01—Abstract
Summary
Summary of the 10-K filed March 22, 2018. Cited figures are marked; the original filing is the authoritative source.
The Home Depot, Inc. (HD) reported robust performance in fiscal year 2017, demonstrating strong revenue growth and profitability.
Net sales reached $100.9 billiona, a significant increase driven by comparable sales growth and improved average ticket prices. The company's strategy, focused on an 'One Home Depot' interconnected experience for both DIY and professional customers, appears to be yielding positive results, with notable growth in online sales. Despite headwinds from hurricane-related expenses and the impact of tax reform, the company managed to increase net earnings to $8.6 billion, or $7.29 per diluted share.
Management highlighted strategic investments in supply chain efficiency, technology, and customer service as key drivers for future success. The company also continued its commitment to shareholder returns through substantial share repurchases and dividend payments, underscoring its financial strength and confidence in its business outlook.
02—Key points
Key Highlights
- The Home Depot reported a 6.7% increase in net sales, reaching $100.9 billion in fiscal year 2017.
- Comparable sales grew by 6.8%, indicating strong performance in existing stores and online channels.
- Online sales saw a significant increase of 21.5%, now representing 6.7% of total net sales.
- Net earnings rose to $8.6 billion, or $7.29 per diluted share, a 13.0% increase from the prior year.
- The company repurchased $8.0 billion of its common stock and paid $4.2 billion in cash dividends, demonstrating a strong commitment to shareholder returns.
- Investments in the 'One Home Depot' strategy, focusing on an interconnected customer experience across stores and online, are a key strategic priority.
- The company incurred approximately $170 million in hurricane-related expenses, impacting gross profit and operating expenses in the latter half of fiscal 2017.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2018, Home Depot, Inc. kept $0.09.
- Revenue$100.90B100.0%
- Cost of revenue−$66.55B66.0%
- Gross profit$34.36B34.0%
- Operating costs−$19.68B19.5%
- Operating income$14.68B14.5%
- Interest, other & tax−$6.05B6.0%
- Net income$8.63B8.6%
Where FY2018 revenue went
$100.90B- Cost of revenue: $66.55B, 66% of revenue
- SG&A: $17.86B, 18% of revenue
- Net income: $8.63B, 8.6% of revenue
- Other operating costs: $1.81B, 1.8% of revenue
- Interest, other & tax: $6.05B, 6.0% of revenue
Kept 8.6% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2018filed March 22, 2018Financial Statements
FY2018 against FY2017
| Line item | FY2018FY2017 | Change |
|---|---|---|
| Revenue | $100.90B$94.59B | +6.7% |
| Cost of Revenue | $66.55B$62.28B | +6.8% |
| Gross Profit | $34.36B$32.31B | +6.3% |
| SG&A Expenses | $17.86B$17.13B | +4.3% |
| Operating Expenses | $19.68B$18.89B | +4.2% |
| Operating Income | $14.68B$13.43B | +9.3% |
| Interest Expense | $1.06B$972.00M | +8.7% |
| Net Income | $8.63B$7.96B | +8.5% |
| EPS (Basic) | $7.33$6.47 | +13.3% |
| EPS (Diluted) | $7.29$6.45 | +13.0% |
| Shares Outstanding (Basic) | 1.18B1.23B | −4.1% |
| Shares Outstanding (Diluted) | 1.18B1.23B | −4.1% |
05—Questions
Frequently Asked Questions
What is The Home Depot's primary strategy for future growth?
The Home Depot's primary strategy is to create a seamless and frictionless 'One Home Depot' experience for customers, connecting stores and online channels. This involves connecting associates to customer needs, ensuring products and services meet those needs, optimizing the supply chain from product to shelf, and continuously innovating the business model.
How did the Tax Cuts and Jobs Act of 2017 affect The Home Depot's financial results?
The Tax Cuts and Jobs Act of 2017, which reduced the U.S. federal statutory tax rate, resulted in a net $127 million charge in fiscal year 2017. This charge reduced diluted earnings per share by approximately $0.11. The company also paid a one-time bonus to its U.S. hourly associates, impacting net earnings by $72 million and reducing diluted EPS by $0.06.
What is the company's approach to capital allocation and shareholder returns?
The Home Depot prioritizes reinvesting in the business. After meeting business needs, excess cash is used for shareholder returns based on specific principles: targeting a dividend payout of approximately 55% of prior year earnings, maintaining a high return on invested capital, and repurchasing shares when value-creating. In fiscal 2017, the company returned $8.0 billion through share repurchases and $4.2 billion via cash dividends.
What are the main risks facing The Home Depot, as outlined in the filing?
Key risks include intense competition in the home improvement retail space, the inability to timely identify or respond to evolving consumer needs and trends, challenges in attracting and retaining qualified associates while managing labor costs, potential failures of critical information technology systems, disruptions in the supply chain, and risks associated with data security and privacy. Economic conditions and housing market volatility are also significant external risks.
06—Continue