Home Depot 2005 Annual Report Download - page 3

2005 Annual Report 1The Home Depot Inc.
From 2000 to 2005, we opened more than 900 stores,
including our 2,000th in December 2005. In 2000, we reported
$45.7 billion in annual sales; five years later, our sales nearly
doubled, to $81.5 billion. Over the same period, our operating
margin grew 230 basis points, from 9.2 percent to 11.5 percent,
and our earnings per share more than doubled, from $1.10 to
$2.72. Since 2000, we returned nearly $13 billion, or approxi-
mately 59 percent of our cumulative earnings, to shareholders
in the form of dividends and share repurchases. And we achieved
EPS growth of at least 20 percent in each of the past four years.
In short, over the past several years, we’ve been able to deliver
sustainable, predictable and profitable growth, creating a
company that has the strongest balance sheet in the industry
and tremendous potential for future growth.
2005: A Year of Record Performance
Reflecting the hard work and dedication of our 345,000
associates, fiscal year 2005 was another defining year for
The Home Depot. We achieved record earnings per share ($2.72,
up 20.4 percent), record operating margin (11.5 percent) and
record net earnings ($5.8 billion, up 16.7 percent). Our financial
success has allowed us to deliver on our commitment to create
shareholder value.
Enhance the Core: Putting the Customer First
Our success in 2005 reflects our focus on offering our customers
innovative and distinctive merchandise. Certainly, a solid measure
of innovation is average ticket, and in 2005, it reached an
all-time high: $57.98, up 5.6 percent from the previous
year. LG appliances, Ducane gas grills, Behr’s Colores Origenes
Caribbean-inspired paint palette, Milwaukee and Makita
Lithium-Ion power tools are all examples of how we have
enhanced our core to bring differentiation to every aisle in
our stores.
Our appliance story is a great one. From a virtual standing start a
few years ago, we have gone from zero to #3 in core appliance
market share, securing nearly 10 percent of the U.S. market by
the end of 2005. Across merchandising categories, we will
continue to exceed our customers’ expectations with innovative
products that differentiate us from the competition.
In 2005, we continued leveraging technology to improve the
customer experience. With bold IT initiatives – self-checkout,
Back End Automation and Re-engineering (BEAR), and central-
ized automated replenishment – we increased our operational
efficiency, achieved expense productivity and helped shift more
“tasking” hours to the selling floor.
Extend the Business: A Wealth of Fresh Thinking
In 2005, we accelerated our response to evolving customer
trends by broadening our assortment, not just in our stores, but
also through Home Depot Direct. Through new upscale catalogs,
customers can access everything from power tools to home
furnishings and choose from more than 30,000 products online.
Homedepot.com attracts over 3 million visits a week.
A critical part of our strategy to create new revenue streams is
our services business, or The Home Depot’s expert installations.
This business taps into an emerging mega-trend: an aging pop-
ulation that will need increasing assistance in maintaining and
Five years ago, we laid out our strategy to
enhance the core, extend the business and
expand the market. We identified nearly
$1 trillion in global opportunities that could
be captured by building from the founda-
tion of our existing business. We undertook
aggressive efforts that allowed us to better
serve our traditional customers and reach out
to new ones. We sought out creative talent;
breakthrough technology; and, most impor-
tantly, innovative ideas. That strategy is on
course, and it is working.
To Our Shareholders,
Customers, Associates,
Communities and Suppliers: