The Home Depot Analytical Report

The Home Depot Analytical Report

Alita Prince Nicholas Barden Jessica Rakowicz Hannah Lenning November 15, 2013

Memo of Transmittal To: Professor Jenell Barnard From: Jessika Rakowicz, Nicholas Barden, Alita Prince, and Hannah Bosch Date: October 24, 2013 Subject: Group 3 Report Here is the Research-based Analytical Report that was conducted on the fortune 500 company The Home Depot. The past few weeks we have spent researching The Home Depot Company. We have collected research and combined our findings into one report. By looking into the history of The Home Depot we can see how they have expanded over the years. As they have strived to reach their goals, they have become the largest home improvement warehouse. In order to continuously grow The Home Depot must acknowledge their competitors. By looking into their competitors the company can determine where they need to improve. Financial reports provide vital information to look at the companys current standing in the market. By recognizing where The Home Depot stands they can determine how to improve. Creating growth plans and future goals will allow the company to expand even further. Their expansion can depend on their societal impacts, technological development, and global presence. Through their growth and expansion The Home Depot has helped community members with their home projects. With their help, the business has possibly helped families to raise the home values in their community. Teaching the importance of house upkeep and curb appeal enriches the safety and value of homes. This work could not have been done without the help of each group member. Conducting the report has allowed us to see how a business works and thinks in society.

Table of Contents Page History ....... 1 Home Depot Summary and Goals . 1 Home Value ... 2 Curb Appeal .. .3 Societal Impacts ..... 3 Global Presence ..... 4 Technology .... 5 Market Saturation .. 7 Turnover .... 8 Financial Analysis ..... 9 Competition and Market Comparison . 13 Conclusion ... 14 References ... 15

List of Illustrations Page 1. Home Depot Values .... 1 2. Home Depot vs. Lowes Mobile Apps ..... 7 3. Home Depot Market Saturation .. 8 4. Percent Distribution of Employee Tenor by Occupation, 2012 .. 8 5. Home Depot Balance Sheet .... 9 6. Home Depot Income Statement .11 7. Home Depot Stock Value .. 13

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History The Home Depot Inc. began in 1978 after being founded by Bernie Marcus and Arthur Blank; along with co-founders Ron Brill and Pat Farrah. Their intention was to build the largest home improvement warehouse, larger than any other competitor, in a one-stop shopping do-ityourself store. The first warehouse was built in Atlanta, Georgia and opened June 22, 1979. After thirty-five years of services, and with 2,248 locations, the company is now the largest home improvement retailer in the United States. The Home Depot is located in all fifty states, Puerto Rico, Mexico, The District of Columbia, U.S. Virgin Islands, and ten providences in Canada. The company even extended to China in 2006, where they created a 12 chain store called The Home Way. According to an article in the New York Times, The Home Depot stores average approximately 104,000 square feet of enclosed space, with approximately 24,000 additional square feet of outside garden area. (Talaie, Ramin, 2013) Their products offered include everything from home appliances, tools, hardware, lumber, building material, paint plumbing, flooring, garden supplies, plants, and much more. The goal of the founders was to provide the majority amount of products at the lowest cost. The Home Depot website contains information on the companys values which include providing excellent customer care, caring for their employees, giving back to the community, doing the right thing (versus doing things right), building strong relationships, respecting the people, encouraging entrepreneurial spirit, and providing shareholder value. The picture to the right shows how all of the values are distributed through The Home Depot. This chart and more information regarding the values can be found at The Home Depot Website. Further strategies included having the best customer service where employees are knowledgeable on the location of all products, how to use them, and be able to assist the customers. One of the things Home Depot really prides themselves in is providing excellent customer services. From the beginning of the business employees offered the best customer care; and to this day they still offer outstanding care to their customers. Home Depot Summary and Goal The Home Depots mission statement is broke up into eight corporate values. Those values are as follows: o Taking care of our people o Giving back to our communities o Doing the right thing o Excellent customer service o Creating shareholder value o Building strong relationships o Entrepreneurial spirit

