Home Depot 2004 Annual Report Download - page 3

The Home Depot, Inc. 1
Earnings per diluted share grew 20.2% to $2.26 in 2004. Average
ticket reached $54.89, gross margin climbed to 33.4% and oper-
ating margin increased to 10.8% – all company records. We also
drove comparable store sales of 5.4%, our best comparable store
sales performance since 1999.
At the same time, we maintained one of the strongest balance sheets
in retail, ending the year with shareholders’ equity of $24 billion;
$39 billion in assets, including $2.2 billion in cash and short-term
investments; and a debt-to-equity ratio of 8.9%.
We had a great year when measured across virtually every
key metric. Our outstanding financial performance allowed us
to continue reinvesting in our business and return approximately
$4 billion of cash to our shareholders last year through share
repurchases and dividends. Over the past four years, total
share repurchases and dividends returned to shareholders
equated to $3.90 per diluted share, or approximately 56% of our
cumulative earnings.
I could not be more proud of what our 325,000 associates achieved
from both an operational and a financial perspective. In 2004, we
accomplished something even more meaningful: building a foun-
dation for continued growth and profitability well into the future.
Enhancing the Core
In 2004, we continued our focus to improve the customer experi-
ence in our stores by investing approximately $1 billion in store
remodels and refreshes.
At the center of these efforts were continued performance improve-
ments from major merchandising resets in core areas such as
lighting, flooring, kitchen and appliances, to name a few. We also
launched a steady stream of innovative and distinctive new prod-
ucts that received a record number of accolades from leading
consumer publications. We continued to use technology, installing
human resource and financial systems, to improve our operating
systems and enable future growth. And, in all U.S. stores, we
completed our installation of POS systems, which allowed us to roll
out cordless scan guns to all stores and have over 1,000 self-
checkout systems in place. These technologies shorten checkout
times and enhance the customer experience.
We invested heavily not only in our physical assets, but also in
our associates, through more than 23 million hours in learning,
which helped our associates deliver better customer service. We
enhanced our compensation and rewards programs with record
Success Sharing payouts of approximately $90 million. We
launched exciting new hiring partnerships with AARP and the
Departments of Defense, Veterans Affairs and Labor, and we added
new benefits programs that are available to full- and part-time
associates, making us an employment practices leader in the
retail industry.
Extending the Business
We opened 183 net new stores, including several new and excit-
ing store formats in Manhattan, New York and Park Royal, West
Vancouver. These stunning new urban formats represent the best
of The Home Depot when it comes to innovation in design,
merchandising, product selection and service delivery, and have
opened up future revenue opportunities for The Home Depot.
Looking back at 2004, our strong performance was the result of focusing on our core
purpose: Improve Everything We Touch. This core purpose, which we shared with our
associates at our 25th anniversary celebration last summer, captures both who we are
as a company and how we came together as a team in 2004 to build on our proud past
and create an even brighter future.
Driven by our core purpose, we focused on the execution of our unwavering strategy to
enhance the core, extend the business and expand our markets. As a result, we deliv-
ered record financial performance, with sales growth of 12.8% to $73 billion. To put
that into perspective, from 2000 to 2004, we have grown our top line sales by more
than $27 billion, roughly the sales of a company ranking among the top 60 in the
Fortune 500.
To Our Customers, Suppliers,
Shareholders and Associates: