Home Depot 2013 Annual Report Download - page 25

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Results of Operations
For an understanding of the significant factors that influenced our performance during the past three fiscal years, the
following discussion should be read in conjunction with the Consolidated Financial Statements and the Notes to Consolidated
Financial Statements presented in this report.
Fiscal 2013 Compared to Fiscal 2012
Net Sales
Fiscal 2013 consisted of 52 weeks compared to 53 weeks in fiscal 2012. Net Sales for fiscal 2013 increased 5.4% to $78.8
billion from $74.8 billion for fiscal 2012. The increase in Net Sales for fiscal 2013 reflects the impact of positive comparable
store sales for fiscal 2013, partially offset by $1.2 billion of Net Sales attributable to the additional week in fiscal 2012. Total
comparable store sales increased 6.8% for fiscal 2013 compared to an increase of 4.6% for fiscal 2012.
The positive comparable store sales for fiscal 2013 reflect a number of factors, including the execution of our key initiatives,
continued strength in our core categories and an improved U.S. housing market. All of our departments posted positive
comparable store sales for fiscal 2013. Comparable store sales for our Kitchen, Electrical, Lumber, Plumbing, Lighting, Bath
and Indoor Garden product categories were above or at the Company average for fiscal 2013. Comparable store sales for our
Tools, Paint, Flooring, Décor, Hardware, Outdoor Garden, Millwork and Building Materials product categories were positive
for fiscal 2013. Further, our comparable store customer transactions increased approximately 3.4% for fiscal 2013 and
comparable store average ticket increased approximately 3.3% for fiscal 2013 due in part to strong sales in our appliance
business and continued recovery in sales to our professional customers.
Gross Profit
Gross Profit increased 6.0% to $27.4 billion for fiscal 2013 from $25.8 billion for fiscal 2012. Gross Profit for fiscal 2012
included a $10 million charge related to the China store closings. Gross Profit as a percent of Net Sales was 34.8% for fiscal
2013 compared to 34.6% for fiscal 2012, an increase of 18 basis points. The increase in gross profit margin in fiscal 2013 was
driven primarily by businesses we acquired in fiscal 2012, which are gross margin accretive, higher productivity in our
supply chain and improved shrink performance, partially offset by a change in the mix of products sold.
Operating Expenses
Selling, General and Administrative expenses ("SG&A") increased 0.5% to $16.6 billion for fiscal 2013 from $16.5 billion
for fiscal 2012. SG&A for fiscal 2012 included a $135 million charge related to the China store closings. As a percent of Net
Sales, SG&A was 21.1% for fiscal 2013 compared to 22.1% for fiscal 2012. The decrease in SG&A as a percent of Net Sales
for fiscal 2013 reflects expense leverage resulting from the positive comparable store sales environment and strong expense
controls.
Depreciation and Amortization was $1.6 billion for both fiscal 2013 and 2012. Depreciation and Amortization as a percent of
Net Sales was 2.1% for both fiscal 2013 and 2012.
Operating Income
Operating Income increased 18.0% to $9.2 billion for fiscal 2013 from $7.8 billion for fiscal 2012. Operating Income as a
percent of Net Sales was 11.6% for fiscal 2013 compared to 10.4% for fiscal 2012.
Interest and Other, net
In fiscal 2013, we recognized $699 million of Interest and Other, net, compared to $545 million for fiscal 2012. Interest and
Other, net, as a percent of Net Sales was 0.9% for fiscal 2013 compared to 0.7% for fiscal 2012. The increase in Interest and
Other, net, as a percent of Net Sales for fiscal 2013 reflects increased interest expense associated with the issuance of $4.0
billion of incremental long-term debt in fiscal 2013. Interest and Other, net, for fiscal 2012 included a $67 million pretax
benefit related to the termination of our guarantee of a senior secured loan of HD Supply, Inc.
Provision for Income Taxes
Our combined effective income tax rate was 36.4% for fiscal 2013 compared to 37.2% for fiscal 2012. The effective income
tax rate for fiscal 2012 was higher than fiscal 2013 as we were unable to realize any tax benefit from the $145 million charge
related to the China store closings for fiscal 2012. Excluding the charge related to the China store closings, our combined
effective income tax rate was 36.5% for fiscal 2012.