(Adds company, analyst comment; changes dateline, previously CHICAGO)
ATLANTA, Jan 26 (Reuters) - Home Depot Inc said on Monday it was eliminating 7,000 jobs, or about 2 percent of its workforce, as the world's largest home-improvement retailer closes its Expo home design centers and cuts corporate support staff.
Its shares rose as much as 6 percent after the news.
Home Depot also said it was freezing officer salaries in a bid to save money in the recession and prolonged U.S. housing slump.
The company added it will close other specialty outlets, including five YardBIRDS stores and a bath remodeling business known as HD Bath.
Home Depot opened the Expo stand-alone stores in 1991. Even during the most recent U.S. housing boom, it was not a strong business and weakened significantly as demand waned for high-priced home improvement projects.
The company said it expects Expo and the other specialty concepts to post a 2008 operating loss of $50 million, with that expected to widen to $80 million in 2009.
"For our shareholders and our associates, the benefits of closing Expo exceed the benefits of continuing to invest in it," Home Depot Chief Executive Frank Blake said during a conference call.
Home Depot initially hoped Expo, a project business that sells higher-end kitchens and baths, would be a growth engine and at one point had planned as many as 200 Expo stores. But high fixed costs and weak profitability led to a scale back in recent years.
"Those stores were marginally profitable even in the boom years, and one can only imagine what they are doing now when we are having a massive housing bust," said Paul Larson, a Morningstar analyst.
Home Depot's store closures will affect about 34 design center stores and 5,000 jobs, with another 2,000 posts trimmed as the company eliminates some administrative staff.
The company expects pretax charges of about $532 million from its actions, including $390 million in the fourth quarter, which ends Feb. 1.
Additional charges are set for the fourth quarter over the sale of the HD Supply wholesale distribution unit in 2007 and an ongoing equity interest in it. Those charges will be about $55 million related to a dispute on working capital and $163 million for a write-down of its investment in HD Supply.
STRATEGY SHIFT
Blake, who became chairman and CEO in early 2007 after Robert Nardelli resigned under pressure, has been closing concept stores and upgrading service and products in Home Depot's core retail business to win back market share as rival Lowe's Cos Inc expands.
Blake eliminated stores including Landscape Supply, which sold plants and garden products, and flooring stores.
"The company is returning its focus to what it really does best, the regular big-box strip-mall type store," Larson said.
Though officer ranks are being cut 10 percent and their salaries will be frozen, Home Depot said it would still pay merit raises and bonuses to its regular employees in a bid to make its stores desired places to work. The retailer also said it would keep matching retirement plan contributions.
For fiscal 2008, which ends next month, Home Depot said it still expects declines of 8 percent in sales and 24 percent in per-share profit from continuing operations.
Last year, Home Depot closed 15 underperforming U.S. stores and scrapped plans to open about 50 more that had been in its new-store pipeline. The company said on Monday its current 2009 plans call for no closures of core retail stores.
Home Depot shares rose 77 cents, or 3.55 percent, to $22.49 in afternoon New York Stock Exchange trading. Lowe's shares were up 60 cents, or 3 percent, at $20.65. (Reporting by Karen Jacobs, additional reporting by Brad Dorfman in Chicago; Editing by Gerald E. McCormick and Maureen Bavdek)