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o Respect for all people With these eight corporate values working together as to form the mission statement for Home Depot it allows them stay on top. Instead of one short mission statement Home Depot makes sure that it satisfies all aspects that make it such a successful business. The goal of the Home Depot is to make sure they reach and maintain all eight corporate values in order to provide the highest level of service, the broadest selection of products, and the most competitive prices. The Home Depot offers a number of products and services to help anyone that wants to build a house, renovate their house, or do a number of other household projects. Not only does Home Depot offer products for someone working on their own home but it provides products for contractors as well. For people that are looking for contractors, Home Depot offers a special service that is known as The Home Depot Services that has contractors nationwide that can install anything ranging from floors to roofs, windows to water heaters, and the list goes on and on. The Home Depot has 2,248 stores that are located all over the Unites States, as well as Puerto Rico, the Virgin Island, Canada, and Mexico. Each store is designed for a total average 104,000 square feet per each store and approximately an additional 24,000 square feet for the gardening center. The inventory of the store is made up of nearly 40,000 types of building supplies, home improvement supplies, household appliances, and lawn and garden supplies and products. The Home Depot offers a unique service by specifically stocking each store to match that stores local area needs. Home Value The Home Depot not only offers in store assistance, but now provides free do-it-yourself classes to teach the community how to complete your own projects. Not all Home Depot stores offer the DIY classes, and they all started the classes at different times depending on the location. During a personal interview with a current Home Depot employee, Ian Snyder, it was discovered that the Lapeer store has offered do-it-yourself classes for about three years. He has been an instructor and participated in many of the classes offered. Classes range from updating your bathroom, tiling a floor, designing a room, and landscaping the outside of your house. (Snyder, Ian, personal communication, October 4, 2013) Community members who have participated in the DIY classes have raved about the different projects they have learned to complete themselves. The many do-it-yourself classes offered allow people to save money by completing projects themselves. Along with saving money, many of the projects help to enhance your house and raise the value in the appeal of your place. By updating your bathroom or tile, like Ian Snyder mentioned, you can make your house appear newer and nice which will increase the value. When you take the simple steps to update a house you can really be adding thousands of dollars to the worth. Along with the classes offered my Home Depot, the store participates with Pinterest to offer easy ideas for customers to create decorations for their home. These ideas use simple home objects that can be created into beautiful decorations to enhance a house. There have been some examples shown on display inside The Home Depot, and they offer all the simple tools the project requires. One project includes handing little hooks on the inside of your kitchen cabinet to hang measuring cups and spoons on, so they do not take up space inside of a drawer. Another project was reusing an old mirror and adding wood or popsicle sticks to create a design going out

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from the mirror, like a sun. The store just really shows how you can use simple everyday items and create a beautiful decoration and create more space for your house. Curb Appeal Part of home value that is important to people is the curb appeal the house offers. When looking for a new place to live, curb appeal is something that everyone considers, whether they realize it or not. Curb Appeal is all about the first impression you give the exterior of a potential home, and it is usually the deciding factor when driving by houses for sale. Buyers look at distinct details such as the yard size, features that stand out, features that can easily be enhanced, and features that can be improved. Curb appeal is important because buyers want to know that they can be safe in the home they are interested in. Safety is a prime concern when house hunting. Big lawns, weeds, mold/mildew, old windows that need replacing, tree limbs near the roof and many other significant features are important for the safety of the buyer. A lot of these problem areas can cost thousands of dollars to repair and its important for the seller to put these features into consideration when putting your house up for sale. Home Depot can assist you with all your needs, from lighting, landscape decisions, repairs and much more to ensure that your home has great potential on the market. Your curb appeal can boost the cost of your home. If you have a big budget and you buy a home that needs some help, Home Depot can help you to renovate and remodel your home to your likings. Employees are ready and willing to lend helping hands with great customer experience and home improvement guidance to stay within your budget. The company provides how-to guides, advice, workshops and even a garden club conveniently on the web and at your local store to help create a stress free moving experience.

