home depot company report
TRANSCRIPT
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1.
The Home Depot, Inc. - Company Profile, SWOT & Financial Report
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TABLE OF CONTENTS
1
The Home Depot, Inc. - Key Employees ..................................................................................................... 6
2 The Home Depot, Inc. - Key Employee Biographies .................................................................................. 7
3 The Home Depot, Inc. - Major Products and Services ............................................................................... 8
4 The Home Depot, Inc. - History ................................................................................................................. 10
5
The Home Depot, Inc. - Company Statement ........................................................................................... 13
6
The Home Depot, Inc. - Locations and Subsidiaries ............................................................................... 15
6.1 The Home Depot, Inc. - Head Office .................................................................................................................. 15
6.2
The Home Depot, Inc. - Other Locations and Subsidiaries ................................................................................. 15
7
The Home Depot, Inc. - Business Analysis .............................................................................................. 16
7.1
The Home Depot, Inc. - Company Overview ...................................................................................................... 16
7.2
The Home Depot, Inc. - Business Description .................................................................................................... 16
8 The Home Depot, Inc. - SWOT Analysis ................................................................................................... 17
8.1 The Home Depot, Inc. - SWOT Analysis - Overview .......................................................................................... 17
8.2 The Home Depot, Inc. - Strengths ..................................................................................................................... 17
8.2.1
Strength - Strong supply chain management ................................................................................................. 17
8.2.2 Strength - Strong market position .................................................................................................................. 17
8.2.3
Strength - Strong revenue growth .................................................................................................................. 17
8.3 The Home Depot, Inc. - Weaknesses ................................................................................ ................................ 17
8.3.1 Weakness - Product recalls ........................................................................................................................... 17
8.4 The Home Depot, Inc. - Opportunities ................................................................................................................ 17
8.4.1
Opportunity - Improving US housing market ...................................................................................... ............ 17
8.4.2 Opportunity - Strategic acquisitions ............................................................................................................... 18
8.4.3 Opportunity - Growth of web-based stores ..................................................................................................... 18
8.5 The Home Depot, Inc. - Threats......................................................................................................................... 18
8.5.1 Threat - Foreign exchange risk ...................................................................................................................... 18
8.5.2 Threat - Rising manpower costs .................................................................................................................... 18
8.5.3
Threat - Stiff competition ............................................................................................................................... 18
9
The Home Depot, Inc. - Company Financial Analysis ............................................................................. 20
9.1
The Home Depot, Inc. - Five Year Snapshot: Overview of Financial and Operational Performance Indicators .... 20
9.1.1 The Home Depot, Inc. - Financial ratios: Annual ratios ................................................................................... 20
9.1.2 The Home Depot, Inc. - Financial ratios: Interim ratios ................................................................................... 22
9.1.3
The Home Depot, Inc. - Financial ratios: Capital Market Ratios ...................................................................... 23
9.2 The Home Depot, Inc. - Financial Performance and Ratio Charts....................................................................... 24
9.2.1
The Home Depot, Inc. - Revenue and Operating Profit .................................................................................. 24
9.2.2 The Home Depot, Inc. - Asset and Liabilities ................................................................................................. 25
9.2.3 The Home Depot, Inc. - Net Debt vs. Gearing Ratio ....................................................................................... 26
9.2.4 The Home Depot, Inc. - Operational Efficiency .............................................................................................. 27
9.2.5
The Home Depot, Inc. - Solvency .................................................................................................................. 28
9.2.6 The Home Depot, Inc. - Valuation .................................................................................................................. 29
9.3 The Home Depot, Inc. - Key Competitors ........................................................................................................... 30
10
The Home Depot, Inc. - Mergers & Acquisitions and Partnerships ........................................................ 31
10.1
The Home Depot, Inc. - M&A and Partnerships Strategy .................................................................................... 31
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11 The Home Depot, Inc. - Recent Developments ........................................................................................ 33
12
Appendix .................................................................................................................................................... 36
12.1
Methodology ..................................................................................................................................................... 36
12.2 Ratio Definitions ................................................................................................................................................ 36
12.3
Disclaimer ......................................................................................................................... ................................ 41
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List of Tables
Table 1: The Home Depot, Inc. - Key Employees ................................................................................................................ 6
Table 2: The Home Depot, Inc. - Key Employee Biographies ............................................................................................... 7
Table 3: The Home Depot, Inc. - Major Products and Services ............................................................................................ 8
Table 4: The Home Depot, Inc. - History ................................................................................................................ ............ 10
Table 5: The Home Depot, Inc. - Subsidiaries .................................................................................................................... 15
Table 6: The Home Depot, Inc. - Financial ratios: Annual ratios ......................................................................................... 20
Table 7: The Home Depot, Inc. - Financial ratios: Interim ratios ......................................................................................... 22
Table 8: The Home Depot, Inc. - Financial ratios: Capital Market Ratios ............................................................................ 23
List of Figures
Figure 1: The Home Depot, Inc. - Revenue and Operating Profit ....................................................................................... 24
Figure 2: The Home Depot, Inc. - Financial Position .......................................................................................................... 25
Figure 3: The Home Depot, Inc. - Net Debt vs. Gearing Ratio ............................................................................................ 26
Figure 4: The Home Depot, Inc. - Operational Efficiency.................................................................................................... 27
Figure 5: The Home Depot, Inc. - Solvency ....................................................................................................................... 28
Figure 6: The Home Depot, Inc. - Valuation ....................................................................................................................... 29
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The Home Depot, Inc.
Fast Facts
Headquarters Address 2455 Paces Ferry Road N.W., Atlanta,
30339,United States of America
Telephone + 1 770 4338211
Fax + 1 302 6365454
Website www.homedepot.com
Ticker Symbol, Stock Exchange HD, New York Stock Exchange
Number of Employees 340,000
Fiscal Year End February
Revenue (in US$ million) 74,754
SWOT Analysis
Strengths Weaknesses
Strong market position
Product recalls
Strong revenue growth
Strong supply chain management
Opportunities Threats
Growth of web-based stores Foreign exchange risk
Improving US housing market Rising manpower costs
Strategic acquisitions Stiff competition
Share Data
Share price (US$) as on 15 Oct 2013 Share price (US$) as on 75.18
EPS (US$) 3
Market Capitalization (US$ million) 107,691
Enterprise Value (US$ million) 117,030
Shares outstanding (million) 1,432
Financial Snapshot
Operating Performance
The company reported revenue of US$74,754 million
during the fiscal year 2013 (2013). The company's
revenue grew at a CAGR of 1.19% during 2009 –2013,
with an annual growth of 6.19% over 2012. In 2013,
the company recorded an operating margin of 10.39%,
as against 9.46% in 2012.
Revenue and Margins
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1 The Home Depot, Inc. - Key Employees
Table 1: The Home Depot, Inc. - Key Employees
Name Job Title Board Level Since Age
Francis S. Blake Chairman, Chief Executive Officer Executive Board 2007 64
Teresa RoseboroughExecutive Vice President, General
Counsel, Corporate SecretarySenior Management 2011 54
Matthew CareyChief Information Officer, Executive Vice
PresidentSenior Management 2010 48
Carol B. TomeChief Financial Officer, Executive Vice
President - Corporate ServicesSenior Management 2007 56
Craig A. Menear Executive Vice President - Merchandising Senior Management 2007 55
Marvin R. Ellison Executive Vice President - U.S. Stores Senior Management 2008 48
Timothy M. Crow
Executive Vice President - Human
Resources Senior Management 2007 57
Karen Katen Director Non Executive Board 2007 64
Bonnie G. Hill Director Non Executive Board 2008 71
Armando Codina Director Non Executive Board 2007 66
Albert P. Carey Director Non Executive Board 2008 61
Gregory D. Brenneman Director Non Executive Board 2000 51
Ari Bousbib Director Non Executive Board 2007 52
F. Duane Ackerman Director Non Executive Board 2007 70
J. Frank Brown Director Non Executive Board 2011 56
Mark Vadon Director Non Executive Board 2012 43
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2 The Home Depot, Inc. - Key Employee Biographies
Table 2: The Home Depot, Inc. - Key Employee Biographies
Matthew Carey
Job Title : Chief Information Officer, Executive Vice President
Since : 2010
Age : 48
Mr. Carey has been the Chief Information Officer and Executive Vice
President of the company since 2010. Prior to this, he served as the
Chief Technology Officer and Senior Vice President at eBay Inc.
