HOME DEPOT MANAGEMENT REPORT

BY
MICHAEL MACCHIA, HASIT SHAH, GAURAV TULADHAR AND KESSIA WILLIAMS
December 13, 2012
QUALITATIVE BREAKDOWN
OVERVIEW
THE HOME DEPOTS PROFILE
CORPORATE RESPONSIBILITY
PRODUCTS AND SERVICES
HOME IMPROVEMENT INDUSTRY
S.W.O.T. ANALYSIS
MACRO ANALYSIS
COMPETITORS
QUANTITATIVE BREAKDOWN
FINANCIAL AND CSR PERFORMANCE
ECONOMIC VALUE ADDED
FINANCIAL RATIO ANALYSIS
TARGET PRICE/FORECAST
CONCLUSION
MANAGEMENT SUMMARY AND RECOMMENDATION
THE HOME DEPOTS PROFILE
Founded in 1978 and opening its doors in
Atlanta, Georgia in 1979
Worlds largest home improvement retailer in the
US.
Sells a wide assortment of building materials,
home improvement and, lawn and garden
products
Provide rigorous product knowledge training,
which they passed on to customers through do-it-
yourself clinics.
Their philosophy of customer service
whatever it takes means cultivating a
relationship with customers rather than merely
completing a transaction.
Revolutionized the home improvement industry
by bringing the know-how and the tools to the
consumer and by saving them money.
Fastest growing retailer in U.S. history
Qualitative Breakdown
Image Courtesy: http://kids4kids2012atworldleadershipconference.wordpress.com/2012/06/16/visiting-home-depot-
corporate-headquarters-2/
CORPORATE RESPONSIBILITY
In 2002, The Home Depot Foundation was established
with the mission of improving homes and lives.
Focus is to repair and refurbish homes and facilities that
house disadvantaged families and individuals.
Helps out U.S. military veterans who are facing increasing
financial and physical hardships as they return to civilian
life.
In 2011, the foundation made a three-year, $30 million
pledge to veterans' housing initiatives. In September 2012,
the Foundation announced an additional $50 million
commitment to veterans' non-profits over the next three
years to ensure every veteran has a safe place to call home
years.
Image courtesy : http://media.corporateir.net/media_files/IROL/63/63646/corpGov/value_wheel.gif)
PRODUCTS AND SERVICES
There are up to 40,000 different kinds
of building materials, home
improvement supplies, appliances, and
lawn & garden products for customers
project needs.
Selections may vary from store to store
due to geographic market needs.
Services include: Home Services,
Contractor Services, The Home Depot
Clinics and Kids Workshops
31%
29%
21%
19%
Current Year 2012
Sales
$ 70,395.0 millions
Plumbing, electrical & kitchen
Hardware & seasonal
Building materials, lumber & millwork
Paint & flooring
As of 11/07/2012 Thompson
HOME IMPROVEMENT INDUSTRY
Made up of companies that sell goods and offer services.
This is a $300 billion dollar a year industry that is heavily linked to the housing market.
Expected to surpass past product sales for this year. Harvards Joint Center for Housing Studies
projects that home improvement spending could see double-digit growth in the first half of 2013.
The Home Depot and Lowes Inc. dominate the industry; together they make up for 18% of the
$300 billion dollar industry.
As employment growth rises and housing markets improve, sales expected; averaging 5.9% in
2014 to 2015.
http://homeimprovementstip.com/wp-content/uploads/2011/12/indiana4.jpg
significant bargaining power,
new IT infrastructure & advanced inventory management system
improved customer satisfaction
brand awareness
rapid deployment centers
partnership with Martha Stewart, company culture
Employees care
Living and large portfolio of proprietary brands,
television network (HDTV),,merchandising strategy and workshops
rapid expansion into unknown territories
product recalls
not targeting the female customer
growing Chinese home improvement market,
increasing relevance of ECO options, increase in
sales,
catering to the DIY market, increased demand for
power tools
growth in online market
the only big-box retailer to offer high quality
(designer) products such as Ralph Lauren paint.

increased regulations on private label credit cards
increasing charge offs,
wholesalers offering lower prices to professional
business customers
improperly managing the DIY market
rise in customer service complaints
government investigations and litigation

SWOT ANALYSIS
STRENGTH WEAKNESS
OPPORTUNITY THREAT
MACRO ANALYSIS
The housing market, has somewhat stabilized, making steady gains in the past few months due to the
help of Hedge funds and private-equity firms.
With the housing market being closely related to the home improvement industry, this solidifies the
forecast of the industrys growth in the coming years.
In the article The Big Long: A new generation of investors is betting on Americas housing market
the author says that investors believe the recovery of the housing market is underway and are looking
to profit from it. Also points out that shares in Home Depot are expected to go up sharply.
On a larger scale, household debt has been reduced however due to refinancing options after the
housing market crash.
Lower interest rates has allowed households to save more but its but consumers will need to regain
confidence in the economy
The Home Depot, and other companies in the industry - better manage their inventories since
consumers will still be spending less than they did in the years before the recession.
http://homeimprovementstip.com/wp-content/uploads/2011/12/Indiana3.jpg
COMPETITORS
Menard, Inc., The Sherwin-Williams Company, True Value Company, Lowes Company Inc. and
Ace Hardware Company
Lowes Companies Inc. is the second largest retailer of home improvement products in the US
The Home Depots main rival within the industry.
Ace Hardware Company, unlike The Home Depot and Lowes Companies Inc., are privately held,
independent stores that are operated by entrepreneurs.
See table for comparison among the three companies in terms of annual sales, market cap and
revenue/market share.
http://www.bloggingstocks.com/2008/05/08/battle-of-the-brands-home-depot-vs-lowes/
http://www.rainbird.com/homeowner/store/index.htm
Quantitative Breakdown
FINANCIAL AND CSR PERFORMANCE
ECONOMIC VALUE ADDED

