10-QPeriod: Q1 FY2005

HOME DEPOT, INC. Quarterly Report for Q1 Ended May 2, 2004

Filed June 4, 2004For Securities:HD

Summary

Home Depot, Inc. reported a strong first quarter for fiscal year 2004, with net sales increasing by 16.2% to $17.6 billion compared to the prior year. This growth was fueled by a robust 7.7% increase in comparable store sales and contributions from new store openings. Diluted earnings per share (EPS) saw a significant rise of 25.6% to $0.49, and excluding the impact of a new accounting standard (EITF 02-16), EPS would have been $0.52, a 33.3% increase. The company highlighted a strong financial position, with cash and short-term investments at $4.3 billion and a low debt-to-equity ratio of 7.3%. Management also noted improvements in operating income and gross profit margins, partly driven by strategic initiatives like the private label credit program. Investments in store initiatives, including Pro, Appliance, Designplace, and Tool Rental, are progressing and contributing to the company's growth strategy. The company also announced strategic acquisitions, including White Cap Industries and Home Mart Mexico, to expand its market reach and professional customer base.

Key Highlights

  • 1Net sales increased 16.2% to $17.6 billion, driven by comparable store sales growth of 7.7%.
  • 2Diluted EPS rose 25.6% to $0.49 ($0.52 excluding EITF 02-16 impact).
  • 3Gross profit margin improved to 32.9% (32.0% excluding EITF 02-16), supported by strong sales and strategic credit programs.
  • 4Operating income increased by 20.6% to $1.75 billion.
  • 5The company repurchased $916 million of its common stock in the quarter, signaling confidence and returning capital to shareholders.
  • 6Strategic acquisitions of White Cap Industries and Home Mart Mexico were completed to expand market presence and customer base.
  • 7Total assets grew to $37.9 billion, with significant increases in merchandise inventories and cash and cash equivalents.

Frequently Asked Questions

Sales growth was primarily driven by a strong increase in comparable store sales of 7.7% and the sales generated from newly opened stores. The average ticket price also reached a company record of $55.11, contributing to the overall sales increase.

The adoption of EITF 02-16 reclassified certain vendor considerations from advertising expense to a reduction of cost of merchandise sold. This resulted in a reduction of reported net earnings by $78 million and diluted EPS by $0.03 for the quarter. Management provided adjusted figures to facilitate comparison with prior periods.

Home Depot plans to open 185 new stores in fiscal 2004 and expects sales growth of 10% to 12%, driven by comparable store sales, new store openings, and stores opened in the prior year. The company projects diluted EPS growth of 10% to 14% for the full fiscal year 2004.

The company significantly increased cash used in financing activities due to the repurchase of $916 million of its common stock. Additionally, Home Depot renewed its backup credit facility, increasing its capacity to $1 billion and extending its term to May 2009.