Post on 25-Feb-2016
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Situational AnalysisSituational AnalysisTeam A1 ProjectTeam A1 Project
March 11, 2006
Kerrie CoxAdrienne P. Love
Jeff KodaGarland Collier
Jim Clifton
Company OverviewCompany Overview
• Founded in 1979 in Atlanta, GA by Bernie Marcus and Authur Blank
• Robert L. Nardelli- president/chairman/CEO
• Employees- 100,000 plus• Over 2000 stores throughout US,
Canada, Mexico, Puerto Rico and St. Thomas– Approx. store size-108,000 sq ft,– 40,000+ SKUs
• 2005 Revenue- $81.5 billion
“World’s largest home improvement retailer”
Company CultureCompany Culture
• Very customer focused• 8 core values
– Taking Care of our People– Respect For all People– Doing the Right Thing– Strong Relationships– Giving Back– Excellent Customer Service– Shareholder Returns– Entrepreneurial Spirit
“Excellent Customer Service”
Company Company CultureCulture
• All businesses under corporate umbrella follow the same values– EXPO– Apex – Home Depot Landscape Supply
• Welcome Aboard broadcast from chairman• Extensive Community Relations Program
– Building and refurbishing playgrounds – Ensuring safe community spaces– Building affordable housing– Preparing communities for emergencies
• Hire Nice– 100,000+ employees hired annually
“Communicate Corporate Value Throughout”
Revenue PlanRevenue Plan
Revenue Plan
$53.60 $58.20$64.80
$73.10$81.00
$89.10$98.01
$107.81$118.59
9% 11% 13% 11% 10% 10% 10% 10% 10% 10%
$130.45
0
20
40
60
80
100
120
140
2001 2002 2004 2004 2005 2006 2007 2008 2009 2010
Bill
ions
• 9 to 12 percent sales growth guidance over the next 5 years• Open 175 new stores
www.yahoofinance.com www.homedepot.com
Operating MarginOperating Margin
Operating Margin Plan
$4.9 $5.8 $6.8 $7.9 $9.2$10.6
$12.3$14.3
$16.6$19.2
10% 10% 11% 12% 13% 13% 14% 15%9% 11%0
5
10
15
20
25
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Bill
ions
• Focus on increased revenues and cost control
www.yahoofinance.com www.homedepot.com
EarningsEarnings
Earnings Plan
$3.70$3.00
$4.30
$5.00
$5.80
$6.84
$8.08$9.53
$11.24 $13.27
0.00
2.00
4.00
6.00
8.00
10.00
12.00
14.00
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Bill
ions
• 10-14 percent earnings guidance
www.yahoofinance.com www.homedepot.com
ROA-ROEROA-ROE
ROA/ROE Forecast
11% 12% 13% 13% 13% 14% 14% 15% 15% 16%
17%19% 19% 21% 21%
23% 25% 26% 27%29%
0%
5%
10%
15%
20%
25%
30%
35%
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
ROAROE
• Efficient use of assets and equity for profitable returns
www.yahoofinance.com www.homedepot.com
ROICROIC
Return On Invested Capital
16% 16%18% 19% 19% 20% 20% 21% 21%
0%
5%
10%
15%
20%
25%
2002 2003 2004 2005 2006 2007 2008 2009 2010
Perc
ent R
etur
n
• Wise use of capital to grow the business
www.yahoofinance.com www.homedepot.com
Average SaleAverage Sale
Average Transaction
$49.43$51.29
$54.89$57.80
$59.53$61.32
$63.16$65.05
$67.01
40
45
50
55
60
65
70
2002 2003 2004 2005 2006 2007 2008 2009 2010
Dol
lars
• Focus on higher dollar products and transactions
www.yahoofinance.com www.homedepot.com
Main CompetitorsMain Competitors
www.hoovers.com
0.00
50,000.00
100,000.00
150,000.00
200,000.00
250,000.00
300,000.00
350,000.00
Home Depot Lowe's Menard1 True Value1
Annual Sales ($ mil.)EmployeesMarket Cap ($ mil.)
CustomersCustomers
•Contractors
•Do it yourselfers
•Handymen and Women
•Designers
• Retail Customers
www.homedepot.com
Company StrengthsCompany Strengths
• Size, diversity and continuous growth• Business Model
– Broad assortment of high-quality merchandise and services at competitive prices using highly knowledgeable, service-oriented personnel and strong marketing and co-op promotions
– Knowledgeable associates • Distinctive product range
– 40,000 SKUs including both national brand name and proprietary items
– Strategic alliances with certain suppliers to market products• New Capital Expenditures
– Yearly revenue growth – 9 Billion return to shareholders
“Continuous Growth”
www.mindbranch.com/listing/product/P313-8421.html - 9k
Company WeaknessesCompany Weaknesses
• Weak new store productivity• Rising expenses
– 5 consecutive years – Expense ratio has increased at a
faster pace than competition• Lowe's expenses per foot 19% lower
• Store layout and appearance– Criticized for inconsistencies in
layout/appearance– Resulted in negative publicity and
customer dissatisfaction
“Rising Expenses”
www.mindbranch.com/listing/product/P313-8421.html - 9k
Company OpportunitiesCompany Opportunities
• International Expansion• Acquisition• Additional Products and
Services• Vendor Strategic Alliances
“Global Expansion”
www.mindbranch.com/listing/product/P313-8421.html - 9k
Company ThreatsCompany Threats
• Competitive Environment• Polictical and Regulatory
Issues• Entry to New Markets• Cost of Capital and Expenses
“Proceed with Caution”
www.mindbranch.com/listing/product/P313-8421.html - 9k
Opportunity Threat MatrixOpportunity Threat Matrix
Probability of Occurrence (2011)
Level of Impact High Low
High 3 2
Low 1 4
1 Positioning Store Locations Against Competition
2 Regulatory/Political Issues
3 Real Estate Development Industry Bubble
4 Public Perception
References References
• www.homedepot.com
• www.mindbranch.com/listing/product/P313-8421.html - 9k
• www.yahoofinance.com
• www.mindbranch.com/listing/product/P313-8421.html - 9k
• Joint Center for Housing Studies by Harvard School 2005
Chart AppendixChart Appendix