Home Depot Management Report by Mike Macchia, Hasit Shah, Gaurav Tuldhar and Kessia Williams

Home Depot Management ReportbyMichael Macchia, Hasit Shah, Gaurav Tuladhar and Kessia WilliamsDecember 13, 2012Qualitative breakdownOverviewThe Home Depots profile corporate responsibility Products and serviceshome improvement industrys.w.o.t. analysis macro analysisCompetitorsQuantitative breakdownfinancial and csr performanceeconomic value added financial ratio analysistarget price/forecastConclusionmanagement summary and recommendation

The Home Depots ProfileFounded in 1978 and opening its doors in Atlanta, Georgia in 1979Worlds largest home improvement retailer in the US. Sells a wide assortment of building materials, home improvement and, lawn and garden products Provide rigorous product knowledge training, which they passed on to customers through do-it-yourself clinics. Their philosophy of customer service whatever it takes means cultivating a relationship with customers rather than merely completing a transaction. Revolutionized the home improvement industry by bringing the know-how and the tools to the consumer and by saving them money. Fastest growing retailer in U.S. history Qualitative Breakdown

Image Courtesy: http://kids4kids2012atworldleadershipconference.wordpress.com/2012/06/16/visiting-home-depot-corporate-headquarters-2/Corporate Responsibility In 2002, The Home Depot Foundation was established with the mission of improving homes and lives.Focus is to repair and refurbish homes and facilities that house disadvantaged families and individuals. Helps out U.S. military veterans who are facing increasing financial and physical hardships as they return to civilian life. In 2011, the foundation made a three-year, $30 million pledge to veterans' housing initiatives. In September 2012, the Foundation announced an additional $50 million commitment to veterans' non-profits over the next three years to ensure every veteran has a safe place to call home years.

Image courtesy :http://media.corporateir.net/media_files/IROL/63/63646/corpGov/value_wheel.gif)Products And ServicesThere are up to 40,000 different kinds of building materials, home improvement supplies, appliances, and lawn & garden products for customers project needs. Selections may vary from store to store due to geographic market needs. Services include: Home Services, Contractor Services, The Home Depot Clinics and Kids Workshops As of 11/07/2012 Thompson Home Improvement IndustryMade up of companies that sell goods and offer services. This is a $300 billion dollar a year industry that is heavily linked to the housing market.Expected to surpass past product sales for this year. Harvards Joint Center for Housing Studies projects that home improvement spending could see double-digit growth in the first half of 2013. The Home Depot and Lowes Inc. dominate the industry; together they make up for 18% of the $300 billion dollar industry. As employment growth rises and housing markets improve, sales expected; averaging 5.9% in 2014 to 2015.

http://homeimprovementstip.com/wp-content/uploads/2011/12/indiana4.jpgSWOT analysis STRENGTH WEAKNESS OPPORTUNITY THREAT Macro AnalysisThe housing market, has somewhat stabilized, making steady gains in the past few months due to the help of Hedge funds and private-equity firms. With the housing market being closely related to the home improvement industry, this solidifies the forecast of the industrys growth in the coming years. In the article The Big Long: A new generation of investors is betting on Americas housing market the author says that investors believe the recovery of the housing market is underway and are looking to profit from it. Also points out that shares in Home Depot are expected to go up sharply. On a larger scale, household debt has been reduced however due to refinancing options after the housing market crash. Lower interest rates has allowed households to save more but its but consumers will need to regain confidence in the economyThe Home Depot, and other companies in the industry - better manage their inventories since consumers will still be spending less than they did in the years before the recession.http://homeimprovementstip.com/wp-content/uploads/2011/12/Indiana3.jpg

CompetitorsMenard, Inc., The Sherwin-Williams Company, True Value Company, Lowes Company Inc. and Ace Hardware CompanyLowes Companies Inc. is the second largest retailer of home improvement products in the US The Home Depots main rival within the industry. Ace Hardware Company, unlike The Home Depot and Lowes Companies Inc., are privately held, independent stores that are operated by entrepreneurs. See table for comparison among the three companies in terms of annual sales, market cap and revenue/market share.

http://www.bloggingstocks.com/2008/05/08/battle-of-the-brands-home-depot-vs-lowes/http://www.rainbird.com/homeowner/store/index.htmQuantitative BreakdownFinancial And CSR PerformanceEconomic Value Added

Shares Outstanding1,537,000,000.00Share Price44.87Market Cap68,965,200,000.00Long Term Debt10,758,000,000.00Total Capital28,656,000,000.00Percent of Debt37.54%Percent of Equity62.46%Risk Free Rate1.93%Risk Premium2.37%Beta1.01Cost of Equity4.32%WACC6.2%NOPAT387,840,000.00Return on Capital14.72%(ROC-WACC)8.52%EVA2,441,491,200.00EVA per share0.63

Financial ratio analysisLiquidity: Above AverageFinancial ratio analysisFinancial ratio analysisFinancial ratio analysisProfitability: Above Average Gross Profit Margin, Operating Margin, Net profit margin, Return On Assets, Return on Equity

Asset Management: Above Average CGS in Inventory, Inventory Turnover, Asset Turnover Financial ratio analysisDebt Management: AverageFinancial ratio analysisDebt ManagementFinancial ratio analysisFinancial ratio analysisFinancial ratio analysisFinancial ratio analysisTarget price/forecastAs of December 11, 2012, the 12-month forecast for the Home Depot shows a median price of 59.00, a high of 72.00 and a low of 51.00. The median reflects the -6.2% decrease from the last price of 62.89.

http://money.cnn.com/quote/forecast/forecast.html?symb=HD

ConclusionSummary and RecommendationsThe S.W.O.T. analysis found several opportunities and areas of improvement for The Home Depot, particularly with the growing Chinese home improvement market.The report finds the prospects of the company in its current position to be positive. There are areas of improvement and require further investigation and remedial action by the management.Some of the limitations include: Forecasting figures are not provided, nature and type of industry does not provided industry averages on all ratios, time constraints on analyzing data, depth of analysis lacking due to nature and scope of work We recommend that The Home Depot lower their debt and use retained earnings more frequently to finance their operations in order to stay profitable and above the competition.

https://plus.google.com/107290324397908716387/postsRatios for Home Depot and Competitors

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