Earlier, he served as the Chief Technology Officer and Senior Vice
President at Wal-Mart Stores Inc.
Carol B. Tome
Job Title : Chief Financial Officer, Executive Vice President - Corporate
Services
Since : 2007
Age : 56
Ms. Tome has been the Chief Financial Officer and Executive Vice
President, Corporate Services of the company since 2007. She served
as the Senior Vice President Finance and Accounting and as the
Treasurer from 2000 to 2001 and as the Vice President and the
Treasurer during 1995-00. She served as the Vice President and the
Treasurer of Riverwood International Corporation, a provider of
paperboard packaging from 1992 to 1995. She also serves as aDirector of United Parcel Service, Inc. and the Federal Reserve Bank
of Atlanta.
Francis S. Blake
Job Title : Chairman, Chief Executive Officer
Since : 2007
Age : 64
Mr. Blake has been the Chairman and Chief Executive Officer of the
company since 2007. Prior to this, he served as the Executive Vice
President Business Development and Corporate Operations of the
company. Previously, he served as the Deputy Secretary of Energy
from 2001 to 2002. During 2000 - 01, he worked as the Senior Vice
President at General Electric Company and as the Vice President of
Business Development at GE Power Systems from 1996 to 2000.
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3 The Home Depot, Inc. - Major Products and Services
The Home Depot, Inc. is a home improvement specialty retailer based in the US. The key products and services
offered by the company include the following:
Table 3: The Home Depot, Inc. - Major Products and Services
Products:
Plumbing, electrical equipment
Kitchen equipment
Building materials
Lumber and millwork
Paint
Appliance parts, filters and accessories
Doors and windows
Home décor
Lighting and fans
Flooring materials
Appliances
Hardware tools
Services:
Truck rental services
Credit card services
Installation services
Gift cards
Loans
Brands:
Behr Premium Plus
Behr Premium Ultra
Charmglow
Glacier Bay
Husky
Pegasus
Ridgid
Ryobi
Traffic Master
Veranda
Vigoro
EcoSmart
Defiant
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Table 3: The Home Depot, Inc. - Major Products and Services
Everbilt
Hampton Bay
HDX
Banner:
The Home Depot
Home Decorators Collection
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4 The Home Depot, Inc. - History
Table 4: The Home Depot, Inc. - History
Year Event type Description
2012 Corporate Changes/ExpansionsThe company opened 12 new stores, including nine stores in Mexico, two stores in the US
and one relocation in the US.
2012 Asset Disposal The company closed all the seven stores in China.
2012 Corporate Changes/ExpansionsThe company opened new customer call centers in Utah and Georgia to support
interconnected business.
2012 New Products/ServicesThe company introduced new services such as Buy Online, Return In Store (‘BORIS’) and
Buy Online, Ship To Store (‘BOSS’).
2012 Acquisitions/Mergers/Takeovers The company acquired Redbeacon, an online home services platform.
2012 Acquisitions/Mergers/TakeoversThe company acquired MeasureComp L.L.C., a flooring measurement and quote building
company.
2012 Acquisitions/Mergers/TakeoversThe company acquired U.S. Home Systems, Inc., a provider of kitchen and bath refacing
products and services.
2012 Acquisitions/Mergers/Takeovers The company acquired BlackLocus, Inc, a data analytics and pricing company.
2012 Corporate Changes/Expansions The company expanded its brand portfolio by adding HDX brand products.
2011 Contracts/AgreementsThe company signed a commercial agreement with PramacSpA. According to the agreement
Pramac will supply portable generators to the company for distribution in the US.
2009 Contracts/AgreementsThe company along with Martha Stewart Living Omnimedia, Inc. (MSLO) entered into an
agreement to develop an exclusive Martha Stewart Living brand of interior and exterior paints.
2009 Corporate Awards
The company obtained Environmental Excellence Award from the US Environmental
Protection Agency SmartWay Transport Partnership for conserving energy and lowering
greenhouse gas emissions.
2008 New Products/ServicesThe company launched a national in-store, consumer compact fluorescent light (CFL) bulb
recycling program.
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Table 4: The Home Depot, Inc. - History
2007 Contracts/Agreements The company and National Football League entered into a multi-year marketing partnership,
which designated the company as the official home improvement sponsor of the National
Football League.
2007 Contracts/Agreements The company entered into an agreement to sell HD Supply to Private Equity Group.
2006 Acquisitions/Mergers/Takeovers The company acquired Hughes Supply.
2006 Contracts/Agreements The company signed a definitive agreement to acquire Home Decorators Collection.
2006 Contracts/AgreementsThe company signed a definitive agreement to acquire The Home Way, China's first home
improvement retailer.
2005 Contracts/Agreements
The company and Mark Burnett Productions entered into an alliance to develop programs,
which highlighted Home Depot's products and services in Burnett-produced television
programming.
2004 Acquisitions/Mergers/Takeovers The company acquired Creative Touch Interiors (CTI).
2004 Acquisitions/Mergers/Takeovers The company acquired White Cap Construction Supply.
2004 Acquisitions/Mergers/Takeovers The company acquired Home Mart.
2003 Acquisitions/Mergers/TakeoversThe company acquired Tampa-based Installed Products USA and Installed Products of
California.
2003 Acquisitions/Mergers/Takeovers The company acquired RMA Home Services based in Atlanta, the US.
2002 Divestiture The company sold its four stores in Argentina.
2002 Acquisitions/Mergers/TakeoversThe company acquired Del Norte, a four-store chain of home improvement stores in Juarez,
Mexico.
2001 Divestiture The company sold five stores in Chile to its former joint venture partner, Falabella.
2001 Acquisitions/Mergers/Takeovers The company acquired the 'Your other Warehouse' company.
2001 Acquisitions/Mergers/Takeovers The company acquired Total Home, a large home improvement retailer in Mexico.
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Table 4: The Home Depot, Inc. - History
2000 Acquisitions/Mergers/Takeovers The company acquired Apex Supply.
2000 Corporate Changes/Expansions
The company established the first Home Depot stores in Argentina and Canada, and also
opened a test store in Plano, Texas.
1999 Acquisitions/Mergers/Takeovers The company acquired Georgia Lighting.
1998 Corporate Changes/Expansions The company entered the Puerto Rican market.
1997 Acquisitions/Mergers/Takeovers The company acquired National Blinds & Wallpaper.
1994 Acquisitions/Mergers/Takeovers The company acquired Aikenhead and entered Canada market.
1986 Corporate Changes/Expansions The company opened its first super-sized store.
1984 Stock Listings/IPO The company moved its listing from NASDAQ to the New York Stock Exchange.
1981 Stock Listings/IPO Home Depot was listed on NASDAQ.
1978 Incorporation/Establishment The Home Depot, Inc. was established in Atlanta, Georgia, the US.
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5 The Home Depot, Inc. - Company Statement
An excerpt from management discussion and analysis section of The Home Depot, Inc. Incorporated is given below. The
statement has been taken from the company's 2013 10-K.
Executive Summary and Selected Consolidated Statements of Earnings Data
For the fiscal year ended February 3, 2013 ("fiscal 2012"), we reported Net Earnings of $ 4.5 billion and Diluted Earnings per
Share of $ 3.00 compared to Net Earnings of $3.9 billion and Diluted Earnings per Share of $ 2.47 for the fiscal year ended
January 29, 2012 ("fiscal 2011"). The results for fiscal 2012 included a total charge of $145 million, net of tax, related to the
closing of our remaining seven big box stores in China ("China store closings") in fiscal 2012, which had a negative impact of
$0.10 to Diluted Earnings per Share. Excluding the charges related to the China store closings, Net Earnings were $4.7
billion and Diluted Earnings per Share were $3.10 for fiscal 2012. Net Sales increased 6.2% to $74.8 billion for fiscal 2012
from $70.4 billion for fiscal 2011. Our comparable store sales increased 4.6% in fiscal 2012, driven by a 2.9% increase in
our comparable store average ticket and an increase in our comparable store customer transactions.
