home depot company report

8/16/2019 Home Depot Company Report

1/41www.canadean-winesandspirits.com

1.

The Home Depot, Inc. - Company Profile, SWOT & Financial Report


2/41

©Canadean. This product is licensed and is not to be photocopied.

The Home Depot, Inc.

2

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


3/41



3

11 The Home Depot, Inc. - Recent Developments ........................................................................................ 33

12

Appendix .................................................................................................................................................... 36

12.1

Methodology ..................................................................................................................................................... 36

12.2 Ratio Definitions ................................................................................................................................................ 36

12.3

Disclaimer ......................................................................................................................... ................................ 41


4/41



4

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


5/41



5


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


6/41



6

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

Source: Canadean


7/41



7

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.

Source: Canadean


8/41



8

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


9/41



9

Table 3: The Home Depot, Inc. - Major Products and Services

Everbilt

Hampton Bay

HDX

Banner:

The Home Depot

Home Decorators Collection

Source: Canadean


10/41



10

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.


11/41



11


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.


12/41



12


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.

Source: Canadean


13/41



13

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,


14/41



14

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.


15/41



15

6 The Home Depot, Inc. - Locations and Subsidiaries

6.1 The Home Depot, Inc. - Head Office


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

Source: Canadean


16/41



16

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.


17/41



17

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%


18/41



18

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


19/41



19

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.


20/41



20

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


21/41



21

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


22/41



22

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


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


23/41



23

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


24/41



24

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


25/41



25

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


26/41



26

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


27/41



27

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


28/41


29/41



29

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


30/41



30

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)


31/41



31

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 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.


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.


32/41



32

The Home Depot partners with Martha Stewart

Deal Type Partnership Deal Sub Type Other


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.


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.


33/41



33

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.


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.


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.


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.


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.


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).


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.


Home Depot to recruit 70,000 spring season associates


34/41



34

Home improvement retailer The Home Depot has started recruiting to fill more than 70,000 seasonal positions for spring.


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.


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.


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.


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.


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.


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.


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.


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.


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.


35/41



35


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.


Source: Canadean


36/41



36

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


37/41



37

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 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.


38/41



38

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.


39/41



39

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


40/41



40

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


41/41


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.

home depot company report

Documents