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HOME DEPOT, INC. Annual Report, Year Ended Feb 1, 2004

Filing Date
Filed April 12, 2004
Period End
February 1, 2004
Security
HD
In the record · 2016–202610-K1110-Q328-K121

HD filed 11 annual reports (10-K), 32 quarterly reports (10-Q) and 121 current reports (8-K) between 2016 and 2026.

  1. Leadership change8-K · Mar ’21Mar ’21
  2. Leadership change8-K · Apr ’23Apr ’23
  3. FY2025 annual report10-K · Mar ’25Mar ’25

01—Abstract

Summary

Summary of the 10-K filed April 12, 2004. Cited figures are marked; the original filing is the authoritative source.

The Home Depot's fiscal 2003 (year ended February 1, 2004) was a strong year, with net earnings rising 17.5% to $4.3 billiona and diluted EPS up 20.5% to $1.88 on net sales of $64.8 billion, an 11.3% increase.

Growth was driven by a 3.8% comparable store sales increase, the first positive comp since 2000, plus contributions from 175 new stores. Gross margin expanded to 31.8% from 31.1%, aided by centralized purchasing, lower shrink, import penetration, and the adoption of EITF 02-16. Net service revenues grew 40% to $2.8 billionb, and the company repurchased about $1.6 billion of stock during the year, with a share repurchase authorization increased to $1.4 billion in February 2004.

Balance sheet strength stood out. Cash and short-term investments were $2.9 billionc, total debt-to-equity was 6.1%, and return on invested capital reached 20.4%, up 160 basis points. Operating cash flow rose to $6.5 billion from $4.8 billion, while capital expenditures increased to $3.5 billion.

The company owns about 86% of its stores, which management views as a competitive advantage. Management guides to fiscal 2004 net sales growth of 9% to 12%, comparable store sales growth of 3% to 6%, and diluted EPS growth of 7% to 11%, including roughly a $0.05d dilution from EITF 02-16. Investors should note the company's exposure to the U.S. housing and remodeling cycle, rising self-insurance and medical costs, and cannibalization, which reduced comparable sales by about 2.7% in fiscal 2003.

FIN 46 consolidation will add $282 million of long-term debt in fiscal 2004, lifting the debt-to-equity ratio to about 7.4% on a pro forma basis, with no net earnings impact. Overall, the filing portrays a company with strong growth, expanding margins, and a conservative balance sheet.

02—Key points

Key Highlights

  1. Net sales rose 11.3% to $64.8 billion, with comparable store sales up 3.8%, the first positive comp since 2000.
  2. Diluted EPS increased 20.5% to $1.88, and net earnings grew 17.5% to $4.3 billion.
  3. Gross margin expanded 70 basis points to 31.8%, driven by centralized purchasing, lower shrink, and higher import penetration.
  4. Net service revenues increased 40% to $2.8 billion, reflecting strength in installed services such as countertops, HVAC, and flooring.
  5. Balance sheet remains strong, with $2.9 billion in cash and short-term investments, a 6.1% debt-to-equity ratio, and ROIC of 20.4%.
  6. Operating cash flow rose to $6.5 billion, and $1.6 billion of stock was repurchased during fiscal 2003, with the authorization increased by $1 billion in February 2004.
  7. Fiscal 2004 guidance calls for 9% to 12% net sales growth, 3% to 6% comparable store sales growth, and 7% to 11% diluted EPS growth, with 175 planned new stores.

03—Questions

Frequently Asked Questions

  1. How did Home Depot perform financially in fiscal 2003?

    Home Depot grew net sales 11.3% to $64.8 billion and net earnings 17.5% to $4.3 billion. Diluted EPS reached $1.88, up from $1.56. Comparable store sales rose 3.8%, the first positive comp since 2000.

  2. What drove the improvement in gross margin?

    Gross margin rose to 31.8% from 31.1%. The company cited changing customer preferences, centralized purchasing, lower shrink from better inventory management, greater penetration of lower-cost import products, the benefits of Tool Rental Centers, and the adoption of EITF 02-16, which added about $40 million in the one month it was applied in fiscal 2003.

  3. How strong is Home Depot's balance sheet and capital allocation?

    The company had $2.9 billion in cash and short-term investments and a 6.1% total debt-to-equity ratio, the lowest in its industry according to management. It owns about 86% of its stores. Operating cash flow was $6.5 billion, capital expenditures were $3.5 billion, and the company repurchased about $1.6 billion of stock while increasing dividends 21%.

  4. What are the main risks and headwinds for fiscal 2004?

    Key risks include the U.S. economy, store cannibalization (estimated to reduce fiscal 2003 comps by about 2.7% and fiscal 2004 comps by about 2%), competition, rising workers' compensation and medical costs, and the EITF 02-16 accounting change, which is expected to reduce pre-tax earnings by about $180 million and add about $0.05 of dilution. FIN 46 will also add $282 million of consolidated debt in fiscal 2004 with no net earnings impact.

  5. What is the company's outlook for fiscal 2004?

    Management expects net sales growth of 9% to 12%, comparable store sales growth of 3% to 6%, diluted EPS growth of 7% to 11% including the EITF 02-16 impact, and capital expenditures of about $3.7 billion. The company plans to open 175 new stores, including 14 in Canada and nine in Mexico.

04—Continue

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