Comparable store sales for our U.S. stores increased 4.9% in fiscal 2012. Fiscal 2012 consisted of 53 weeks compared with
52 weeks for fiscal 2011. The 53 rd week added approximately $1.2 billion in Net Sales and increased Diluted Earnings perShare by approximately $0.07 for fiscal 2012. In fiscal 2012, we continued to focus on the following four key initiatives:
Customer Service – Our focus on customer service is anchored on the principles of creating an emotional connection with
customers, putting customers first and simplifying the business. In fiscal 2012, we opened new customer call centers in Utah
and Georgia to support our interconnected business. In addition, as a result of initiatives such as our new scheduling system
for our associates and a centralized return to vendor process initiated in fiscal 2011, we now have approximately 57% of our
store labor hours dedicated to customer-facing activity and expect to achieve our goal of 60% in fiscal 2013. Through these
and other efforts, we continue to see our customer satisfaction survey scores improve.
Product Authority – Our focus on product authority is facilitated by our merchandising transformation and portfolio strategy,
which is aimed at delivering product innovation, assortment and value. As part of this effort, we introduced innovative new
products and great values for both our professional and D-I-Y customers in a variety of departments. Also in fiscal 2012, we
expanded some of our appliance showrooms to include the Electrolux ®, Whirlpool® and Frigidaire® brands. These brands
were also added to our e-commerce platform in fiscal 2012. Disciplined Capital Allocation, Productivity and Efficiency – Our
approach to driving productivity and efficiency is advanced through continuous operational improvement, incremental supply
chain benefits, disciplined capital allocation and expense control and building shareholder value through higher returns on
invested capital and total value returned to shareholders in the form of dividends and share repurchases.
In fiscal 2012, we completed the mechanization of all of our RDCs, which we expect to further improve the cost
effectiveness of this platform. Our inventory turnover ratio was 4.5 times at the end of fiscal 2012 compared to 4.3 times at
the end of fiscal 2011. We repurchased a total of 74 million shares for $4.0 billion through ASR agreements and the open
market during fiscal 2012. In addition, in February 2013, our Board of Directors authorized a new $17.0 billion share
repurchase program that replaces the previous authorization, and announced a 34% increase in our quarterly cash dividend
to $0.39 per share.
Interconnected Retail – Our focus on interconnected retail is based on building a competitive platform across all commerce
channels. During fiscal 2012, we launched improvements to our website, including MyInstall, which is designed to improve
transparency and communication in installation projects and to simplify the customer experience.
We made several enhancements to our professional customer website, including adding an online bulk pricing program that
mirrors our in-store bulk pricing program. We also introduced new programs, such as Buy Onl ine, Return In Store ("BORIS")
and Buy Online, Ship To Store ("BOSS") in fiscal 2012, to expand upon Buy Online, Pick-Up In Store ("BOPIS"), which we
introduced in fiscal 2011. In May 2012, we acquired MeasureComp L.L.C., a flooring measurement and quote building
company. MeasureComp's business was largely dedicated to The Home Depot and by in-sourcing this service under Home
Depot Measurement Services, we expect to build a seamless process for our flooring customers that is designed to provide
a better experience for them and a better close rate for us. In October 2012, we completed the acquisition of U.S. Home
Systems, Inc. ("USHS"). USHS was an exclusive provider of kitchen and bath refacing products and services as well as
closet and garage organizational systems to The Home Depot.
This acquisition will allow us to create more effective interconnection between our stores and the USHS in-home selling
platform under Home Depot Interiors, similar to what we have done with our roofing, siding and windows businesses. We
also completed the acquisition of BlackLocus, Inc. in December 2012. BlackLocus is a data analytics and pricing company,
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which will bring additional tools and capabilities to support our merchandising team. We opened twelve new stores, including
nine new stores in Mexico, two new stores in the U.S.
and one relocation in the U.S., and closed seven stores in China in fiscal 2012, for a total store count of 2,256 at the end of
fiscal 2012. As of the end of fiscal 2012, a total of 280 of our stores, or 12.4%, were located in Canada and Mexico. We
generated $7.0 billion of cash flow from operations in fiscal 2012.
We used this cash flow to fund $4.0 billion of share repurchases, pay $ 1.7 billion of dividends and fund $1.3 bi llion in capital
expenditures. Our return on invested capital (computed on net operating profit after tax for the trailing twelve months and the
average of beginning and ending long-term debt and equity) was 17.0% for fiscal 2012 compared to 14.9% for fiscal 2011.
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6 The Home Depot, Inc. - Locations and Subsidiaries
6.1 The Home Depot, Inc. - Head Office
The Home Depot, Inc.
2455 Paces Ferry Road N.W.
Atlanta
Zip: 30339
United States of America
Tel: + 1 770 4338211
Fax: + 1 302 6365454
6.2 The Home Depot, Inc. - Other Locations and Subsidiaries
Table 5: The Home Depot, Inc. - Subsidiaries
Home Depot of Canada Inc.
Suite 900
1 Concorde Gate
Toronto
Zip: M3C 4H9
Canada
Tel: + 1 416 6090852
Fax: + 1 416 4124215
Home Depot Mexico, S. de RL de CV
Ricardo Margain 555 Edif. A Parque
Garza Garcia
Zip: 66267
Mexico
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7 The Home Depot, Inc. - Business Analysis
7.1 The Home Depot, Inc. - Company Overview
The Home Depot, Inc. (Home Depot) is a specialty retailer of home improvement products based in the US. The product
portfolio of the company includes plumbing tools, electricals, kitchen appliances, hardware tools, building materials, paint,
flooring materials, and lawn and garden products. Home Depot caters to Do-It-Yourself (D-I-Y), Do-It-For-Me (D-I-F-M)
customers as well as professional builders. All the products are sold through national and private label brands such as Behr
Premium Plus, Behr Premium Ultra, Charmglow, Glacier Bay, Husky, Pegasus, Ridgid, Ryobi, Traffic Master, Veranda,
Vigoro, EcoSmart, Defiant, Everbilt, Hampton Bay and HDX. It also provides various services that include rental services,
gift cards, loans, credit card services and installation services. As of February 2013, Home Depot operated 2,256 stores
including 1,976 stores in the US, 180 stores in Canada and 100 stores in Mexico, under the banners of The Home Depot
and Home Decorators Collection. Additionally, it operates one specialty store, paint and flooring store in Tianjin, China.
Alongside in-stores, it sells the products through e-commerce websites. Home Depot is headquartered in Atlanta, Georgia,
the US.
7.2 The Home Depot, Inc. - Business Description
Home Depot is a leading home improvement retailer in the US. It sells a variety of merchandise including building materials,
home improvement and lawn and garden products.
The company offers 30,000 to 40,000 products at its stores and over 600,000 products through e-commerce websites. The
company serves three primary customer groups including Do-It-Yourself (D-I-Y) customers, Do-It-For-Me (D-I-F-M)
customers and professional customers. D-I-Y customers purchase products and complete the projects and installations on
their own. D-I-F-M customers purchase materials and provide them to third parties to complete the project or installation.
The professional customers include professional remodelers, general contractors, repairmen, small business owners and
tradesmen.
Home Depot categorizes its product offerings into four product groups: Plumbing, electrical and kitchen; Hardware and
seasonal; Building materials, lumber and millwork; and Paint and flooring. During FY2013, Plumbing, electrical and kitchen
accounted for 30.80% of the total revenue followed by Hardware and seasonal with 29.40%, Building materials, lumber and
millwork with 20.60%, and Paint and flooring with 19.20%.
The company merchandises the products through national and private label brands that include Behr Premium Plus, Behr
Premium Ultra, Charmglow, Glacier Bay, Husky, Pegasus, Ridgid, Ryobi, Traffic Master, Veranda, Vigoro, EcoSmart,
Defiant, Everbilt, Hampton Bay and HDX.
