ATLANTA — /PRNewswire-FirstCall/ — The Home Depot(R), the
world’s largest home improvement retailer, today reported its financial
outlook and key priorities for driving retail growth in 2007 and beyond at
its Annual Investor and Analyst Conference.
(Logo: http://www.newscom.com/cgi-bin/prnh/20030502/HOMEDEPOTLOGO)
Chairman and CEO Frank Blake stated that the Company does not expect
residential construction and the housing market to improve until late in
the second half of 2007 or early 2008. The Company’s outlook for 2007
reflects this broader economic dynamic, as well as the Company’s customer
priorities and strategic investments.
“We are first and foremost a retail business, and our 2007 plans
reflect that commitment,” said Frank Blake, chairman & CEO. “While the
current home improvement market remains challenging, the long-term
fundamentals of our company are strong, and we believe we can improve our
performance and grow at, or faster than, the market beyond 2007. That’s why
we are making significant investments in our associates and our stores.”
The Company’s five key priorities and the anticipated investment that
will be applied to each are outlined below. Total investment in these
priorities in fiscal 2007 is projected to be approximately $2.2 billion,
comprised of $1.6 billion in capital spending and $600 million in expense.
Associate Engagement
The Home Depot’s goal is to provide a unique warehouse shopping
experience characterized by available, helpful and knowledgeable
associates. Customers know that the orange apron means something special,
and the Company intends to focus on know-how and service as a competitive
edge. During 2007, the Company plans investments in associate engagement to
total $360 million, including recruitment of master trade specialists, a
simplified staffing model, technology-enabled customer assistance, and
redesigned compensation and reward plans.
Product Excitement
Product innovation, more focused promotions and everyday low pricing
will drive The Home Depot’s merchandising initiatives in 2007. The Company
expects to invest $260 million in 2007 on merchandising resets, product
innovation, pricing strategies and sourcing initiatives.
Product Availability
Keeping the right quantities of merchandise on the store shelves is a
key priority for 2007 and beyond. The Home Depot will focus on improving
its in- stock position by investing in its logistics capabilities,
including demand forecasting and distribution. The Company plans to invest
$275 million in these efforts.
Shopping Environment
The Home Depot consistently hears through surveys that customers want
to shop in safe, clean and uncluttered stores. In 2007, the Company plans
investments to total $865 million to support the shopping experience,
including sustained maintenance and merchandising reset programs.
Own the Pro
The Home Depot’s goal is to be the number one destination for pro
customers, primarily repair and remodel professionals. During 2007, the
Company expects to spend $415 million on programs such as loyalty programs,
a pro bid room to handle large customer orders with volume discounts,
direct ship programs, credit programs and other specialty sales
initiatives.
“Our 2007 sales and earnings per share targets reflect the reality of
the home improvement market and our commitment to invest for the long-term
health of our business,” said Carol Tome, CFO & executive vice president –
Corporate Services.
2007 Financial Targets
* Total sales growth of 0 percent to 2 percent, with HD Supply growing
from 13 percent of total sales to approximately 15 percent of total
sales by the end of the year
* Retail comps in the negative mid-single-digit area
* Approximately 115 new store openings; 4.6 percent square footage growth
* Diluted earnings per share decline of 4 percent to 9 percent
* Capital expenditures to increase 29 percent to $4.5 billion, focused on
new stores and retail reinvestment
2007 financial targets reflect 52 weeks and do not include the impact
of the 53rd week. The Company will have 53 weeks of operating results in
its fiscal 2007 financial results. Including the impact of the 53rd week,
consolidated sales are expected to increase by 1 percent to 2 percent, and
diluted earnings per share are expected to decline by 3 percent to 8
percent.
Retail Outlook
Beyond 2007, the Company believes that investments made in its retail
business will allow sales in the retail business to return to above market
growth rates. Additionally, the Company expects that these investments will
drive productivity, which will cause earnings to grow faster than sales.
