Home Depot 2003 Annual Report Download - page 3

The Home Depot, Inc. | 01
Record Financial Results
In fiscal 2003, earnings per diluted share grew to a company
record of $1.88, an increase of 21%. We also achieved company
records in average ticket, which grew to $51.15, gross margin,
which reached 31.8%, and operating margin, which reached
10.6%. Our dedicated associates made all of these accomplish-
ments possible, and we are proud of their achievements.
Rock Solid Financial Condition
We continue to benefit from our tremendously strong balance
sheet. We ended the fiscal year with stockholders’ equity of $22
billion, $34 billion in assets, including $2.9 billion in cash, and a
debt to equity ratio of 6.1%, the best in retail.
The strength of our company affords us the ability to reinvest in
the business while also returning value to our shareholders. Over
the past three fiscal years, we have returned $5.1 billion to our
shareholders in the form of share repurchases and dividends
paid. This is equal to $2.18 per diluted share or approximately
46% of our cumulative earnings.
Transforming the Business
Three years ago we began a transformation that has touched
every facet of our business. During this time, we have invested an
unprecedented $10 billion of capital in our company. We are gen-
erating a solid return on our invested capital, which was 20.4% at
the end of fiscal 2003. Beyond our investments in physical capi-
tal, we are also investing heavily in our human capital. In 2003,
we created more net new jobs than any other established company
in the U.S. Our associates received 21 million hours of training
through delivery vehicles such as e-learning and learning forums.
We also made significant investments in our leadership develop-
ment programs, ensuring that we have a pipeline of great talent to
support our current business and future growth.
Sustained, Profitable Growth
Our strategy for sustained, profitable growth is simple: Enhance
the Core, Extend the Business and Expand the Market. We size the
global market opportunity for home improvement at approxi-
mately $900 billion, which considers growth opportunities both
inside and outside of our installed store base of 1,707 stores.
Clearly, we believe we have plenty of room left for growth.
Enhancing the Core
We are enhancing the core of our business through a more sophisticated
focus on the market and on the customer. We are analyzing demo-
graphics, consumer trends and geographic locations to remain current
or ahead of emerging customer trends. This includes a company-wide
store modernization plan, the introduction of innovative and distinctive
merchandise and technological enhancements.
In fiscal 2003, our store modernization plan reached every store at
some level, and we have only just begun. Moving forward, an
increasing proportion of our capital investment will be spent on fur-
ther enhancements to the core of our business, including improved
lighting, high-finish floors, merchandising displays and the addition
of bilingual signage. Our investment in store modernization is
planned to double in 2004 to approximately $1billion.
We continue to strengthen our merchandise offering through category
leadership in national brands, exclusive alliances and proprietary
products. From patio furniture to hand tools, we are delivering a richer
To Our Customers, Suppliers, Shareholders and Associates:
By focusing on sales, service and execution we delivered record financial performance
in fiscal 2003. Sales grew 11%, reaching $64.8 billion, making us the youngest retailer
to reach $30, $40, $50 and now over $60 billion in revenue – a strong achievement for
a company only 24 years old. In three years, we have grown sales by $19 billion, or
42%, and earnings per share have increased by 71%.
Our transformation is paying off in both tangible changes to our business and record
financial returns. Our customers showed their appreciation by shopping in our stores
more than 1.2 billion times in 2003 and the stock market rewarded our accomplish-
ments with a 48% increase in the value of our stock.
Chairman’s Letter