Home Depot 2010 Annual Report Download - page 3

Dear Shareholders:
In 2010, we achieved our first year of positive sales growth since fiscal year 2006. Our comp sales increased by
2.9 percent, with total sales up 2.8 percent. Earnings per share from continuing operations were up 29.7 percent
from last year, reflecting positive sales growth, continuing benefits from our merchandising transformation
efforts and effective expense control.
Our sales growth occurred against a backdrop of continued weakness in the housing market. In the U.S., private
fixed residential investment as a percent of GDP reached a new 60 plus year low of 2.24 percent in the third
quarter of 2010. Despite this, we had positive comp sales for all four quarters of 2010, and by the end of 2010,
we were seeing strength across the U.S., as 49 of the 50 states had positive same store sales for the fourth quarter.
We view this as an indicator that our business can stabilize and improve even as the housing market remains
under stress.
As we look to 2011, we believe that GDP growth and improving customer sentiment will continue to lift our
business in the U.S. On the international front, our Canadian business had negative same store sales in the back
half of the year, reflecting the impact of the previous year’s home renovation tax credit. We expect this pressure
to continue in the beginning of 2011 but then dissipate later in the year. Our Mexican business posted its twenty-
ninth quarter in a row of positive same store sales in the fourth quarter of 2010, and we expect it to continue this
trend in 2011. In China, we have reduced our store footprint, and we believe this will provide a more effective
platform for future performance and development.
In 2010, we continued to invest in our business. We maintained our focus on customer service, supply chain and
merchandising initiatives, as well as the development of our interconnected retail strategy.
Operationally, we made progress with customer service through initiatives such as our FIRST Phone, a hand held
device with multiple functions, including inventory management, product location, a phone, a walkie-talkie, and
a mobile register. We have completed the rollout of the FIRST Phone, and this helped us end the year with 51
percent of store payroll allocated to customer facing activity. As we continue on the path to achieving a 60/40
ratio between customer service and tasking activities, we can see significant improvements in our customer
service surveys.
We opened our nineteenth Rapid Deployment Center or “RDC” in January 2011, marking the completion of our
RDC build out, at least for the next several years. Three years ago, we started with a goal of serving 100 percent
of our U.S. stores through RDCs by the end of fiscal 2010. We achieved this goal. This was a major undertaking
that touched almost every part of the company and required the work and dedication of the entire team. This
structural shift in our supply chain will provide ongoing benefits in cost-out, asset efficiency and customer
service.
Over the course of 2010, we made significant improvements in our merchandising systems, with foundational
work on our data warehouse and improved tools for forecasting and replenishment. We will continue on that path
in 2011, and we are also continuing our investments in multi-channel – or interconnected – retailing. Through our
mobile applications, website and social media presence, we are creating the capability to serve our customers
“when, where and how” they want to be served.