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Tuesday, September 19, 2006

Home Depot: Is Nardelli's Pay Fair? (HD)(LOW)

According to the Associated Press, the board of Home Depot may have a look at the future compensation of Robert Nardelli, the company CEO. Nardelli's pay package, well over $100 million since he joined, has been attacked by a number of investors.

Whether Nardelli's pay package is reasonable probably depends on when Wall St. got bought into the stock. The share price is down about 10% since he joined the company in 2000.

However, after the company hit a slump in 2003, the stock was at just above $20. It has since recovered to just under $37, which is quite a return over three-and-half years.

It is also hard to lay the current stock price at Nardelli's feet. Rising gas prices and slowing home sales have hurt large home improvement firms including Home Depot's primary competitor, Lowes. Before the economic slowdown in the sector, HD's revenue growth was spectacular. Revenue for the period ending February 4, 2004 was $64.8 billion. For the fiscal ending January 30, 2005, it rose to $73.1 billion. And, for the most recent fiscal, the topline hit $81.5 billion.

Nardelli does have one, very significant strike against him, and it may be the critical issue in the evaluation of his pay. Over the last five years, HD's only real competitor, Lowes, has seen its stock rise almost 100%. During the same period, HD's stock is down very slightly. And, that is pretty damning.

Douglas A. McIntyre can be reached at He does not own securities in companies that he writes about.

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