Home Depot provides additional services for customers including delivery and will-call services. It also provides installation
services for carpets, flooring, cabinets, countertops, water heaters generators, furnace and central air systems. The
company offers these services mainly to D-I-F-M customers who intend to purchase products and avail installation services
from the company. Additionally, it provides rental services that include renting trucks and hardware tools for its customers.
As of February 2013, Home Depot operated 2,256 stores including 1,976 stores in the US (including Puerto Rico, the US
Virgin Islands and Guam), 180 stores in Canada and 100 stores in Mexico. In 2012, Home Depot closed all the stores inChina except one store, paint and flooring store in Tianjin, China. The company operates The Home Depot stores and Home
Decorators Collection stores with an average retail space of 104,000 sq. ft. besides 24,000 sq. ft. of garden area. Home
Depot also offers products through e-commerce websites, www.homedepot.com, www.homedecorators.com and
www.redbeacon.com.
The company manages 153 warehouses and distribution centers located in 35 states comprising an estate of 37.2 million
sq. ft. of which 1.2 million sq. ft. is owned and 36 million sq. ft. is leased.
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8 The Home Depot, Inc. - SWOT Analysis
8.1 The Home Depot, Inc. - SWOT Analysis - Overview
The Home Depot, Inc., (Home Depot) is a home improvement retailer in the US. Strong market position, strong supply chain
management and strong financial performance are the key strengths of the company whereas product recalls remain a
major concern area. Going forward, risks associated with stiff competition, rising manpower costs and foreign exchange risk
may impede its growth prospects. However, improving US housing market, strategic acquisitions and growth of web-based
stores may offer ample growth opportunities to the company.
8.2 The Home Depot, Inc. - Strengths
8.2.1 Strength - Strong supply chain management
Home Depot’s stores are supported by 153 warehouses and distribution centers consisting of over 37.20 million sq. ft. It has
been transforming its supply chain to ensure product availability for customers and reduce total supply chain costs. It has
restructured its distribution centre network and introduced Rapid Deployment Centres (RDC), which allow for aggregation ofstore requirements into a single purchase order, and then rapid allocation and deployment of inventory to stores upon arrival
at the distribution centre. The new process simplified order processing at suppliers and reduced lead time required for stock
replenishment. It operated 18 RDCs, 33 bulk distribution centers and 36 conventional distribution centers, which include
stocking, direct fulfillment and specialty distribution centers, in the US, Canada and Mexico. Home Depot has been
improving its merchandising tools to improve the efficiency in its inventory management. Its inventory turnover ratio
improved from 4.3 times in FY2012 to 4.5 times in FY2013. With its focus on supply chain and inventory management, the
company not only ensures product availability at its stores but also, reduces its operating costs.
8.2.2 Strength - Strong market position
Home Depot is the world’s largest home improvement retailer, on the basis of FY2012 revenue. Its stores sell a wide
assortment of building materials, home improvement and lawn and garden products, and provide several value added
services. It operates 2,256 Home Depot and Home Decorators Collection stores including 1,976 stores in 50 states of the
US, 180 stores located in Canada and 100 stores in Mexico. On an average, each of the company’s stores has 104,000 sq.
ft. of enclosed space and 24,000 sq. ft. of garden area. A typical Home Depot store stocks 30,000 to 40,000 SKUs, both
branded and private labels. Additionally, it offers over 60,000 products online. Being the market leader in home improvement
retailing, the company enjoys economies of scale in buying, logistics and marketing operations.
8.2.3 Strength - Strong revenue growth
The company exhibited a strong revenue growth during the review year. It generated revenue of US$74,754 million during
FY2012, which grew at a CAGR of 4.85% during 2011 –13 with an annual growth of 6.19% over FY2012. This growth in its
annual revenue was primarily driven by rising US housing market, which led to increased sales in comparable stores by
2.90%. Furthermore, the company maintained higher operating margin of 10.39% compared to its close competitor Lowe's
Companies, Inc., which recorded a margin of 6.20% for the same period. A strong revenue growth provides the company
with financial strength to pursue growth opportunities.
8.3 The Home Depot, Inc. - Weaknesses
8.3.1 Weakness - Product recalls
Product recalls may significantly affect Home Depot brand equity. In July 2013, the company recalled over 107,000 units of
soleil portable fan heaters after receiving 464 reports, melting plastics in fans. In April 2013, the company voluntarily recalled
11,300 units of CE Tech 1,000 ft. Riser Cable, as the riser cable did not meet fire resistance standards posing a fire hazard.
Both the products were imported from China. Such product recalls indicate poor quality measures while importing items
tarnishing the company’s brand image besides increasing operational expenditure.
8.4 The Home Depot, Inc. - Opportunities
8.4.1 Opportunity - Improving US housing market
The company stands to benefit from the growing US housing market. The US housing market has been improving since
2010. According to Housing Index report released in August 2013 by US Census Bureau, the housing index rose by 5.90%
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in July 2013 compared to June 2013. It reported annual housing starts of 896,000 units. Housing Index refers to the
residential construction activity in a specific country. Additionally, the retail sales data released by US Census Bureau in
August 2013, reported sales growth of building materials and garden-equipment retailers increased by 9.20% in the second
quarter of 2013 on year-on-year basis. Therefore, with rising housing market the company may further capture the market
share.
8.4.2 Opportunity - Strategic acquisitions
Strategic acquisitions offer strong growth opportunities for the company, especially while foraying into new markets or
launching new products or services. In December 2012, the company acquired BlackLocus, Inc, (BlackLocus) a data
analytics and pricing company. BlackLocus builds technology that helps retailers make data-driven pricing decisions. In
October 2012, the company acquired U.S. Home Systems, Inc., a provider of kitchen and bath refacing products and
services. This acquisition offer effective interconnection between Home Depot stores and the U.S. Home Systems, Inc’s in-
home selling platform. In May 2012, the company acquired MeasureComp L.L.C., a flooring measurement and quote
building company. This acquisition offers Home Depot customers with additional flooring related services. In January 2012,
the company acquired Redbeacon.com, an e-marketplace. This acquisition offers the company, online home services
platform that connects consumers with contractors for their home maintenance, repair and remodeling needs. Such
acquisitions offer a steady revenue source apart from providing business expansion opportunities for the company.
8.4.3 Opportunity - Growth of web-based stores
The company stands to benefit from growing trend of online retailing, which provides consumers the convenience of
shopping from home. With the increase in interactive methods and limitless content, the retail e-commerce is growing at a
faster rate. According to the Census Bureau of the Department of Commerce, during fourth quarter of 2012, e-commerce
sales in the US was US$60 billion, an increase of 4.40% in comparison with third quarter of 2012. The fourth quarter 2012 e-
commerce estimate increased 15.60% compared to fourth quarter of 2011. It was also reported that the estimate of the US
retail e-commerce sales for the fourth quarter of 2012 totaled US$72 billion, an increase of 36.30% compared to third
quarter of 2012. Additionally, according to an in-house research, the US online retail sales are expected to remain the
fastest-growing category group during 2011-2016, growing at a CAGR of 12.23%. The company operates online websites,
www.homedepot.com, www.homedecorators.com and www.redbeacon.com. Home Depot may further enhance its online
shops and benefit from the increasing estimates of web-based store concepts.
8.5 The Home Depot, Inc. - Threats
8.5.1 Threat - Foreign exchange risk
Home Depot operates stores and sourcing offices in Canada, Mexico and China, and is exposed to the fluctuations in
foreign exchange rates. The company reports financials in the US Dollar and therefore its revenue is exposed to volatility
against other functional currencies such as the Canadian Dollar, Mexican Pesos and Chinese Renminbi. During FY2013, the
company reported a gain of US$100 million from foreign currency translation adjustment as compared to a loss of US$143
million in FY2012. The company also involves in foreign exchange hedging activities by entering into foreign exchange
forward contracts to minimize the risk associated with currency translation. However, there may be no assurance that such
hedging activities or measures limit the impact of movements in exchange rates on the company’s results of operations.
