Home Depot 2005 Annual Report Download - page 24

If we cannot successfully manage the unique challenges presented by international markets, we may not be
successful in expanding our international operations.
Our expansion strategy includes expansion of our operations in existing and new international markets
by selective acquisitions, strategic alliances and the opening of new stores. Our ability to successfully
execute our expansion strategy in international markets is affected by many of the same operational
risks we face in expanding our U.S. operations. In addition, our international expansion may be
adversely affected by our ability to identify and gain access to local suppliers as well as by local laws
and customs, legal and regulatory constraints, political and economic conditions and currency
regulations of the countries or regions in which we currently operate or intend to operate in the future.
Risks inherent in our international operations also include, among others, the costs and difficulties of
managing international operations, adverse tax consequences and greater difficulty in enforcing
intellectual property rights. Additionally, foreign currency exchange rates and fluctuations may have an
impact on our future costs or on future cash flows from our international operations.
Our success depends upon our ability to attract, train and retain highly qualified associates.
To be successful, we must attract, train and retain a large and growing number of highly qualified
associates while controlling related labor costs. Our ability to control labor costs is subject to numerous
external factors, including prevailing wage rates and health and other insurance costs. In addition, many
of our associates are in hourly positions with historically high turnover rates. We compete with other
retail and non-retail businesses for these associates and invest significant resources in training and
motivating them. We also depend on our executives and other key associates for our success. There is
no assurance that we will be able to attract or retain highly qualified associates in the future.
Changes in accounting standards and subjective assumptions, estimates and judgments by management related
to complex accounting matters could significantly affect our financial results.
Generally accepted accounting principles and related accounting pronouncements, implementation
guidelines and interpretations with regard to a wide range of matters that are relevant to our business,
such as revenue recognition, asset impairment, inventories, self-insurance and litigation, are highly
complex and involve many subjective assumptions, estimates and judgments by our management.
Changes in these rules or their interpretation or changes in underlying assumptions, estimates or
judgments by our management could significantly change our reported or expected financial
performance.
Increased competition could adversely affect prices and demand for our products and services and could
decrease our market share.
Our business is highly competitive, based principally on price, store location, customer service and
depth of merchandise. In each of the markets we serve, there are a number of other home
improvement stores, electrical, plumbing and building materials supply houses and lumber yards. With
respect to some products, we also compete with discount stores, local, regional and national hardware
stores, mail order firms, warehouse clubs, independent building supply stores and other retailers. In
addition, we compete with specialty design stores or showrooms, some of which are only open to
interior design professionals, local and regional distributors, and wholesalers and manufacturers that
sell products directly to their customer bases. Moreover, our Home Depot Supply businesses compete
with local and regional distributors and wholesalers and manufacturers that sell products directly to
their customer bases. Intense competitive pressures from one or more of our competitors could affect
prices or demand for our products and services. If we are unable to timely and appropriately respond
to these pressures, our financial performance and our market share could be adversely affected.
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