Home Depot 2005 Annual Report Download - page 32

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Executive Summary and Selected Consolidated Statements of Earnings Data
For fiscal year ended January 29, 2006 (‘‘fiscal 2005’’), we reported Net Earnings of $5.8 billion and
Diluted Earnings per Share of $2.72 compared to Net Earnings of $5.0 billion and Diluted Earnings
per Share of $2.26 for fiscal year ended January 30, 2005 (‘‘fiscal 2004’’). Net Sales increased 11.5% to
$81.5 billion for fiscal 2005 from $73.1 billion for fiscal 2004. Comparable store sales increased 3.8%
for fiscal 2005. We also achieved a record gross profit margin of 33.5% and a record operating margin
of 11.5% for fiscal 2005. These results were achieved through the continued execution of our strategy
to enhance the core, extend the business and expand the market.
We enhanced our core business by continuing to introduce new and innovative merchandise that
reflects emerging consumer trends, supported by continued investments in store modernization and
technology. Significant merchandising enhancements in fiscal 2005 include:
• An enhanced grill lineup led by our proprietary Charmglow↧ brand and the exclusive Ducane
Stainless Steel Grills;
• Flooring innovation through our DuPont RealTouch Elite Laminate Flooring;
• Introduction of LG appliances and a broadened assortment of Maytag and GE products;
• Expanded patio lineup led by our proprietary Hampton Bay↧ set;
• Broadened assortment of paint, including Colores Origenes, Bellagio faux paint, and the Ralph
Lauren metallic and suede paint;
• Innovative products from Ryobi↧, including the Ryobi One+ System↩, Ryobi Multitaskit↩ and
Ryobi Gas Pressure Washer; and
• Growing power tool lineup, including the introduction of exclusive Makita and Milwaukee
lithium-ion power tools for professional and do-it-yourself customers.
Our store modernization efforts included improved signage, point-of-purchase information and
merchandise resets across a variety of categories. During fiscal 2005, we also achieved the following
accomplishments related to our technology initiatives:
• Completed the rollout of our back-end scanned receiving to all stores in the United States
(‘‘U.S.’’) and Canada;
• Commenced vendor certification for certified receiving;
• Continued installation of self-check out registers, in 1,272 stores at the end of fiscal 2005;
• Grew centralized automatic replenishment to 20% of store sales; and
• Implemented the new in-store Special Order Services Initiative pilot in 285 stores.
These investments in our business are paying off as evidenced by improvement in key operating
performance measurements, including average ticket, which increased 5.6% to a record $57.98 for fiscal
2005.
We invested $3.9 billion in capital expenditures during fiscal 2005 for store modernization and
technology as well as for 179 new store openings. We further extended our business by offering a
variety of installation and home maintenance programs to our do-it-for-me customers through our
stores. Our services revenue increased 21.4% to $4.3 billion for fiscal 2005. We saw sustained growth in
categories such as countertops, roofing, kitchens, windows and HVAC. During the fourth quarter of
fiscal 2005, we extended our services business by acquiring Chem-Dry, the world’s largest carpet and
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