Home Depot 2009 Annual Report Download - page 28

Fiscal 2008 Compared to Fiscal Year Ended February 3, 2008 (“fiscal 2007”)
Net Sales
Fiscal 2008 consisted of 52 weeks compared to 53 weeks in fiscal 2007. Net Sales for fiscal 2008 decreased
7.8% to $71.3 billion from $77.3 billion for fiscal 2007. The decrease in Net Sales for fiscal 2008 reflects the
impact of negative comparable store sales and $1.1 billion of Net Sales attributable to the additional week in
fiscal 2007, partially offset by Net Sales of $1.8 billion from new stores in fiscal 2008. Comparable store sales
decreased 8.7% for fiscal 2008 compared to a decrease of 6.7% for fiscal 2007.
There were a number of factors that contributed to our comparable store sales decline. The U.S. residential
construction and home improvement markets continued to be soft and consumers were challenged due to higher
unemployment and an across-the-board tightening of consumer credit availability. We saw relative strength in
Building Materials, Plumbing, Garden/Seasonal and Hardware as comparable store sales in these areas were
above or at the Company average for fiscal 2008. Comparable store sales for Lumber, Flooring, Paint,
Electrical, Kitchen/Bath and Millwork were below the Company average for fiscal 2008. Softness in our big
ticket categories negatively impacted average ticket, which decreased 3.3% to $55.61 for fiscal 2008. Our new
stores cannibalized approximately 5% of our existing stores as of the end of fiscal 2008, which had a negative
impact to comparable store sales of approximately 1%.
Gross Profit
Gross Profit decreased 7.7% to $24.0 billion for fiscal 2008 from $26.0 billion for fiscal 2007. Gross Profit as a
percent of Net Sales was 33.7% for fiscal 2008 compared to 33.6% for fiscal 2007, an increase of four basis
points. This gross margin expansion included $30 million in markdowns taken in connection with our
Rationalization Charges. Excluding these markdowns, our Gross Profit as a percent of Net Sales increased eight
basis points for fiscal 2008, reflecting our focused bay portfolio approach to product assortment.
Operating Expenses
SG&A increased 4.7% to $17.8 billion for fiscal 2008 from $17.1 billion for fiscal 2007. As a percent of Net
Sales, SG&A was 25.0% for fiscal 2008 compared to 22.1% for fiscal 2007. Excluding the Rationalization
Charges, SG&A as a percent of Net Sales for fiscal 2008 was 23.7%, an increase of approximately 170 basis
points over the prior year. The increase in SG&A as a percent of Net Sales for fiscal 2008 was primarily the
result of expense deleverage in the negative comparable store sales environment, as well as an increase of
approximately 70 basis points due to a higher cost of credit associated with the private label credit card
program. For fiscal 2008, the penetration of the private label credit card sales was 28.1% compared to 29.4%
for fiscal 2007.
Depreciation and Amortization increased 4.9% to $1.8 billion for fiscal 2008 from $1.7 billion for fiscal 2007.
Depreciation and Amortization as a percent of Net Sales was 2.5% for fiscal 2008 and 2.2% for fiscal 2007.
The increase as a percent of Net Sales was primarily due to sales deleverage and the depreciation of our
investments in shorter lived assets such as store resets and technology.
Operating Income
Operating Income decreased 39.8% to $4.4 billion for fiscal 2008 from $7.2 billion for fiscal 2007. Operating
Income as a percent of Net Sales was 6.1% for fiscal 2008 compared to 9.4% for fiscal 2007. Excluding the
Rationalization Charges, Operating Income as a percent of Net Sales was 7.4% for fiscal 2008.
Interest and Other, net
In fiscal 2008, we recognized $769 million of Interest and Other, net, compared to $622 million in fiscal 2007.
Interest and Other, net, as a percent of Net Sales was 1.1% for fiscal 2008 compared to 0.8% for fiscal 2007.
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