8.5.2 Threat - Rising manpower costs
Labor costs in the US have been increasing in the recent past. The tight labor markets, government mandated increases in
minimum wages and a higher proportion of full-time employees are resulting in an increase in labor costs. The federal
minimum wage provisions are contained in the Fair Labor Standards Act (FLSA). The minimum wage rate in the US
remained at US$5 per hour since 1997 and increased to US$7 per hour in July 2010. In addition, the minimum wage rates
have crossed or are nearer to US$9 per hour in several states such as Washington, California, District of Colombia, Oregon
and Massachusetts, among others. According to the Bureau of Labor Statistics, wages and salaries have increased by
1.70% during the 12-month period ending September 2012. Additionally, nine states of the US have increased the minimum
wages by 10 to 35 cents, effective from January 1, 2013. As the company operates with majority of stores in the US and an
employee base of over 340,000 personnel, increased labor costs affects the operational performance of Home Depot.
8.5.3 Threat - Stiff competition
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The company faces stiff competition from the several players in the Home improvement market as a large number of
operators trying to grab majority of the market share. Additionally, specialty retailers, such as Home Depot, face a threat of
consumers shifting away to other channels, especially mass merchandisers. In the current economic scenario of slow
recovery, consumers are budget conscious and are being lured by low prices offered by the mass merchandisers such as
Amazon Inc,Wal-Mart and Target. Furthermore, the company competes with specialty design stores, showrooms, discount
stores, hardware stores, mail order firms, warehouse clubs, independent building supply stores and installers of home
improvement products. Such high competition may force it to increase its product differentiation by offering merchandise at
low prices and raise i ts promotional expenses, which may escalate its operating costs.
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9 The Home Depot, Inc. - Company Financial Analysis
9.1 The Home Depot, Inc. - Five Year Snapshot: Overview of Financial and Operational
Performance Indicators
The company reported revenue of US$74,754 million during the fiscal year 2013 (2013). The company's revenue grew at a
CAGR of 1.19% during 2009 –2013, with an annual growth of 6.19% over 2012. During 2013, operating margin of the
company was 10.39% in comparison with operating margin of 9.46% in 2012. In 2013, the company recorded a net profit
margin of 6.07% compared to a net profit margin of 5.52% in 2012.
9.1.1 The Home Depot, Inc. - Financial ratios: Annual ratios
Table 6: The Home Depot, Inc. - Financial ratios: Annual ratios
Key Ratios Unit/Currency 2013 2012 2011 2010 2009
Equity Ratios
EPS (Earnings per Share) US$ 3.00 2.47 2.01 1.55 1.37
Dividend per Share US$ 1.26 1.04 0.95 0.90 0.90
Dividend Cover Absolute 2.38 2.38 2.13 1.72 1.52
Book Value per Share US$ 11.98 11.64 11.64 11.42 10.48
Cash Value per Share US$ 1.68 1.29 0.34 0.84 0.31
Profitability Ratios
Gross Margin % 34.57 34.47 34.27 33.87 33.65
Operating Margin % 10.39 9.46 8.59 7.26 6.11
Net Profit Margin % 6.07 5.52 4.91 4.02 3.17
Profit Markup % 52.83 52.59 52.14 51.21 50.72
PBT Margin (Profit Before Tax) % 9.66 8.62 7.75 6.02 5.04
Return on Equity % 25.51 21.70 17.67 13.72 12.71
Return on Capital Employed % 26.22 21.39 19.46 15.74 14.52
Return on Assets % 11.04 9.58 8.32 6.51 5.49
Return on Fixed Assets % 30.20 25.62 21.91 17.80 15.68
Return on Working Capital % 198.62 129.49 173.94 135.79 197.33
Growth Ratios
Sales Growth % 6.19 3.53 2.75 -7.17 -7.84
Operating Income Growth % 16.59 14.08 21.57 10.19 -39.81
EBITDA Growth % 15.02 10.92 21.09 5.84 -35.41
Net Income Growth % 16.79 16.33 25.44 17.74 -48.58
EPS Growth % 21.35 23.51 27.95 -6.86 -25.92
Working Capital Growth % -23.99 53.23 -5.09 60.12 12.25
Cost Ratios
Operating Costs (% of Sales) % 89.61 90.54 91.41 92.74 93.89
Administration Costs (% of Sales) % 22.08 22.77 23.31 24.03 25.03
Liquidity Ratios
Current Ratio Absolute 1.34 1.55 1.33 1.34 1.20
Quick Ratio Absolute 0.41 0.45 0.28 0.36 0.24
Cash Ratio Absolute 0.22 0.21 0.05 0.14 0.05
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Table 6: The Home Depot, Inc. - Financial ratios: Annual ratios
Leverage Ratios
Debt to Equity Ratio Absolute 0.61 0.60 0.52 0.50 0.64
Net Debt to Equity Absolute 0.47 0.49 0.49 0.43 0.61
Debt to Capital Ratio Absolute 0.36 0.35 0.32 0.32 0.38
Efficiency Ratios
Asset Turnover Absolute 1.82 1.74 1.69 1.62 1.73
Fixed Asset Turnover Absolute 3.11 2.88 2.71 2.59 2.72
Inventory Turnover Absolute 4.57 4.47 4.21 4.30 4.43
Current Asset Turnover Absolute 4.86 4.85 5.04 4.76 5.34
Capital Employed Turnover Absolute 4.21 3.93 3.60 3.41 4.01
Working Capital Turnover Absolute 19.12 13.68 20.26 18.71 32.27
Revenue per Employee US$ 219,865.00
Net Income per Employee US$ 13,338.00
Capex to Sales % 1.76 1.73 1.61 1.46 2.59
Source: Canadean
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9.1.2 The Home Depot, Inc. - Financial ratios: Interim ratios
Table 7: The Home Depot, Inc. - Financial ratios: Interim ratios
Key Ratios Unit/Currency Aug-2013 May-2013 Feb-2013 Oct-2012
Equity Ratios
Interim EPS (Earnings per Share) US$ 1.24 0.83 0.68 0.63
Book Value per Share US$ 10.79 11.22 11.98 11.86
Profitability Ratios
Gross Margin % 34.28 34.92 34.89 34.57
Operating Margin % 13.40 10.95 9.59 9.56
Net Profit Margin % 7.97 6.41 5.60 5.22
Profit Markup % 52.17 53.67 53.59 52.83
PBT Margin (Profit Before Tax) % 12.64 10.11 8.71 8.73
Cost Ratios
Operating Costs (% of Sales) % 86.60 89.05 90.41 90.44
Administration Costs (% of Sales) % 19.07 21.87 23.11 22.83
Liquidity Ratios
Current Ratio Absolute 1.30 1.33 1.34 1.50
Quick Ratio Absolute 0.45 0.48 0.41 0.47
Leverage Ratios
Debt to Equity Ratio Absolute 0.82 0.78 0.61 0.61
Net Debt to Equity Absolute 0.60 0.52 0.47 0.47
Debt to Capital Ratio Absolute 0.44 0.42 0.36 0.35
Source: Canadean
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9.1.3 The Home Depot, Inc. - Financial ratios: Capital Market Ratios
Table 8: The Home Depot, Inc. - Financial ratios: Capital Market Ratios
Key Ratios 15-Oct-2013
P/E (Price/Earnings) Ratio 25.05
EV/EBITDA (Enterprise Value/Earnings Before Interest, Taxes, Depreciation and Amortization) 13.32
Enterprise Value/Sales 1.57
Enterprise Value/Operating Profit 15.07
Enterprise Value/Total Assets 2.85
Dividend Yield 0.02
Note: Above ratios are based on share price as of 15-Oct-2013. The above ratios are absolute numbers.
Source: Canadean
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9.2 The Home Depot, Inc. - Financial Performance and Ratio Charts
9.2.1 The Home Depot, Inc. - Revenue and Operating Profit
The consolidated group revenue of the company for 2013 stood at US$74,754 million, which corresponds to a growth rate of
6.19% over the previous year. The operating margin of the company was 10.39% in 2013, an increase of 93.00 basis points overthe previous year.
Figure 1: The Home Depot, Inc. - Revenue and Operating Profit
Source: Canadean
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9.2.2 The Home Depot, Inc. - Asset and Liabilities
The company's assets grew 1.40% over the previous year to US$41,084 million in 2013. The company's liabilities grew 3.04%
over the previous year to US$23,307 million in 2013. The company's asset to liability ratio reduced from 1.79 in 2012 to 1.76 in
2013.
