Home Depot

About Home Depot

When embarking on household projects, many start their journey at The Home Depot. As the world's largest home improvement chain and fourth-largest US retailer, the company operates about 2,250 stores in the US, Canada, Mexico, and China, as well as an online business. It targets the do-it-yourself (DIY) and professional markets with its selection of – more... some 40,000 items, including lumber, flooring, plumbing supplies, garden products, tools, paint, and appliances. Home Depot also offers installation services for carpeting, cabinetry, and other products. Stung by the deep recession and housing crisis in the US, the firm is beginning to regain its footing by focusing on its core Home Depot stores and exiting China.

Operations

In addition to its big-box retail stores in the US, Canada, and Mexico, Home Depot operates half a dozen Home Decorators Collection stores in five US states. (The company sold its professional HD Supply business in 2007 to better focus on its ailing retail store operation.) The company's Home Depot International subsidiary houses the company's retail operations in Canada (Home Depot of Canada) and Mexico. The DIY chain also operates a growing online business, homedepot.com.

Geographic Reach

Home Depot operates more than 270 stores outside the US, accounting for 12% of its store base and approximately $8 billion of its more than $70 billion in fiscal 2012 (ends January) sales. The chain has stores in all 50 US states, the District of Columbia, Puerto Rico, Guam, and the Virgin Islands.

Financial Analysis

Sales at Home Depot's stores are making a comeback following the Great Recession and implosion of the housing and construction markets in the US. Indeed, in fiscal 2012 (ends January) sales increased 3.5% vs. the prior year, and same-store sales grew by the same amount over the same period. (Indeed, same-store sales were up half a percent vs. the previous annual comparison.) Still, the $70.4 billion Home Depot rang up in fiscal 2012 was well below its record high of more than $90 billion in fiscal 2007. (While the divestiture of HD Supply and other ancillary businesses accounts for some of the decline, the DIY retailer struggled for three consecutive years with declining sales at its core big-box stores before its business began to revive.) Customers spent more on visits to Home Depot stores in fiscal 2012 and the company also credited economic growth and favorable weather conditions for the improvement. Twelve of Home Depot's 14 product categories logged gains, with building materials, paint, hardware, tools and kitchen products among the relatively strong performers. Net income was up more than 16% in fiscal 2012.

Strategy

The home improvement giant aims to regain its footing through its core Home Depot stores. Responding to complaints that it's hard for shoppers to find help inside its vast stores, the company has set a goal of having 60% of its store employees in customer-facing rolls by fiscal 2014. (Indeed, Home Depot suffers in comparison to archrival Lowe's in perceptions of customer service.) Other customer-friendly initiatives include offering in-store repair services for power tools and equipment. Home Depot is also upping its merchandising game, stocking more and better products, including items exclusive to its stores. Key to that effort it building its online business, which allows Home Depot to offer a broader variety of products. In early 2012 the chain launched its Buy On-Line, Pick-up In Store service, which connects its e-commerce and retail store operations. As Home Depot works to boost sales at home, it's also aiming to leverage itself in international markets. While the company has met with considerable success in Canada, and Mexico, it has struggled in China since it entered the market in late 2006. Indeed, Home Depot is closing the last of its seven big-box stores there, saying instead that it will focus on specialty stores and e-commerce in China.

Mergers and Acquisitions

While the company has shed non-core businesses in recent years, it is still making targeted acquisitions. To foster its home services business, Home Depot acquired Texas-based manufacturer U.S. Home Systems, which makes kitchen and bathroom cabinet products, for roughly $94.9 million in October 2012. Earlier in 2012 it acquired RedBeacon, a home services website that specializes in pairing up consumers with contractors. RedBeacon operates in big markets, such as Atlanta, New York, Chicago, and Washington, DC. 

Ownership

Capital World Investors owns more than 12% of The Home Depot's common stock. – less

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