Coupled with its commitment to share repurchases, the Company anticipates
diluted earnings per share growth of more than 10 percent annually. The
overall retail outlook beyond 2007 is as follows:
* Annual sales growth of approximately 5 percent
* Annual earnings growth greater than 5 percent
* Annual diluted earnings per share growth of 10 percent or more
Capital Allocation Outlook
The Company outlined its intent to use available cash after investing
to deliver a predictable dividend payout targeting approximately 30
percent, to generate value-creating share repurchases and to maintain a
high return on invested capital.
“Speed, flexibility and entrepreneurial spirit are hallmarks of The
Home Depot and will guide our decision making in 2007,” said Blake. “We
have aligned our leaders and resources around our five key priorities, and
we believe this strategy will deliver the most value for our customers,
associates and shareholders.”
The Home Depot(R) is the world’s largest home improvement specialty
retailer, with more than 2,163 retail stores in all 50 states, the District
of Columbia, Puerto Rico, U.S. Virgin Islands, 10 Canadian provinces,
Mexico and China. Through its HD Supply(SM) businesses, The Home Depot is
also one of the largest diversified wholesale distributors in the United
States, with nearly 1,000 locations in the United States and Canada
offering products and services for building, improving and maintaining
homes, businesses and municipal infrastructures. In fiscal 2006, The Home
Depot had sales of $90.8 billion and earnings of $5.8 billion. The Company
employs approximately 355,000 associates and has been recognized by FORTUNE
magazine as the No. 1 Most Admired Specialty Retailer and the No. 13 Most
Admired Corporation in America for 2006. The Home Depot’s stock is traded
on the New York Stock Exchange (NYSE: HD) and is included in the Dow Jones
industrial average and Standard & Poor’s 500 index. HDG
Certain statements contained herein, including any statements related
to Net Sales growth, comparable store sales, state of the housing market,
implementation of store initiatives, Net Earnings performance, earnings per
share, store openings and closures, capital allocation and expenditures,
margins, return on invested capital, declaration of dividends and share
repurchases, strategic direction and the demand for our products and
services, constitute “forward-looking statements” as defined in the Private
Securities Litigation Reform Act of 1995. These statements are based on
currently available information and are based on our current expectations
and projections about future events. Risks and uncertainties include but
are not limited to: economic conditions in North America; our ability to
develop relationships with a sufficient number of qualified suppliers;
changes in our cost structure, including fluctuating commodity prices; the
availability of sourcing channels consistent with our strategy of
differentiation; the effect of changes in our leadership on our operations
and strategic direction; the strategic evaluation of HD Supply, including
whether or not any transaction will occur and the terms, timing and
conditions associated with any such transaction; conditions affecting new
store development, such as our ability to find suitable store locations,
obtain required permits and open stores on schedule; conditions affecting
customer transactions and average ticket, including, but not limited to,
weather conditions; the success of our technology initiatives in improving
and streamlining operations and customers’ in-store experience; our ability
to identify and respond to evolving trends in demographics and consumer
preferences; our ability to design stores that appeal to customers; the
costs of redesigning stores in light of evolving customer expectations; the
success of new store formats and businesses; the relative success of our
expansion strategy, including our ability to identify acquisition
opportunities, particularly in markets outside the United States, and our
ability to complete acquisitions on financially attractive terms and
integrate them with our other businesses; our ability to create appropriate
distribution channels for key sales platforms; our ability to successfully
execute our online strategy; our ability to attract, train and retain
highly qualified associates; the impact of new accounting standards;
subjective assumptions, estimates and judgments by management related to
complex accounting matters; decisions by management related to possible
asset impairments; the impact of competition; regulation, government
inquiries or investigations and litigation matters; and possible
restatement or adjustment of financial statements. Undue reliance should
not be placed on such forward- looking statements, as they speak only as of
the date hereof and we undertake no obligation to update these statements
to reflect subsequent events or circumstances except as may be required by
law. Additional information regarding these and other risks and
uncertainties is contained in our periodic filings with the SEC, including
our Annual Report on Form 10-K for the fiscal year ended January 29, 2006.
SOURCE The Home Depot
« U.S. Concrete swings to a fourth-quarter loss | Home Inns to Report Fourth Quarter and Full Year 2006 Financial Results on March 7th, 2007 US Time »