Figure 2: The Home Depot, Inc. - Financial Position
Source: Canadean
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9.2.3 The Home Depot, Inc. - Net Debt vs. Gearing Ratio
The company recorded lower net debt of US$8,302 million at the end of fiscal year 2013 when compared to the previous year's
net debt of US$8,801 million.The company's gearing ratio for the year 2013 was 0.53, which was lower when compared to the
previous year's gearing ratio of 0.60. The gearing ratio remained lower in 2013 due to lower debt funding activities over equity.
Figure 3: The Home Depot, Inc. - Net Debt vs. Gearing Ratio
Source: Canadean
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9.2.4 The Home Depot, Inc. - Operational Efficiency
The company's working capital turnover for 2013 grew to 19.12, from the previous year's working capital turnover of 13.68. In
2013, the company's asset turnover improved to 1.82 from the previous year's current ratio of 1.74.
Figure 4: The Home Depot, Inc. - Operational Efficiency
Source: Canadean
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9.2.6 The Home Depot, Inc. - Valuation
As of 15-Oct-2013, the company recorded an EV/EBIT of 15.07, EV/Total Assets of 2.85 and EV/Sales of 1.57.
Figure 6: The Home Depot, Inc. - Valuation
Source: Canadean
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9.3 The Home Depot, Inc. - Key Competitors
The following companies are the major competitors of The Home Depot, Inc.:
84 Lumber Company
Builders FirstSource, Inc. (Ticker: BLDR)
Lowe's Companies, Inc. (Ticker: LOW)
Menards, Inc.
The Sherwin-Williams Company (Ticker: SHW)
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10 The Home Depot, Inc. - Mergers & Acquisitions and
Partnerships
10.1 The Home Depot, Inc. - M&A and Partnerships Strategy
Jig-A-World partners with The Home Depot
Deal Type Partnership Deal Sub Type Other
Deal Status Completed Announced Date 7/8/2010 12:00:00 AM
Deal in Brief
Jig-A-Loo World Inc., a Canada based retailer of dry silicone-based lubricants, through its wholly-owned subsidiary Jig-A-World
USA, Inc., formed a partnership with The Home Depot, Inc., a home improvement retailer, to provide EconoGreen Plastics(TM) at
Home Depot stores. The EconoGreen Plastics(TM), products includes trash bags and drop cloths, designed to help consumers
reduce environmental waste. These heavy duty bags are made from 100% recycled materials and are 100 percent oxo-
degradable, allowing them to break down within two years after use while costing considerably less than traditional green plasticbags.
"With EconoGreen Plastics(TM) now available at The Home Depot stores nationwide, environmentally conscious consumers
across the U.S. have easier access to our complete line of plastic bags," said Cindy Sutton, vice president, Jig-A-World USA, Inc.
"Now consumers have an affordable option for green bags that they can use throughout their home without paying a premium or
sacrificing quality."
Participant Company Information
Company Name Jig-A-Loo World Inc. Involvement Type Target
Company Overview
Jig-A-Loo World Inc. is a privately held Canadian-based producer of JIG-A-LOO. JIG-A-LOO is an all-purpose, high performance
silicone based lubricant that unlike any other lubricant contains no oil, grease, wax or detergent; is colorless and does not stain ordrip.
The Home Depot partners with Owens Corning
Deal Type Partnership Deal Sub Type Co-Marketing
Deal Status Completed Announced Date 10/5/2009 12:00:00 AM
Deal in Brief
The Home Depot, Inc., a home improvement retailer, expanded its partnership with Owens Corning, a producer of residential and
commercial building materials and glass fiber reinforcements, to sell owens corning’s PINK fiberglass insulation in The Home
Depot's stores. Under the partnership agreement, PINK fiberglass insulation will be sold in more than 2,200 of The Home Depot's
stores across North America. The partnership will enable the Owens Corning to expand its business operations in North America.
Participant Company Information
Company Name Owens Corning Involvement Type Target
Company Overview
Owens Corning (Owens Corning) is a manufacturer of composite and building materials systems. The company manufactures
fabricates and glass fiber reinforcements and sells them in form of mat, veil and fabrics. It offers residential and commercial
building materials which include insulation materials such as thermal and acoustical batts, foam sheathing and accessories as well
as roofing materials such as oxidized asphalt and roofing accessories. The company has several operating brands including
Owens Corning, PINK FIBERGLAS, Cultured Stone, ProStone, Modulo Stone, ParMur and Langeo Stone. The company along
with its subsidiaries operates across the US, Europe, Asia-Pacific and Canada. Owens Corning is headquartered in Toledo, Ohio,
US.
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The Home Depot partners with Martha Stewart
Deal Type Partnership Deal Sub Type Other
Deal Status Completed Announced Date 9/14/2009 12:00:00 AM
Deal in Brief
The Home Depot, Inc., a home improvement retailer, entered into a partnership agreement with Martha Stewart Living
Omnimedia, Inc., a diversified media and merchandising company. Under the agreement, partners will develop an exclusive
Martha Stewart Living brand of home improvement products in select categories including Outdoor Living, Home Organization and
Home decor.
The new brand will be available at The Home Depot will provide its customer a distinctive, innovative merchandise at an
affordable prices.
The partnership will allow Martha Stewart to offer a wider audience the product and information. The partnership will enable
Martha to expand its reach and business.
Participant Company Information
Company NameMartha Stewart Living
Omnimedia, Inc. Involvement Type Target
Company Overview
Martha Stewart Living Omnimedia, Inc. (MLSO) integrated media and merchandising company, based in US. The company has
classified its business operations through four reportable segments, namely, Publishing, Internet, Broadcasting, and
Merchandising. MLSO operates through 10 subsidiaries, namely, MSLO Productions, Inc., MSLO Productions - Home, Inc., MSLO
Productions - EDF, Inc., MSLO Shared IP Sub, LLC, MSLO Emeril Acquisition Sub, LLC, Flour Productions, Inc., MSO IP
Holdings, Inc., Martha Stewart, Inc., and MSX UK Limited. The company is headquartered at New York, US.
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11 The Home Depot, Inc. - Recent Developments
The Home Depot Canada donates $125,000 to Canadian Red Cross
The Home Depot Canada is donating $125,000 to the Canadian Red Cross, to help residents affected by the flooding in Calgary and other
communities in southern Alberta.
Published Date : 6/25/2013 12:57:00 PM
PayOne seeks unspecified damages from The Home Center citing patent infringement
Mobile payment and billing firm PayOne has filed a suit against home improvement retailer, The Home Depot, in the Northern District of
California citing patent infringement.
Published Date : 3/7/2013 5:49:00 AM
The Home Depot net sales increase 6.2% for FY2012
Net sales for The Home Depot aggregated to $74.8bn for the 2012 fiscal, demonstrating a 6.2% increase when compared to 2011.
Published Date : 2/27/2013 6:04:00 AM
The Home Depot begins hiring 80,000 seasonal employees across US outlets
US-based home improvement retailer, The Home Depot, has begun filling about 80,000 seasonal positions across its outlets in the US.
Published Date : 2/7/2013 12:00:00 AM
The Home Depot net sales increase by 4.6% for Q3 in 2012
Home improvement retailer The Home Depot has posted a 4.6% increase in net sales to $18.13bn for the third quarter in 2012 that ended 28
October.
Published Date : 11/14/2012 6:40:00 AM
The Home Depot closes U.S. Home Systems purchase
The Home Depot, an American retailer of home improvement, and US Home Systems has completed the merger of USHS with an indirect
wholly-owned subsidiary of The Home Depot.
Published Date : 10/30/2012 12:00:00 AM
The Home Depot shuts big box stores in China
US-based home improvement specialty retailer The Home Depot is to close its remaining seven big box stores in China, resulting in the loss of
850 jobs.
Published Date : 9/17/2012 10:09:00 AM
American retailer The Home Depot to acquire U.S. Home Systems
US-based home improvement retailer The Home Depot has entered into a definitive merger agreement to acquire U.S. Home Systems (USHS).