Shares Outstanding 1,537,000,000.00
Share Price 44.87
Market Cap 68,965,200,000.00
Long Term Debt 10,758,000,000.00
Total Capital 28,656,000,000.00
Percent of Debt 37.54%
Percent of Equity 62.46%
Risk Free Rate 1.93%
Risk Premium 2.37%
Beta 1.01
Cost of Equity 4.32%
WACC 6.2%
NOPAT 387,840,000.00
Return on Capital 14.72%
(ROC-WACC) 8.52%
EVA 2,441,491,200.00
EVA per share 0.63

FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011
0.00
10.00
20.00
30.00
40.00
50.00
60.00
70.00
80.00
90.00
Year
I
n


B
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MARKET CAP. COMPARISON
Home Depot Lowes
FINANCIAL RATIO ANALYSIS
Liquidity: Above Average
0.00
0.05
0.10
0.15
0.20
0.25
0.30
0.35
0.40
0.45
0.50
0.55
0.60
0.65
0.70
2006 2007 2008 2009 2010 2011
Year
QUICK RATIO COMPARISON
Industry Home Depot Inc Lowe's Cos Inc Ace Hardware
FINANCIAL RATIO ANALYSIS
0.00
0.50
1.00
1.50
2.00
2.50
2006 2007 2008 2009 2010 2011
Year
CURRENT RATIO COMPARISON
Industry Home Depot Inc Lowe's Cos Inc Ace Hardware
FINANCIAL RATIO ANALYSIS
0.00
0.05
0.10
0.15
0.20
0.25
0.30
0.35
0.40
2006 2007 2008 2009 2010 2011
CASH RATIO COMPARISON
Industry Home Depot Inc Lowe's Cos Inc Ace Hardware
FINANCIAL RATIO ANALYSIS
Profitability: Above Average
Gross Profit Margin, Operating Margin, Net profit margin, Return On Assets, Return on
Equity
Asset Management: Above Average
CGS in Inventory, Inventory Turnover, Asset Turnover
FINANCIAL RATIO ANALYSIS
Debt Management: Average
0.00
10.00
20.00
30.00
40.00
50.00
60.00
70.00
80.00
90.00
100.00
110.00
120.00
130.00
140.00
150.00
2006 2007 2008 2009 2010 2011
Year
TOTAL DEBT / EQUITY COMPARISON
Industry Home Depot Inc Lowe's Cos Inc Ace Hardware
FINANCIAL RATIO ANALYSIS
Debt Management
20.74
14.59
279.46
4366.44
8.01
6.03 0.00
500.00
1000.00
1500.00
2000.00
2500.00
3000.00
3500.00
4000.00
4500.00
5000.00
0.00
5.00
10.00
15.00
20.00
25.00
2006 2007 2008 2009 2010 2011
Year
INTEREST COVERAGE COMPARISON
Home Depot Inc Lowe's Cos Inc Ace Hardware Industry
FINANCIAL RATIO ANALYSIS
0.00
5.00
10.00
15.00
20.00
25.00
2006 2007 2008 2009 2010 2011
Year
PRICE / EARNINGS RATIO COMPARISON
Industry Home Depot Inc Lowe's Cos Inc
FINANCIAL RATIO ANALYSIS
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
4.00
2006 2007 2008 2009 2010 2011
Year
PRICE / BOOK RATIO COMPARISON
Industry Home Depot Inc Lowe's Cos Inc
FINANCIAL RATIO ANALYSIS
0.00
0.50
1.00
1.50
2006 2007 2008 2009 2010 2011
Year
PRICE / SALES RATIO COMPARISON
Industry Home Depot Inc Lowe's Cos Inc
FINANCIAL RATIO ANALYSIS
0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
8.00
9.00
10.00
2006 2007 2008 2009 2010 2011
Year
FREE CASH FLOW YIELD COMPARISON
Industry Home Depot Inc Lowe's Cos Inc
TARGET PRICE/FORECAST
As of December 11, 2012, the 12-month forecast for the Home Depot shows a median price of
59.00, a high of 72.00 and a low of 51.00. The median reflects the -6.2% decrease from the last
price of 62.89.









http://money.cnn.com/quote/forecast/forecast.html?symb=HD
CONCLUSION
SUMMARY AND RECOMMENDATIONS
The S.W.O.T. analysis found several opportunities and areas of improvement for The Home Depot,
particularly with the growing Chinese home improvement market.
The report finds the prospects of the company in its current position to be positive. There are areas
of improvement and require further investigation and remedial action by the management.
Some of the limitations include:
Forecasting figures are not provided, nature and type of industry does not provided industry
averages on all ratios, time constraints on analyzing data, depth of analysis lacking due to
nature and scope of work
We recommend that The Home Depot lower their debt and use retained earnings more frequently
to finance their operations in order to stay profitable and above the competition.
https://plus.google.com/107290324397908716387/posts
RATIOS FOR HOME DEPOT AND COMPETITORS

Appendix