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Home Depot profits near 40 percent

Building same-store sales at a rapid clip, while widening margins and cutting costs, The Home Depot Inc. drove fourth-quarter profits up by 38.6 percent, to $15.1 billion from $13.2 billion last year.

Sales at the nation's largest home improvement chain raced back after a relatively subdued performance, jumping by 11.3 percent, to $15.1 billion from $13.2 billion during the prior-year quarter. Same-store sales shot up by 7.6 percent.

Giving a lift to the bottom line, average gross margin expanded by 70 basis points, or seven-tenths of a percentage point, to 32.7 percent from 32 percent. Helped by the combination of stronger sales and stronger margins, gross margin dollars improved by 14.8 percent, to $5 billion from $4.2 billion.

In a further prop to earnings, operating costs were pared by 80 basis points, or eight-tenths of a percentage point, to 20.5 percent of sales from 21.3 percent a year ago.

Saving even more money, The Home Depot reined in its stockpiles. Inventories grew just 8.9 percent, to $9.1 billion from $8.3 billion, substantially beneath the 14.5 percent rate of sales growth.

"These record results reinforce the fact that our strategy of investing nearly $10 billion in business growth and transformation over the past three years is producing the desired results for our customers and our shareholders," said Bob Nardelli, chairman, CEO and president.

Among the highlights of 2002, said Nardelli, were:

  • The roll-out of Designplace and Appliance Centers in more than 1,500 stores;

  • The installation of self-checkout systems in 777 stores;

  • The introduction of new store formats and the start of construction of two stores in Manhattan;

  • The company obtained a contract with the federal Government Services Administration, securing business ties between The Home Depot and federal agencies.

The Home Depot Inc.

Qtr. 2/1/04 (x000) 2003 2002 % chg
Sales $15,125,000 $13,213,000 14.5
Oper. income (EBIT) 1,848,000 1,410,000 31.1
Net income 951,000 686,000 38.6
Per share (diluted) 0.42 0.30 40.0
Average gross margin 32.7% 32.0%
SG&A expenses 20.5% 21.3%
12 months 2003 2002 % chg
Sales 64,816,000 58,247,000 11.3
Oper. income (EBIT) 8,078,000 6,928,000 16.6
Net income 4,304,000 3,664,000 17.5
Per share (diluted) 1.88 1.56 20.5
Average gross margin 31.8% 31.1%
SG&A expenses 19.3% 19.2%


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