Published Date : 8/8/2012 9:31:00 AM
The Home Depot expands appliance brands in select stores, online
The Home Depot, a US-based home improvement retailer, is expanding its appliance brands to include Whirlpool, Electrolux and Frigidaire in
select stores and on homedepot.com.
Published Date : 7/4/2012 10:48:00 AM
Home Depot to recruit 70,000 spring season associates
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Home improvement retailer The Home Depot has started recruiting to fill more than 70,000 seasonal positions for spring.
Published Date : 1/13/2012 7:34:00 AM
The Home Depot introduces new series of LED bulbs
Home improvement retailer, Home Depot, has announced that it now offers the 40W equivalent LED and the widest selection of high powered,
light emitting diodes (LEDs) bulbs on homedepot.com.
Published Date : 8/23/2010 6:21:00 PM
Chester's To Open Six New 'Chicken On The Fly' Outlets In US
Chester's, an Illinois-based quick serve restaurant concept, has opened six new Chicken On The Fly locations in cooperation with The Home
Depot Fuel Centers in the US.
Published Date : 7/21/2010 12:00:00 AM
Chester's To Open Six New 'Chicken On The Fly' Outlets In US
Chester's, an Illinois-based quick serve restaurant concept, has opened six new Chicken On The Fly locations in cooperation with The Home
Depot Fuel Centers in the US.
Published Date : 7/20/2010 6:30:00 PM
Home Depot to stock EconoGreen products in its stores across US
Jig-A-World USA, Inc., makers of automotive and home improvement products, has announced its partnership with The Home Depot stores to
stock its eco-friendly line of products ‘EconoGreen Plastics’ across its stores in US.
Published Date : 7/8/2010 1:35:00 PM
Home Depot to reduce energy usage in its stores
The Home Depot Inc., a home improvement retailer in Atlanta, Georgia, is aiming to reduce its energy usage by 20% in kWh per square feet
usage in its US stores by 2015.
Published Date : 3/4/2010 12:00:00 AM
Home Depot funds KIB tree planting initiative
The Home Depot Inc., a home improvement retailer in Georgia, has announced that The Home Depot Foundation and Alliance for Community
Trees will grant $10,000 to Keep Indianapolis Beautiful, Inc. in support of its “2012 by 2012” tree planting initiative.
Published Date : 3/4/2010 12:00:00 AM
The Home Depot reports net earnings in fourth quarter
The Home Depot, a home improvement retailer in US, has reported that its fiscal 2009 fourth quarter consolidated net earnings were $342
million, compared with a net loss of $54 million for the same period in fiscal 2008.
Published Date : 2/23/2010 12:00:00 AM
Home Depot re-orders Converted Organics' Lawn & Turf Fertilizer
The Home Depot, Inc., a home improvement specialty retailer in Georgia, has placed a re-order for Massachusetts-based fertilizer producer
Converted Organics Inc.’s organic Lawn & Turf fer tilizer.
Published Date : 2/17/2010 12:00:00 AM
Home Depot files application for new store in Lodi, California
The Home Depot Inc., a home improvement chain in Georgia, has filed an application with city planning officials to build store in Californian city
south Lodi's mixed-use Reynolds Ranch development.
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Published Date : 2/6/2010 12:00:00 AM
The Home Depot to offer EcoSMART's new products
The Home Depot, a home improvement retailer in Georgia, will be offering ten new products from US- based “green” pesticides producer
EcoSMART Technologies.
Published Date : 2/4/2010 12:00:00 AM
Source: Canadean
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12 Appendix
12.1 Methodology
Canadean company reports are based on a core set of research techniques which ensure the best possible level of quality
and accuracy of data. The key sources used include:
Company Websites
Company Annual Reports
SEC Filings
Press Releases
Proprietary Databases
Notes
Financial information of the company is taken from the most recently published annual reports or SEC filings
The financial and operational data reported for the company is as per the industry defined standards
Revenue converted to US$ at average annual conversion rate as of fiscal year end
12.2 Ratio Definitions
Capital Market Ratios Capital Market Ratios measure investor response to owning a company's stock and also the cost
of issuing stock.
Price/Earnings Ratio (P/E)
Price/Earnings (P/E) ratio is a measure of the price paid for a share relative to the annual income
earned per share. It is a financial ratio used for valuation: a higher P/E ratio means that investors
are paying more for each unit of income, so the stock is more expensive compared to one with
lower P/E ratio. A high P/E suggests that investors are expecting higher earnings growth in the
future compared to companies with a lower P/E. Price per share is as of previous business
close, and EPS is from latest annual report.
Formula: Price per Share / Earnings per Share
Enterprise Value/Earnings
before Interest, Tax,Depreciation & Amortization
(EV/EBITDA)
Enterprise Value/EBITDA (EV/EBITDA) is a valuation multiple that is often used in parallel with,
or as an alternative to, the P/E ratio. The main advantage of EV/EBITDA over the PE ratio is that
it is unaffected by a company's capital structure. It compares the value of a business, free of
debt, to earnings before interest. Price per share is as of previous business close, and shares
outstanding last reported. Other items are from latest annual report.
Formula: (Market Cap + Debt + Preferred Stock - Cash & Cash Equivalents) / (Net Income +Interest + Tax + Depreciation + Amortization)
Enterprise Value/Sales
Enterprise Value/Sales (EV/Sales) is a ratio that provides an idea of how much it costs to buy
the company's sales. EV/Sales is seen as more accurate than Price/Sales because market
capitalization does not take into account the amount of debt a company has, which needs to be
paid back at some point. Price per share is as of previous business close, and shares
outstanding last reported. Other items are from latest annual report.
Formula: (Market Cap + Debt + Preferred Stock - Cash & Cash Equivalents) / Sales
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Enterprise Value/Operating
Profit
Enterprise Value/Operating Profit measures the company's enterprise value to the operating
profit. Price per share is as of previous business close, and shares outstanding last reported.
Other items are from latest annual report.
Formula: (Market Cap + Debt + Preferred Stock - Cash & Cash Equivalents) / Operating Income
Enterprise Value/Total
Assets
Enterprise Value/Total Assets measures the company's enterprise value to the total assets.
Price per share is as of previous business close, and shares outstanding last reported. Other
items are from latest annual report.
Formula: (Market Cap + Debt + Preferred Stock - Cash & Cash Equivalents) / Total Assets
Dividend Yield
Dividend Yield shows how much a company pays out in dividends each year relative to its share
price. In the absence of any capital gains, the dividend yield is the return on investment for a
stock.
Formula: Annual Dividend per Share / Price per Share
Equity Ratios These ratios are based on per share value.
Earnings per Share (EPS) Earnings per share (EPS) is the portion of a company's profit allocated to each outstanding
share of common stock. EPS serves as an indicator of a company's profitability.
Formula: Net Income / Weighted Average Shares
Dividend per Share Dividend is the distribution of a portion of a company's earnings, decided by the board of
directors, to a class of i ts shareholders.
Dividend Cover Dividend cover is the ratio of company's earnings (net income) over the dividend paid to
shareholders.
Formula: Earnings per share / Dividend per share
Book Value per Share Book Value per Share measure used by owners of common shares in a firm to determine the
level of safety associated with each individual share after all debts are paid accordingly.
Formula: (Shareholders Equity - Preferred Equity) / Outstanding Shares
Cash Value per Share
Cash Value per Share is a measure of a company's cash (cash & equivalents on the balance
sheet) that is determined by dividing cash & equivalents by the total shares outstanding.
Formula: Cash & equivalents / Outstanding Shares
Profitability Ratios
Profitability Ratios are used to assess a company's ability to generate earnings, based on
revenues generated or resources used. For most of these ratios, having a higher value relative
to a competitor's ratio or the same ratio from a previous period is indicative that the company is
doing well.
Gross Margin Gross margin is the amount of contribution to the business enterprise, after paying for direct-
fixed and direct variable unit costs.
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Formula: {(Revenue-Cost of revenue) / Revenue}*100
Operating Margin Operating Margin is a ratio used to measure a company's pricing strategy and operating
efficiency.
