Business Context and Reporting Period
This Form 10-K covers The Home Depot, Inc. for the fiscal year ended February 1, 1998. The Company is the leading retailer in the home improvement industry, operating 624 stores (587 Home Depot, 5 EXPO Design Centers, and 32 in Canada) with approximately 66.4 million square feet of selling space. The business model focuses on a broad assortment of building materials and home improvement products for Do-It-Yourself (D-I-Y), Buy-It-Yourself (B-I-Y), and professional customers.
Key Financial Metrics
Note: Specific revenue, profit, cash flow, and debt figures are not provided in the text of this filing. The document explicitly incorporates the Consolidated Statements of Earnings, Balance Sheets, and Cash Flows by reference to the 1997 Annual Report to Stockholders.
- Market Capitalization: The aggregate market value of Common Stock held by nonaffiliates was approximately $45.5 billion as of March 30, 1998.
- Stock Performance: Common stock traded on the NYSE (Symbol: HD). The price range for the fourth quarter of fiscal 1997 was $52.94 to $61.63. A three-for-two stock split was effected on July 3, 1997.
- Dividends: The Company declared a quarterly cash dividend of $0.05 per share for the fourth quarter ended February 1, 1998.
- Debt Instruments: The Company has 3-1/4% Convertible Subordinated Notes due 2001 registered on the NYSE.
- Product Mix: Building materials, lumber, floor and wall coverings accounted for 34.2% of sales; Plumbing, heating, lighting, and electrical supplies accounted for 27.1%.
Material Changes and Operational Highlights
- Store Expansion: The Company opened 112 new stores and relocated 5 existing stores during fiscal 1997. Store count grew from 214 in 1992 to 624 in 1997 (approx. 24% annual growth).
- Acquisitions:
- Maintenance Warehouse/America Corp. (March 1997): Direct mail marketer for multi-family housing and lodging facilities.
- National Blind & Wallpaper Factory and Habitat Wallpaper & Blinds (November 1997): Acquired to enhance wallpaper and window treatment offerings.
- Load 'N Go (December 1997): Truck and cargo van rental program available in ~300 stores.
- International Growth:
- Canada: Operates 32 stores via a partnership with Molson Companies (75% owned by Home Depot).
- Latin America: First store scheduled to open in Santiago, Chile, in July 1998 via a joint venture with S.A.C.I. Falabella (66.67% owned).
- Puerto Rico: Plans to open two stores in San Juan in fiscal 1998.
- Leadership Change: Arthur M. Blank was named CEO in 1997, succeeding co-founder Bernard Marcus, who remains Chairman of the Board.
Guidance, Outlook, and Risks
- Growth Strategy: The Company anticipates opening approximately 137 new stores in fiscal 1998. Management maintains a policy of not exceeding a maximum growth rate of new stores of approximately 22% per year.
- Market Penetration: The Company employs a "cannibalization" strategy, opening new stores near existing ones to increase market share and customer convenience, even if it initially impacts comparable store sales.
- Professional Focus: Continued emphasis on attracting professional remodelers and contractors through expanded commercial credit programs, delivery services, and dedicated staff.
- Legal Proceedings: The Company is involved in litigation arising from the normal course of business, which management does not believe will materially affect financial position.
- Market Risk: The Company has not entered into derivative financial instruments and believes exposure to market risk is not material.
Investor Verification Checklist
- Verify specific revenue, net income, and cash flow figures in the 1997 Annual Report to Stockholders, as these are incorporated by reference and not listed in this text.
- Review the Proxy Statement for details on executive compensation and security ownership of beneficial owners.
- Monitor the execution of the Chilean joint venture and the opening of the first Latin American store in July 1998.
- Assess the impact of the 137 planned store openings in fiscal 1998 on capital expenditures and liquidity.
- Confirm the status of the 3-1/4% Convertible Subordinated Notes and any potential conversion activity.