lowe's store managers, a grim greeting from the competitor. Truckloads of Home Depot employees have interrupted Lowe's grand openings chanting a Home Depot cheer.

Home Depot's building spree is geared to gain more of the market while others move in. A Raymond James & Associates analyst estimated Home Depot's share of the Tampa Bay area building materials market at 44 percent in 1996.

At the time, Home Depots in the bay area were 18 miles apart. Now they are going up within five miles of each other. "We'd rather steal sales from our own stores than cede market share to anyone," Brown said.

For instance, a store was built in Pinellas Park to pull customers from the Home Depot in St. Petersburg. A year later the Pinellas Park store achieved $50-million in sales while volume at the St. Petersburg store grew by $5-million to $70-million.

Other new stores are testing new floor plans. A new Home Depot in South Tampa will give contractors their own entrance and building materials at one end of the store. Other shoppers will be steered into a separate entrance.

Aisles are designed to shorten long hikes between the towering orange racks. A huge home decor center, decorated in white paneling, looks more like a department store, a switch from the stark warehouse appearance of older stores.

It's an experiment to win more women shoppers. Half of Home Depot's shoppers are women. Lowe's claims 56 percent of its customers are women, largely because it carries appliances and keeps the white interior of its stores brighter than the dingy gray Home Depots. Such tangibles aside, there are few distinctions between the two, so both think customer service will carry the day.

As a result getting the right employees is a big issue. Brown thinks the key to Home Depot's success is that "our people seem to move 25 percent faster" than anyone else in retailing.

"With all this projected growth, Home Depot is concerned about it's ability to maintain its unique company culture in this tight labor market," said Budd Bugatch, a Raymond James analyst.

Brown has increased the company's recruiting efforts and is setting up a training center at the Tampa headquarters. His motto: Home Depot will do whatever it takes to get workers.

The battle with Lowe's also means fighting over real estate. Sites once considered off limits because of price or development constraints are back on the list of potential sites. Possibilities include a store in Crystal River and second locations in Brandon, northwest Hillsborough and St. Petersburg.

Both Lowe's and Home Depot are expected to bid for vacant Builder Square locations. In other cases, Home Depot offers money to relocate other businesses. The company paid to relocate a mobile park for a new Seminole store.

Finding sites requires undercover work by both companies. They often hire third parties to secretly assemble new store sites. Home Depot spread fake rumors about the company's interest in a Tampa site.

The latest battleground is St. Petersburg, home to Home Depot's busiest store in the region. Lowe's paid a premium for a site across the street from Home Depot's store. To get the site, Lowe's officials persuaded Florida Power Corp. to sell its maintenance yard, even though the site was not on the market.

Terry Britt, Lowe's Southeast vice president, said the company picked the site because it is "a good retail location, not because Home Depot was across the street."

The two dueling stores prompted Scotty's, located a few blocks away, to hold a going-out-of business sale. Brown considers such in-your-face competition from Lowe's a "personal affront," ironic considering Home Depot does the same thing to Lowe's in other markets.

Lowe's Britt figures "the customer wants a choice. We'll do whatever we have to do."


ORIGINS: Founded in 1979 by Bernie Marcus and Arthur Blank the weekend after they were fired by the now defunct Handy Andy home improvement chain. They designed a huge warehouse store in Atlanta that was jammed to the ceiling with merchandise. They needed empty cardboard cartons to pull off the look.

GROWTH: Second only to Wal-Mart Stores Inc. among national retail companies in the past two decades. Averaged at least 25 percent annual growth in revenues and profits through the 1990s. Grew in 20 years into the nation's sixth largest retail company.

INNOVATIONS: A retail industry pioneer in just-in-time delivery that requires most manufacturers to handle warehousing. First in the industry to rent delivery trucks and power tools.

PLANS FOR FUTURE: Trying to double the number of its stores to 1,600 by the year 2002. Also opening Home Expo Design Centers, large stores outfitted with garden departments and high-end home decor items. Experimenting with neighborhood hardware stores about one-fifth the size of its home improvement centers.

TAMPA BAY AREA PRESENCE: Opening 17th store this month. Southeast Division headquarters staffed by 70 buyers is in Tampa.


A two-way race for dominance has developed among the nation's biggest home improvement retailers in 1998.

Rank/Store Sales Stores Market Share

1. Home Depot $30.2-billion 761 26 percent

2. Lowe's $12.2-billion 484 10 percent

3. Menard $4-billion 139 3 percent

4. Hechinger/Builders Square+ $3.4-billion 244 2.8 percent

5. Payless Cashways $1.9-billion 159 1 percent

17. Scotty's $525-million 149 .0004 percent

+ Hechinger filed for Chapter 11 bankruptcy protection in June and decided to pull the plug on Builders Square and close 89 stores.

SOURCE: National Home Center News