10-QPeriod: Q1 FY2006

HOME DEPOT, INC. Quarterly Report for Q1 Ended May 1, 2005

Filed June 2, 2005For Securities:HD

Summary

Home Depot reported a solid first quarter for fiscal year 2005, with net sales increasing by 8.1% to $19.0 billion and diluted earnings per share rising to $0.57 from $0.49 in the prior year. This growth was driven by a 2.1% increase in comparable store sales, despite negative impacts from inclement weather across the U.S. The company also achieved record first-quarter gross profit and operating margins, indicating strong operational execution. Investments in store modernization, technology, and new initiatives like the Pro and Appliance programs are showing positive results, with average ticket price reaching a company record of $58.25. The company demonstrated continued expansion efforts through strategic acquisitions in specialty hardware, flooring, and commercial lighting sectors, and an increased presence in Canada and Mexico. Financial health remains robust, with a strong cash position and a low debt-to-equity ratio. However, Home Depot also announced plans to dispose of real estate interests in 15 EXPO stores and convert five others, incurring a related impairment charge. The company continues its aggressive share repurchase program, reflecting confidence in its financial outlook and commitment to returning value to shareholders.

Key Highlights

  • 1Net sales grew 8.1% year-over-year to $19.0 billion, with diluted EPS increasing to $0.57 from $0.49.
  • 2Comparable store sales increased by 2.1%, although negatively impacted by inclement weather.
  • 3Achieved a record first-quarter gross profit margin of 33.5% and operating margin of 10.5%.
  • 4Average ticket price reached a company record of $58.25, a 5.7% increase.
  • 5Significant capital expenditures of $821 million focused on store modernization, technology, and new store openings.
  • 6Completed strategic acquisitions to expand reach in specialty hardware, flooring, and lighting distribution.
  • 7Continued aggressive share repurchase program, with $1.4 billion repurchased in the quarter and significant authorization for future buybacks.

Frequently Asked Questions

Home Depot reported a net sales increase of 8.1% to $19.0 billion for the first quarter of fiscal 2005, compared to $17.6 billion in the prior year. Diluted earnings per share rose to $0.57 from $0.49. The company also achieved record first-quarter gross profit of 33.5% and an operating margin of 10.5%.

Inclement weather across the U.S. negatively impacted sales and comparable store sales growth in the first quarter of fiscal 2005. Despite this, comparable store sales increased by 2.1%. The company noted that new store openings reduced comparable store sales by approximately 1.5% due to cannibalization.

Home Depot is focusing on enhancing its core business through merchandise innovation and store modernization, extending its business with new stores and services, and expanding its market reach, particularly in the professional and international segments. Initiatives like the Pro program, Appliance offerings, DesignPlaceSM, and Tool Rental Centers are being rolled out across stores. Services revenue grew by 16% year-over-year, indicating strong performance in installation and maintenance programs.

The company maintains a strong financial position with $3.0 billion in cash and short-term investments as of May 1, 2005, and a low total debt-to-equity ratio of 9.1%. Home Depot continues its aggressive share repurchase program, returning significant capital to shareholders. Capital expenditures were $821 million, primarily for store development and modernization.