The Atlanta-based home improvement giant reiterated itsintention to open 55 new stores worldwide, including 36 in the US,through the current fiscal year while growing its square footage byapproximately 1.5% annually, starting in fiscal 2009. At the sametime, the company will record a $400-million charge related tocapitalized development costs associated with canceled futureopenings, and reduce aggregate new store capital spending by $1billion over the next three years.

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"We will invest in our core retail business, in this case ourexisting stores, which drive our most profitable sales," FrankBlake, chairman and CEO, stated in a release. He noted that thecompany's total capital spending for the current fiscal year isprojected to be approximately $2.3 billion, less than two-thirds oflast year's amount.

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Wall Street analysts say the moves announced Thursday are thecorrect course of action given the continuing national housingslump, a key contributor to current economic turmoil. They point toCommerce Department estimates that investment in existingresidential real estate was off by nearly 27% through this year'sfirst quarter.

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"It is prudent that the company is scaling back its pipeline,"Laura Champine, who covers Home Depot for Morgan Keegan & Co.,tells GlobeSt.com. "We're unlikely to see the same industry spikewe saw earlier in the decade."

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Champine adds that she was a bit surprised at the number ofstore closings Home Depot disclosed, thinking it would be onlyfive. She says the company's leading position won't be jeopardizedby the scaledown, despite aggressive expansion moves byMooresville, NC-based Lowe's Companies Inc., a distant second inthe home-improvement category.

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Home Depot's 15 announced store closings, affecting roughly1,300 associates nationwide, represent less than 1% of its existingstore portfolio and were deemed to be underperforming locations.The company will record a charge of $186 million related to theclosings, including inventory markdowns of $11 million and employeeseverance of $8 million.

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"We put our real estate projects through a tight capitalefficiency model," Blake said in announcing the closings. "Thismodel prioritizes locations that make the most efficient use ofcapital, reduce cannibalization and drive higher returns. Bybuilding fewer stores, in the best locations, and making sure ourexisting stores are profitable, our company will be in a muchstronger competitive position."

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