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Home Depot
Last year was an annus horribilus for Home Depot. The nation’s largest home-improvement retailer was pummeled by a souring housing market, customer-service woes, a crisis of confidence in its industrial expansion strategy, and a spiraling scandal over former Chief Executive Robert Nardelli’s pay. The crisis culminated when Nardelli resigned early this year and, in February, the company reported its first decline in annual net income in its 29-year history. Despite a stagnant stock price and lower profits, however, Home Depot’s sales grew 11.9% in 2006, and average return on investment was 31.2%, better than archrival Lowe’s. Although Home Depot forecasts flat sales and another profit decline in 2007, new CEO Frank Blake has pledged to return the company to its retailing roots.
| Overall Grade | A- |
|
| Market Data | HD | |
| Market Value (2/28/2007) |
$80.9 Billion |
|
| Profitability* | 31.2% | A- |
| Sales Growth Rate** | 11.9% | B- |
| 12-Month Sales | $90.8 Billion |
|
| 12-Month Net Income | $5.8 Billion |
|
| Total Return | Past 12 Months-4.4% | Past 36 Months13.1% |
| Economic Sector | Consumer Discretionary | |
| Industry | Home Improvement Retail | |
The overall sector letter grade reflects how the weighted average of the return on income, or return on equity, and sales growth grades compare with others in the same sector. For the overall grade as well as the ROE/ROI and sales growth grades, an "A" places a company in the top 7% of its sector and an "A-" in the top 14% of the sector. The actual ranking was done using the underlying numerical measures. Grades are for information only.
* For nonfinancial companies, three-year average pretax operating profit before interest and special items as a percentage of average invested capital. For financial companies, pretax profits as a percentage of average shareholder's equity.
*Three-year average annual sales growth based on the most recently reported 36 months, calculated using the least-squares method.
