It wasn't long ago Home Depot seemed poised to put every mom-and-pop hardware shop out of business.
Riding what seemed to be an endless housing boom, the Atlanta-based home-improvement chain saturated major building regions with its huge 100,000-square-foot stores. Then, the company set its sights on Main Street, creating a concept it called "Villager's Hardware," a smaller, neighborhood type of shop that would cater to customers looking to buy a few items for odd jobs.
In 1999, with great fanfare, the first test store opened on Route 18 in East Brunswick.
A decade later, the housing market has shriveled and Home Depot finds itself forced to beat an uncharacteristic retreat. Yesterday, the company said it was trimming expansion plans in 2009 and beyond, and will close 15 under-performing stores in the United States -- including the East Brunswick shop and another small outpost in Saddle Brook.
The problems aren't isolated to Home Depot. Another big chain, Lowe's, recently reported disappointing 2007 results and said it expects continued softness in sales.
"This down cycle for home improvement is just deeper than anyone expected," said Laura Champine, an analyst for Morgan Keegan. "It's not clear when it will end."
The pain suffered by the big boys is a sweet reversal for the little guy, though.
"Isn't that nice," said John Dobrzynski, owner of Eighteen Lumber, an East Brunswick home- renovation store that sits a short distance from the soon-to-be-shuttered Home Depot.
Dobrzynski's store was founded by his father in the early 1960s, and still faces competition from Lowe's in town and another Home Depot in Milltown. But it survived a challenge by Rickel Home Center, one of the original home-improvement superstores, and the Villager's Hardware experiment that followed in the refitted Rickel building.
"We know what we're talking about when people walk in," Dobrzynski said. "That's basically why we're here."
That was supposed to be the idea behind Villager's Hardware stores, too. At 40,000 square feet, the East Brunswick store was less than half the size of a normal, big-box Home Depot. It was designed as a quicker way for shoppers to get nails, tools, paint and garden supplies -- a sort of 7-11 for small, do-it-yourself projects, with an emphasis on customer service. Four opened in New Jersey, including the Saddle Brook store.
Within three years, however, the experiment was over and the stores were rebadged as regular -- if smaller -- Home Depots. In recent years, the company has been gravitating toward a bigger-is-better philosophy: A store in Union, which is opening in phases, will be a massive 225,000 square feet when complete.
Still, some customers said they'll miss the more intimate surroundings of the East Brunswick store.
"I'll be sorry to see it close," said Joan Hubert, who lives in Monroe and came to the store to look at mailboxes. "It's so convenient. I shop here all the time."
Leonard Saragnese of Old Bridge said he preferred the store to the bigger Home Depot outlet in Milltown.
"You find everything a lot easier, and there seem to be a lot more workers than at the other one," he said. "Bottom line is, they're more helpful."
Home Depot has been struggling for the past few years, and Chief Executive Frank Blake has called current conditions "challenging." Earnings were down more than 16 percent last year, but a more troubling sign was a 6.7 percent drop in same-store sales, a key indicator of a retailer's health. Lowe's same-store sales, meanwhile, fell 5.1 percent last year.
Home Depot said it conducted a thorough review of the sites slated for closing, most of which are in smaller towns with limited growth prospects. It is still committed to building 55 new stores in the current fiscal year, including one in Paterson, according to spokeswoman Sheriee Bowman.
Fifty other stores in the planning stage will be delayed, in some cases for a decade or more, and Home Depot plans to slash capital spending by $1 billion over the next three years. Most of its investment will go toward gussying up existing stores.
"By building fewer stores, in the best locations, and making sure our existing stores are profitable, our company will be in a much stronger competitive position," Blake said in a statement.
Some touted the new, conservative strategy as a positive sign. Former Home Depot chief Robert Nardelli should have been ratcheting down the company's overaggressive expansion three years ago, when it was clear the housing market was showing signs of topping out, said Richard Hastings, a retail analyst for Bernard Sands.
"The company outgrew the capacity of the economy to support it." he said. "We're going from out-of-whack to on track. I do like what I'm seeing."
Home Depot will have 65 stores in New Jersey after the two closings. Employees will have a chance to move to other store locations nearby, Bowman said.
"We are working to place every associate from these impacted locations," she said. "It looks like they will all have positions in surrounding stores."