Societal Impacts When it comes to a company in society, there are usually positive and negative ways in which the company affects the society. The Home Depot is no exception to this. The company has definitely assisted the community in providing home improvement supplies at an affordable cost. On the other hand, as they have expanded the company has put some smaller hardware stores out of business. By reviewing how The Home Depot impacts the society it can help determine where they have strengths and weaknesses and how to positively outreach to the community. By growing and expanding over the past thirty-five years The Home Depot has acquired some companies along the way. This can be seen as both a positive and negative impact on society for the company. Their variety of products at a cheaper cost will help the community members save money, but the companies they acquired are no longer around. According to a New York Times article The Home Depot acquired Measurecomp LLC. in February 2013 and The Home Depot History website states they also acquired Total Home from Mexico in 2001 when they expanded to the country. Smaller chain home improvement stores also seem to be struggling when competing with The Home Depot. By acquiring companies The Home Depot can continue to expand their growth in society. The Home Depot Foundation was established in 2002 and donates time, labor, money and supplies to numerous charities. Their main focus is to offer grants to veterans and the

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companys partners. They understand the impact of hard work and volunteering and believe in giving up their time to help improve their local communities. In 2012 The Home Depot participated in 550 volunteer projects across the country to assist veterans. The projects range from building wheelchair ramps, renovating a home, or transitioning housing for veterans. The Home Depot has partners in Operations Homefront, Habitat for Humanity, Volunteers of America, and many other non-profit organizations. The company is dedicated to helping veterans find a safe place to call home. The Home Depot Foundation has helped many families and communities over the years. Global Presence Outside of the United States, 281 international operations represent 12.4 percent of Home Depots store base. In 1994 Home Depot entered Canada, as well as Mexico in 2001 as a result of company acquisitions and company growth. Home Depot currently serves as the number one home improvement company in Mexico and one of the top companies in Canada. When deciding to expand their company globally, Home Depot explored and researched customs, trends and specific home improvement needs throughout different countries before making any big moves. We are committed to being a global company by enhancing our direct relationships with quality manufacturers, and reinforcing the confidence we have in global suppliers to provide products that offer Home Depot customers quality, value and innovation. ("Global presence," 2013) The benefits of expanding retail services outside the United States helped to build the companys brand and popularity. Aside from a few hiccups in locations like China, the company is learning from international oversights and finding ways to stay on top in the home improvement industry in other secured settings. Global expansion has increased sales and income for the company, providing home improvement services and putting other hardware stores out of business. Home Depot also provides international shipping services serving consumers around the world. Order products through their Puntomio website at homedepot.puntomioshop.com, and you can ship to a variety of locations overseas. There are no restrictions on order amount other that the weight. Puntomio takes care of clearing customs to send products directly to the receiver. Home Depot has impacted other countries with their foundation, giving back to communities and helping local families with hundreds of volunteers. The Foundation is helping to repair communities from disasters, creating eco-friendly advancements, and sharing time, knowledge and resources to support affordable housing and build strong communities for [those] in need. ("Our focus home," 2013) With earthly perspectives, the company is all about providing products that are not only the best quality, but also products that are not harmful to our environment. In 2007, Home Depot introduced a label on thousands of their products promoting conservation of energy, sustainable forestry and clean water. (Barbaro, 2007) With their eco-friendly products and array of green programs, Home Depot has impacted the environment in ways that competitors and several other companies have not. Growth Plans Home Depot holds rank as a fortune 500 company. This is not a simple position to hold. With their standing comes a variety of obstacles thrown from competitors and risky opportunities for improvement. For future growth plans, Home Depot would like to emphasize on their

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company values, meeting the needs of the customers with quality customer service. They are working every day to find ways to boost their product value and selection. There is always room for improvement and Home Depot strives for the best. Providing secured benefits for their employees, and building a competitive platform is a priority. ("The Home Depot - News Release") With their passion for global preservation, Home Depot is finding new ways to help the environment through their products and services. In 2010, the company committed to remove 20% of its greenhouse gas emissions from its domestic supply chain by the year 2015. This mission is still in effect with their supply of CFL light bulbs and rechargeable battery recycling for consumers. They have also installed 81 water reclamation tanks from 2010-2012, saving an average of 500,000 gallons of rain water a year. This water is being recycled and used in their garden centers. Home Depots plans and goals for the environment will enhance their growth and worldly recognition. (Home Depot and the environment) Home Depot would like to continue to work on consumer needs, such as customer experience, maintenance, workshops, giving back to the community, and other initiatives that will improve the overall shopping experience before starting any additional projects. The company is recovering from the housing market decline and they are in no hurry to engage in additional new projects.