Formula: (Operating Income / Revenues) *100
Net Profit Margin Net Profit Margin is the ratio of net profits to revenues for a company or business segment - that
shows how much of each dollar earned by the company is translated into profits.
Formula: (Net Profit / Revenues) *100
Profit Markup Profit Markup measures the company's gross profitability, as compared to the cost of revenue.
Formula: Gross Income / Cost of Revenue
PBIT Margin (Profit Before
Interest & Tax)
Profit Before Interest & Tax Margin shows the profitability of the company before interest
expense & taxation.
Formula: {(Net Profit + Interest + Tax) / Revenue} *100
PBT Margin (Profit Before
Tax) Profit Before Tax Margin measures the pre-tax income over revenues.
Formula: {Income Before Tax / Revenues} *100
Return on Equity Return on Equity measures the rate of return on the ownership interest (shareholders' equity) of
the common stock owners.
Formula: (Net Income / Shareholders Equity)*100
Return on Capital Employed
Return on Capital Employed is a ratio that indicates the efficiency and profitability of acompany's capital investments. ROCE should always be higher than the rate at which the
company borrows; otherwise any increase in borrowing will reduce shareholders' earnings.
Formula: EBIT / (Total Assets – Current Liabilities)*100
Return on Assets Return on Assets is an indicator of how profitable a company is relative to its total assets, the
ratio measures how efficient management is at using its assets to generate earnings.
Formula: (Net Income / Total Assets)*100
Return on Fixed Assets Return on Fixed Assets measures the company's profitability to its fixed assets (property, plant &
equipment).
Formula: (Net Income / Fixed Assets) *100
Return on Working Capital Return on Working Capital measures the company's profitability to its working capital.
Formula: (Net Income / Working Capital) *100
Cost Ratios Cost ratios help to understand the costs the company is incurring as a percentage of sales.
Operating costs (% of Sales) Operating costs as percentage of total revenues measures the operating costs that a company
incurs compared to the revenues.
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Formula: (Operating Expenses / Revenues) *100
Administration costs (% of
Sales)
Administration costs as percentage of total revenue measures the selling, general and
administrative expenses that a company incurs compared to the revenues.
Formula: (Administrative Expenses / Revenues) *100
Interest costs (% of Sales) Interest costs as percentage of total revenues measures the interest expense that a company
incurs compared to the revenues.
Formula: (Interest Expenses / Revenues) *100
Leverage Ratios
Leverage ratios are used to calculate the financial leverage of a company to get an idea of the
company's methods of financing or to measure its ability to meet financial obligations. There are
several different ratios, but the main factors looked at include debt, equity, assets and interest
expenses.
Debt to Equity Ratio
Debt to Equity Ratio is a measure of a company's financial leverage. The debt/equity ratio also
depends on the industry in which the company operates. For example, capital-intensive
industries tend to have a higher debt equity ratio.
Formula: Total Liabilities / Shareholders Equity
Debt to Capital Ratio
Debt to capital ratio gives an idea of a company's financial structure, or how it is financing its
operations, along with some insight into its financial strength. The higher the debt-to-capital ratio,
the more debt the company has compared to its equity. This indicates to investors whether a
company is more prone to using debt financing or equity financing. A company with high debt-to-
capital ratios, compared to a general or industry average, may show weak financial strength
because the cost of these debts may weigh on the company and increase its default risk.
Formula: {Total Debt / (Total assets - Current Liabilities)}
Interest Coverage Ratio Interest Coverage Ratio is used to determine how easily a company can pay interest on
outstanding debt, calculated as earnings before interest & tax by interest expense.
Formula: EBIT / Interest Expense
Liquidity Ratios
Liquidity ratios are used to determine a company's ability to pay off i ts short-terms debts
obligations. Generally, the higher the value of the ratio, the larger the margin of safety that the
company possesses to cover short-term debts. A company's ability to turn short-term assets into
cash to cover debts is of the utmost importance when creditors are seeking payment.
Bankruptcy analysts and mortgage originators frequently use the liquidity ratios to determinewhether a company will be able to continue as a going concern.
Current Ratio
Current Ratio measures a company's ability to pay i ts short-term obligations. The ratio gives an
idea of the company's ability to pay back its short-term liabilities (debt and payables) with its
short-term assets (cash, inventory, receivables). The higher the current ratio, the more capable
the company is of paying its obligations. A ratio under 1 suggests that the company would be
unable to pay off its obligations if they came due at that point.
Formula: Current Assets / Current Liabilities
Quick Ratio Quick ratio measures a company's ability to meet its short-term obligations with its most liquid
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assets.
Formula: (Current Assets - Inventories) / Current Liabilities
Cash Ratio
Cash ratio is the most stringent and conservative of the three short-term liquidity ratio. It only
looks at the most liquid short-term assets of the company, which are those that can be mosteasily used to pay off current obligations. It also ignores inventory and receivables, as there are
no assurances that these two accounts can be converted to cash in a timely matter to meet
current liabilities.
Formula: {(Cash & Bank Balance + Marketable Securities) / Current Liabilities)}
Efficiency Ratios Efficiency ratios measure a company's effectiveness in various areas of its operations,
essentially looking at maximizing its use of resources.
Fixed Asset Turnover
Fixed Asset Turnover ratio indicates how well the business is using its fixed assets to generate
sales. A higher ratio indicates the business has less money tied up in fixed assets for each
currency unit of sales revenue. A declining ratio may indicate that the business is over-invested
in plant, equipment, or other fixed assets.
Formula: Net Sales / Fixed Assets
Asset Turnover
Asset turnover ratio measures the efficiency of a company's use of its assets in generating sales
revenue to the company. A higher asset turnover ratio shows that the company has been more
effective in using its assets to generate revenues.
Formula: Net Sales / Total Assets
Current Asset Turnover
Current Asset Turnover indicates how efficiently the business uses its current assets to generate
sales.
Formula: Net Sales / Current Assets
Inventory Turnover
Inventory Turnover ratio shows how many times a company's inventory is sold and replaced
over a period. A low turnover implies poor sales and, therefore, excess inventory. A high ratio
implies either strong sales or ineffective buying.
Formula: Cost of Goods Sold / Inventory
Working Capital Turnover
Working Capital Turnover is a measurement to compare the depletion of working capital to the
generation of sales. This provides some useful information as to how effectively a company is
using its working capital to generate sales.
Formula: Net Sales / Working Capital
Capital Employed Turnover Capital employed turnover ratio measures the efficiency of a company's use of its equity in
generating sales revenue to the company.
Formula: Net Sales / Shareholders Equity
Capex to sales Capex to Sales ratio measures the company's expenditure (investments) on fixed and related
assets' effectiveness when compared to the sales generated.
Formula: (Capital Expenditure / Sales) *100
Net income per Employee
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Net income per Employee looks at a company's net income in relation to the number of
employees they have. Ideally, a company wants a higher profit per employee possible, as it
denotes higher productivity.
Formula: Net Income / No. of Employees
Revenue per Employee
Revenue per Employee measures the average revenue generated per employee of a company.
This ratio is most useful when compared against other companies in the same industry.
Generally, a company seeks the highest revenue per employee.
Formula: Revenue / No. of Employees
Efficiency Ratio
Efficiency Ratio is used to calculate a bank's efficiency. An increase means the company is
losing a larger percentage of its income to expenses. If the efficiency ratio is getting lower, it is
good for the bank and its shareholders.
Formula: Non-interest expense / Total Interest IncomeSource : Canadean
12.3 Disclaimer
All Rights Reserved
No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form by any means,
electronic, mechanical, photocopying, recording or otherwise, without the prior permission of the publisher, Canadean.
The data and analysis within this report is driven by Canadean from its own primary and secondary research of public and
proprietary sources and does not necessarily represent the views of the company profiled.
The facts of this report are believed to be correct at the time of publication but cannot be guaranteed. Please note that the
findings, conclusions and recommendations that Canadean delivers will be based on information gathered in good faith f romboth primary and secondary sources, whose accuracy we are not always in a position to guarantee. As such Canadean can
accept no liability whatever for actions taken based on any information that may subsequently prove to be incorrect.