Home Depot 2007 Annual Report Download - page 5

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out in 2007. As part of our investment plan, we have
aggressive plans to build out our U.S. supply chain, to
put more associates on the selling floor through a major
“aprons on the floor” initiative, and to take the first step in
transforming our information technology infrastructure
by converting our Canadian business to an Enterprise
Resource Planning platform focused on enhancing our
merchandising and customer facing activities. As our
market improves and as the benefits of these investments
in our business take hold, we look forward over the next
four years to returning to a double digit operating margin.
We will also continue to build relationships and strengthen
ties with our communities. This has been a hallmark
of The Home Depot. One of the best parts of my job is
hearing about the extraordinary things our associates
do to help each other, help our customers and help our
communities every day. We are a values based business,
and we do our best to live and celebrate the values
represented on the wheel depicted on this page. We
recognize the self-reinforcing strength of these values
builds great customer service. I hope, as you shop in our
stores, you will notice our continuing improvement and
the value of the investments we are making.
Francis S. Blake
Chairman & Chief Executive Officer
April 3, 2008
expand to new areas such as Guam, where we opened our
first store this year.
As I complete my first year in this role, I want to thank
the Board of Directors for their support and dedication.
I would especially like to recognize our directors that
are retiring this year: John Clendenin, Claudio González,
Mitch Hart, and Ken Langone – one of our founders.
Their guidance and counsel has been instrumental in the
success of our company.
OUR STRATEGY IS SIMPLE:
We have clearly defined The Home Depot as a retail
business. The sale of HD Supply in August of 2007 was
the critical step in achieving that clarity and focus. We
also defined our capital allocation strategy: We will be
focused on improving our return on invested capital and
will benchmark all uses of excess cash against the value
created for shareholders through share repurchases.
With that in mind, we used the proceeds from the
sale of HD Supply and cash on hand to buy back $10.7
billion of stock. This puts us approximately halfway
through our announced $22.5 billion recapitalization
plan. Our cash flow will help determine the timing of
the remaining steps in the recapitalization plan, as we
look to maintain an adjusted debt/EBITDAR ratio of 2.5
times. We are targeting a payout ratio of 30 percent,
amongst the highest ratios in retail.
Our strategy: focus on our retail business, invest in our
people, improve our stores, bring great products at great
value to our customers, drive a high return on invested
capital, and return excess cash to our shareholders.
For 2008, we are expecting a year every bit as challenging
as 2007. We plan on opening fewer stores than has been
our historical practice as we continue to invest and
sharpen our focus on existing stores. We will continue
to invest in our business along the five priorities set
2007 ANNUAL REPORT 05
VALUES WHEEL