Technology The climate for big retailers has changed, in the past the retailers had more influence over what people bought. Now that competition has become much fiercer and consumers have less disposable income due to the recession they are much pickier and more demanding of retailers. These people dont want to spend what little money they have unless its on something they really want. Paul Leinwand, a consultant at Booz & Company said, The assumption that when the recession was over consumers would return to where they were has already been disproved. Consumers dont just demand better prices, they also want great service with a customized shopping trip they want to feel special. Retailers have responded to this via technology with loyalty programs that track shopping history and preferences, cell phone apps that allow for a customized shopping experience, personalized websites, and targeted marketing via email and Facebook. (The Economist, 2010) Consumer behavior has changed vastly even though consumer confidence has increased. Customers are much more attracted to sales, they do more research on the internet to find the best prices and product for themselves, they are typically women, and they are spending money again but they are making the companies work for it a little harder this time around. Retailers are changing their stock more frequently and adjusting their methods to meet consumers needs. Home Depot is very active on Pinterest, the DIY social network where great ideas, recipes, and DIY projects linked from other sites can be saved and shared. (The Economist, 2010) Almost all companies of all sizes have a Facebook page and Twitter account; its a quick and easy way to get right where your customers are and get your information in front of them in a fun way that they are more likely to pay attention to. Home Depot is one of these companies, whose page has an astounding 675,000 likes and whose posts get a lot of consumer interaction. The Home Depot Facebook page features posts that link to pictures and videos for DIY projects, links to its Twitter and other pages, posts about its foundations and organizations, and company

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history that they have laid out throughout the timeline for users to explore. HD has a Twitter Team Blake and Nicole along with customer service rep Jon who has made more than 12,000 Tweets. They post about sales, featured products, upcoming events and they respond and interact with customers. (Sternberg, 2012) Youtube is a video hosting site owned by Google. HD uses Youtube to host its impressive 2,500 videos that not only get put directly in front of their 13,000 subscribers but also get searched for by consumers looking for information on DIY projects and How-To videos which HD posts many of along with promotional videos featuring products and their uses. Home Depot posts links to their Youtube videos on their social media pages adding to the number of people who see them. Apps are the newest technological craze big retailers like, Home Depot, have been taking advantage of. These apps have many different function including tracking user purchases, allowing a user friendly way for the consumer to directly tell the retailer what they want, a user friendly way to shop that is easily customizable, alerts for sales or user-set events, and much more. Retailers are investing heavily to track consumers' behavior in an attempt to work out what they might want to buy and how much they are willing to pay (The Economist, 2010). Lowes, one of Home Depots competitors is now featuring several television ads entirely about their new cell phone and tablet apps. Each company is fighting to get the better apps and features to draw in customers. See table 1 for a comparison of Home Depot and Lowes cell phone/tablet apps. The two companies apps have nearly identical features but where they really differ is with style, while both have similar functions they have drastically different layouts and they focus on different things. Home Depot wants you to sign in before you can use the app which means that then they can track your interests and preferences and offer you personalized coupons. Both apps try to be positive and inspire their customers to try new things with their homes. Lowes offers inspiration photos with pictures of different ideas for DIY projects, reminiscent of Pinterest while Home Depots app does not. (Sternberg, 2012)

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Table 1

Home Depot vs Lowes Mobile App

DIY Tidbits Check store inventory Check isle location Scan QR/UPC codes Save shopping lists DIY Videos Customer Service Interface Product Ratings Store Locations Inspiration Boards Sign in to customize Use GPS to determine nearest store Purchase and send Gift Cards electronically Shopping history Home Depot X X X X X X X X X Lowes X X

X X X

X X X X

X X

X X

(Table 1 created by Jessica Rakowicz) Market Saturation In 2004 Colin McGranahan, of Sanford Bernstein, did analysis that suggested the market would reach full saturation by the end of the year. This means that without any increase in demand any new store openings would decrease their profits rather than increase them, at that time they would have 2,248 stores in the US market (The Economist, 2003). Home Depot does not have many stores in foreign markets and is most powerful in the US. The DIY atmosphere in other countries is not the same as in the US market and shoppers attitudes are completely different. Home Depot has a flagship store in China but no plans for additional stores and very few plans for expansion into other foreign markets. DIY retailers are leaning more towards investing in an internet presence in foreign markets because they can get the reward with much less risk and investment. It also offers a great way to test the waters with the market; its like youre doing research and reaping the rewards at the same time (ACQUIRE MEDIA NEWSEDGE, 2012).

