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Jan. 28, 2011, 11:28 a.m. EST

Home Depot Shuts Last Beijing Store

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By Jean Yung

SHANGHAI—U.S. home-improvement giant Home Depot /zigman2/quotes/208081807/composite HD -2.44% Inc. said Friday it closed its last Beijing store Jan. 21 and will focus on developing its China business in two other cities where growth is faster.

The move is the latest sign of the difficulties plaguing the company in China, where its do-it-yourself model has struggled to gain traction despite the fast growth in the country's housing market and it other retail sectors. Executives and analysts have said Chinese urban consumers generally want to hire people for tasks like home remodeling, rather than handling it themselves.

The Atlanta-based company isn't the only foreign home-improvement retailer struggling in China. U.K.-based Kingfisher /zigman2/quotes/200571451/delayed UK:KGF -1.61% PLC, Europe's biggest home-improvement chain by sales, also struggled suffered amid a downturn in the Chinese housing market in 2008 and early 2009.

Kingfisher Chief Executive Ian Cheshire said in October the company needs another year to "have a sense of where we stand" in its China business, though the unit was on track to break even or turn a small profit in 2011. Kingfisher booked a £107 million ($170 million) restructuring charge in the fiscal year ended Jan. 31, 2009, having closed a third of its more than 60 B&Q outlets in China.

Home Depot entered China in 2006 with the purchase of a Chinese home-improvement chain called Home Way that had 12 stores in northeastern China, including two in Beijing. It has since closed several of those stores, and senior Home Depot executives have said repeatedly in recent years that they were looking for ways to retool their China strategy.

Home Depot now operates a total of six stores in Tianjin, an eastern port city that is one of China's biggest municipalities, and Xi'an, capital of the central Chinese province of Shaanxi, a company spokesman said. The spokesman added that Home Depot will conduct a trial for a smaller format store in Zhengzhou, the capital of central China's Henan province. Worldwide, Home Depot has more than 2,200 stores.

Home Depot Chairman Frank Blake said in March 2009 that the company would either figure out how to make money in China "or we won't be there." The company doesn't report financial results for its China operations.

Mr. Blake said last month that the company's business in China remains "problematic," and the company is working to build a profitable business model by focusing on "select" Chinese cities.

"Moving forward, our plan is to focus on high-growth cities--specifically Tianjin and Xi'an—where we will concentrate any future growth to establish critical scale and market leadership," the Home Depot spokesman said on Friday.

$ 331.50
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