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Home Depot Consolidates Away 1,000 in a Move Echoing Walmart and Sam's

Another day, another note, and now Home Depot (HD) is laying off 1,000 workers in a consolidation that in some ways echoes what just happened with Sam's Club and Walmart (WMT).

In a memo to employees, Frank Blake, Home Depot's CEO, announced that the company would be closing three test stores that hadn't lived up to the company's expectations: a small format store in Wilson, N.C., a temporary hurricane recovery outlet in Waveland, Miss., and a clearance outlet in Austell, Ga.

That will cost 100 jobs. The company will slash 900 more as it makes what Blake described as "prudent structural changes where it makes business sense to consolidate" at least some operations.

Examples Blake provided included centralization of human resources at the company's Atlanta headquarters, pooling support structure for the finance department and streamlining real estate and construction functions. After all, the topic of the day was closing stores not building them.

Blake took pains to point out that Home Depot is not closing any of its big home centers. A year ago, the company announced it would shut down its Expo Design Center chain and lay off 7,000 workers. Blake also insisted that the current move isn't about economic pressure.

Oh, but it is.

Sure, Home Depot isn't being compelled by immediate circumstances to cut positions, and it will even add 200 jobs in Atlanta. Yet, the move is about a change in how retailers look at their businesses when times are tough. A growing economy leaves room for indulgences and mistakes. As long as sales gain with economic expansion and management bonuses continue to come down the pipeline, retailers are apt to let things be. Heck, three decades after Aldi, Trader Joe's and Costco forerunner Price Club began operating, the supermarket industry even is conceding that it has to streamline and focus operations to core customer needs. So, when tough times hit and the only way to grow sales or even maintain them is to take them from another retailer -- and the bonuses stop flowing -- action must be taken.

In both the case of Sam's and Home Depot, operations are being realigned for greater efficiency. Just as at Home Depot, Sam's announced a small spate of store closings, although it did that before revealing it was cutting over 10,000 jobs. While Sam's outsourced a marketing function rather than pulling it back into headquarters, the club chain transfered responsibilities for product demonstrations to a company in the next town over that already works for Walmart and is pretty much beholden to it. So the outsourcing can be viewed as a lower cost kind of consolidation. In both cases, jobs were cut, mostly among workers who supported rather than performed core functions.

Neither Sam's nor Home Depot is in danger of going out of business, but the executives who lead them are bound to push as hard on the cost side as they can until consumers start spending again. Problem is, some are running out of places in stores and distribution systems where they can trim without hitting something that will hurt. Now it's down to non-vital personnel, who are being evacuated from payrolls and benefit plans. Expect more retail layoffs, big and small, at least until consumer confidence turns around enough to start folks spending again. That should be, ironically enough, when the employment picture begins to improve.