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Turnover Employees in service jobs, such as hourly workers and lower management, at Home Depot are more likely than any other group to work at a job for 12 months or less (Sok, 2013).

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What this all means is an incredibly high turnover rate for the service industry, which results in extra costs. The cost of losing an employee is estimated at between and 1 times his annual salary, these costs are sunk costs associated with training and loss of productivity, as well as the cost to find a new employee to replace him. Home Depot is one of the 100% Turnover Industries which lose the equivalent of all of their employees every year, which can be very costly to a retailer. These high turnover jobs have a few things in common; they are boring jobs, bad pay, dead end, and unattractive jobs. Things that employers can do to encourage retention include becoming more flexible, offering more options for applications, and changing questions to weed out poor employees. (Employee Turnover Labours lost, 2000) In September 2013 Home Depot decided to cut worker benefits for part time workers their main workforce, in response to the Affordable Care Act (FROM ACQUIRE MEDIA NEWSEDGE, 2013). According to Glassdoor.com, a website that provides average pay information for many companies, the average hourly pay for a part time cashier at Home Depot is $8.91, at 20 hours per week that is $178.20 barely enough to take care of one person. With low pay and a lack of benefits it doesnt seem that the Home Depot is doing much to combat their high turnover rate which is actively cutting into their profits. Financial Analysis Between 2011 and 2012 The Home Depot experienced a significant amount of financial changes within their analysis. When performing a financial analysis there are five reports, including Horizontal Analysis, Current Position Analysis, Accounts Receivable Analysis, Inventory Analysis, and Profitability Analysis. Each analysis reports on different finances of the company. The most important financial information of a report is found in the horizontal analysis, which includes the balance sheet and income sheet. These two financial documents report a companys assets, liabilities, owner and stockholder equity, net sales, gross profit, net earnings, and cost of goods sold. After determining the horizontal analysis you can then use the results to help determine the remaining four analytical reports. Within this portion of the report, we will discuss and reflect on the financial analytics of The Home Depot. Being that the Horizontal Analysis helps determine the majority of a companys financial standing, we are going to focus on the balance sheet and income statement. We created our own balance sheet and income statement for The Home Depot. All data listed and amounts used were gathered from The Home Depots 10-K Document found on the U.S. Secretary and Commission Exchange Website. Below you can review the horizontal analysis from the company and a summary of the significant changes from year 2011 to 2012.

The Home Depot Inc.

Comparative Balance Sheet
January 29, 2012 and January 30, 2011
(Amount in Millions, except share and per share data)

Jan. 29, 2012 Assets Current Assets: Cash and Cash Equivalents Receivables, net Merchandise Inventories

Jan. 30, 2011

Increase/Decrease Amount Percent

$1987 $1245 $10,325

$545 $1085 $10,625

$1442 $160 $(300)

264.5% 14.7% (2.8%)

P a g e | 10 Other Current Assets Total Current Assets Property and Equipment, at cost: Land Buildings Furniture, Fixtures, Equipment Leasehold Improvements Construction in Progress Capital Lease Less Accumulation Depreciation and Amortization Net Property and Equipment Notes Receivable Goodwill Other Assets Total Assets Liabilities and Stockholders Equity Current Liabilities: Accounts Payable Accrued Salaries and Related Expenses Sales Tax Payable Deferred Revenue Income Taxes Payable Current Installments of Long-Term Debt Other Accrued Expenses Total Current Liabilities Long Term Debt, excluding current installments Other Long-Term Liabilities Deferred Long-Term Liabilities Total Liabilities Stockholders Equity Common stock, par values $0.05; authorized: 10 billion shares; issued: 1.733 billion shares at January 29,2012 and 1.722 billion shares at January 30, 2011; outstanding: 1.537 billion shares at January 29, 2012 and 1.623 billion shares at January 30, 2011 Paid-In Capital $963 $14,520 $8,480 $17,737 $10,040 $1,372 $758 $588 $38,975 $14,527 $24,448 $135 $1,120 $295 $40,518 $1,224 $13,479 $8,497 $17,606 $9,687 $1,373 $654 $568 $38,385 $13,325 $25,060 $139 $1,187 $260 $40,125 $(261) $1,041 $(17) $131 $353 $(1) $104 $20 $590 $1202 $(612) $(4) $(67) $35 $393 (21.3%) 7.7% (0.2%) 0.7% 3.6% (0.07%) 15.9% 3.5% 1.5% 9% (2.4%) (2.9%) (5.6%) 13.9% 1%

