Home Depot’s decision to close 15 stores sent shares higher on Thursday. But is it still the place to shop for more upside returns?
Home Depot is the latest retailer to attempt to stop hemorrhaging sales by cutting back exposure to weak consumer markets, explains CNBC’s Margaret Brennan on “Closing Bell.” But making Home Depot more profitable comes at the expense of about 1300 employee jobs and the closure of 15 stores.
These cuts will cost the retailer a $586 million dollar charge in the first quarter but ultimately save the company $1 billion in capital expenditures over three years, according to estimates.
What will Home Depot do with this cash? Citi analyst Deb Weinswig says there is a good chance that shares will be repurchased.
Keep in mind though these cutbacks will not replace lost sales. Home depot's growth fed off of the housing boom. What's significant is that Home Depot is refocusing on fixing its existing locations.
I think HD is still cheap at current levels, says Guy Adami also on CNBC’s “Closing Bell.” Their balance sheet looks great and will probably look better after all is said and done. They pay a 3.1% dividend and they should be the beneficiaries of a recovery, which I expect to see in the second half of the year.