10-QPeriod: Q1 FY2003

HOME DEPOT, INC. Quarterly Report for Q1 Ended May 5, 2002

Filed June 4, 2002For Securities:HD

Summary

Home Depot, Inc. reported robust financial performance for the first quarter of fiscal year 2002, demonstrating significant year-over-year growth. Net sales surged by 17.1% to $14.3 billion, driven by the opening of new stores and a strong comparable store-for-store sales increase of 5%. This growth was further bolstered by favorable weather conditions impacting key product categories like paint, lumber, and lawn & garden, as well as successful merchandising and credit initiatives. Profitability also saw a substantial improvement, with Net Earnings increasing by 35.4% to $856 million, resulting in a diluted Earnings Per Share of $0.36, up from $0.27 in the prior year. This enhanced profitability is attributed to a higher gross profit margin, aided by centralized purchasing and the expansion of tool rental centers, and improved operating expense management. The company also highlighted a strong increase in operating cash flow and a healthy cash position, providing confidence in its ability to fund future growth and capital expenditures.

Key Highlights

  • 1Net sales increased by 17.1% to $14.3 billion in Q1 FY2002 compared to Q1 FY2001.
  • 2Comparable store-for-store sales grew by 5%, driven by favorable weather and merchandising initiatives.
  • 3Net earnings rose by 35.4% to $856 million, with diluted EPS increasing to $0.36 from $0.27.
  • 4Gross profit margin improved to 30.5% from 30.0% due to centralized purchasing and tool rental center expansion.
  • 5Operating expenses as a percentage of sales decreased, particularly selling and store operating expenses, due to labor productivity improvements.
  • 6Cash flow from operations increased significantly to $3.2 billion.
  • 7The company announced plans to acquire Maderería Del Norte, S.A. de C.V., a four-store chain in Mexico, subject to regulatory approval.

Frequently Asked Questions

The sales growth was driven by two main factors: the expansion of the store base, with 1,386 stores open in Q1 FY2002 compared to 1,178 in Q1 FY2001, and a strong comparable store-for-store sales increase of 5%. Favorable weather conditions in key categories like paint, lumber, and lawn & garden, along with successful merchandising and credit initiatives, also contributed significantly.

Profitability was enhanced through a higher gross profit margin, achieved by benefits from centralized purchasing, online auctions, special buys, and the expansion of tool rental centers. Additionally, selling and store operating expenses as a percentage of sales decreased due to improved labor productivity and effective wage management, despite an increase in workers' compensation and general liability costs.

Home Depot reported a strong increase in cash flow from operations to $3.2 billion and maintained a substantial cash position of $5.2 billion in cash, cash equivalents, and short-term investments as of May 5, 2002. The company expects its current cash, internally generated funds, a $1 billion commercial paper program, and other financing sources to be sufficient to fund its planned capital expenditures, including the opening of approximately 200 new stores in fiscal year 2002.

Yes, the company announced its intention to acquire Maderería Del Norte, S.A. de C.V., a four-store home improvement chain in Mexico. This acquisition is expected to close in the second quarter of fiscal year 2002, pending regulatory approval. The company also noted that the adoption of SFAS 142 and SFAS 144 did not have a material impact on financial results, and they are no longer amortizing goodwill.