$4,856 $1,372 $391 $1,147 $23 $30 $1,557 $9,376 $10,758 $2,146 $340 $22,620

$4,717 $1,290 $368 $1,177 $13 $1,042 $1,515 $10,122 $8,707 $2,135 $272 $21,236

$139 $82 $23 $(30) $10 $(1,012) $42 $(746) $2051 $11 $68 $1,384

3% 6.4% 6.3% (2.5%) 76.9% (97.1%) 2.8% (7.4%) 23.5% 0.5% 25% 6.5%

$87

$86

$1

1.2%

$6,966

$6,556

$410

6.3%

P a g e | 11 Retained Earnings Accumulated Other Comprehensive Income Treasury Stock, at cost, 196 million shares at January 29, 2012 and 99 million shares at January 30, 2011 Total Stockholder Equity Total Liabilities and Stockholders Equity $17,246 $293 $(6,694) $14,995 $445 $(3,193) $2251 $(152) $3501 15% (34.2%) 109.6%

$17,898 $40, 518

$18,889 $40,125

$(991) $393

(5.2%) 1%

The Home Depot Inc.

Comparative Income Statement
January 29, 2012 and January 30, 2011
(Amount in Millions, except share and per share data)

Jan. 29, 2012

Jan. 30, 2011

Net Sales $70, 395 $67,997 Cost of Goods Sold $46,133 $44,693 Gross Profit $24,262 $23,304 Selling, General, and $16,028 $15,849 Administrative Expenses Depreciation and Amortization $1,573 $1,616 $(43) (2.7%) Total Operating Expenses $17, 601 $17,465 $136 0.8% Total Operating Income $6,661 $5,839 $822 14.1% Interest and other (Income) Expense: Interest and Investment Income $(13) $(15) $2 13.3% Interest Expense $606 $530 $76 14.3% Other $51 $(51) (100%) Interest and Other, Net $593 $566 $27 4.8% Earnings from Continuing Operations before Provision for $6,068 $5,273 $795 15.1% income Taxes Provision for Income Taxes $2,185 $1,935 $250 12.9% Net Earnings $3,883 $3,338 $545 16.3% (Home Depot financial tables created by Hannah Bosch) The Home Depot experienced some significant changes within their balance sheet and income statement between 2011 and 2012. The cash and cash equivalents to the Assets have the largest increase. It goes from 545 million to 1,987 million in one year; which is a 264.5% increase to the assets, and a huge advantage to the company. The next largest change is the treasury stock which increased 109.6%. By increasing the treasury stock it reduces the amount of outstanding stock in the open market. Other expenses were decreased by 100%, going from 51 million in 2011 to 0 in 2012. To be able to eliminate expenses within one year is a huge accomplishment, and definitely helped the company out. Current installment of long-term debt decrease 97.1%. It appears that most of the liabilities were brought down by the current installment of long-term debt, which was paid off by 1,012 million. Income taxes payable

Increase/Decrease Amount Percent $2,398 3.5% $1,440 3.2% $958 4.1% $179 1.1%

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increased 76.9%, which is a rather high amount of taxes payable to occur within 1 year. Aside from this increase, all of the significant changes to the companys balance sheet and income statement helped put the company in a better spot financially. The entire five analysis reports would be too extensive to include in this report, however; there are some extremely noteworthy changes that need to be mentioned. Within the current position analysis we conducted a working capital, current ratio, and quick ratio reports, which increased 1,765 million, 0.2 million, and 1.3 million. In these findings we noted that Home Depot now has more ability to pay current liabilities and has a more accurate measure of the debt-paying ability. The increase in working capital may be why the current installment for longterm debt had decreased 97.1%. Though the current ratio and quick ratio have a small increase, it is better to increase the amounts versus decrease. The accounts receivable analysis had some different results. While the accounts receivable turnover decreased by 6 million, the number of days sales in receivables increased by 0.5 days. The decrease in the accounts receivables turnover indicates that Home Depot collection of receivables has declined. Considering that receivables had actually increased between 2011 and 2012, its understanding that they are not collecting their receivables as fast as they are increasing receivables. There was also an increase in the inventory analysis within the inventory turnover which indicates the management of inventory has improved in 2012. The increase was a small amount, from 4.3 million in 2011 to 4.4 million in 2012, but according to the textbook Accounting by Warren and Reeves, inventory improves because increases to cost of goods sold which then expand more sales, and decrease in the average inventories. The number of days sales in inventory decreased by 2.1 days. That means it takes a rough estimate of 2.1 less days to purchase, sell, and replace inventory. This is an improvement to managing inventory. Finally the profitability analysis shows the ratio of net sales to assets, the rate earned on total assets, and the rate earned on stockholders equity. Home Depot had great results in their profitability analysis. The ratio of net sales to assets resulted in no change from 2011 to 2012, which show the operating assets remained the same. The rate earned on total assets increased 1.6% causing higher profitability of total assets in 2012. The 3.7% increase in rate earned on stockholders equity gives leverage to allow debt to raise the return on investment. Warrens textbook states that the rate earned on stockholders equity is normally higher than the rate earned on total assets; since that is the case with these results it proves the computations are showing to be correct. The Home Depot has become extremely established within these past 35 years. Though a few of their assets have decreased from 2011 to 2012, Home Depot has had an overall improvement of 7.7% current assets in the past year. Total liabilities to the company have increased 6.5%, however they were also able to lower their current liabilities by 7.4% since 2011. Another bonus to the company was the ability to lower their stockholders equity by 5.2%, so they owe less money to their shareholders. Though it wasnt a huge increase, Home Depot was able to increase their net sales by 3.5% and their cost of goods sold increased by 3.2%, giving the company a 16.3% increase in their net income in just one year! After computing all of the ratios and rates of the company, we discovered overall the Home Depot is advancing and enhancing their company to be the best.

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Competition and Market Comparison The Home Depot has continued to stay above its competition year after year. Even during the collapse of the housing market Home Depot still managed to stay above it biggest competitor, the 2nd largest home improvement retailer in North America, Lowes. As the housing began to bounce back in 2012 the Home Depot got even stronger. More people were dong more home improvement projects than ever. The earnings for the 4th quarter of Home Depot exceeded the $1 billion mark compared to much lower, $774 million back in the 4th quarter of 2011. This was an incredible increase of nearly 32%. The Home Depots market comparison is mainly compared to its main competition, Lowes. It 2012 Home Depot was clearly ahead of Lowes. Home Depot had a growth of 7% during the final quarter of 2012 and a growth of 4.6% for the entire year, all for same-store sales. Home Depots full years sales came out at 6.2% while Lowes had a sales growth of 2.2%, showing that Home Depot was clearly above Lowes. These growth rates clearly show that Home Depot is on top of the market and is growing and will continue to grow. Not only did Home Depot have a steady growth rate in sales in 2012 but it had a huge jump in stock with a 40% increase. The year 2012 has come and gone and Home Depot still is staying above the competition. The increase in the housing market and in construction industries acts as fuel to fire for sales of Home Depot. Looking at the results of 2012, and how low the housing market was, investors confidence will continue to grow now that the housing market is beginning to grow. This will allow for the values of the stock to increase even more. Home Depot is not afraid of the tactic, spend money to make money, and that is clearly showing. The Home Depot is opening approximately 9 new stores in 2013, and the capital spending of the company is expected to rise to $1.5billion compared to the $1.3 billion of capital spending in 2012. Home Depot will always continue to grow and the facts show that. The average Joe has the confidence in finding the products they need, contactors have the same confidence, and the past market results give the investors the confidence they need to keep investing. As you can see from the graph bellow, Home Depot does have its ups and downs but steadily continues to increase in their stock value.

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Conclusion After thirty five years in business The Home Depot is still improving and continuing to grow. Looking at The Home Deports market saturation, stock value, and financial statements it is clear that the company is continuously increasing their net sales and value in the community. By creating the Home Depot Foundation to assist the local communities and offering free classes for customers, their reputation for the best one-stop do-it-yourself home improvement store is still strong. If the Home Depot continues to develop at their current rate, the companys future will be resilient.

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