The Home Depot Presents 2007 Key Priorities and Financial Outlook

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The Home Depot Presents 2007 Key Priorities and Financial Outlook

  1. 1. The Home Depot Presents 2007 Key Priorities and Financial Outlook ATLANTA, Feb 28, 2007 /PRNewswire-FirstCall via COMTEX News Network/ -- The Home Depot(R), the world's largest home improvement retailer, today reported its financial outlook and key priorities for driving retail growth in 2007 and beyond at its Annual Investor and Analyst Conference. (Logo: http://www.newscom.com/cgi-bin/prnh/20030502/HOMEDEPOTLOGO) Chairman and CEO Frank Blake stated that the Company does not expect residential construction and the housing market to improve until late in the second half of 2007 or early 2008. The Company's outlook for 2007 reflects this broader economic dynamic, as well as the Company's customer priorities and strategic investments. "We are first and foremost a retail business, and our 2007 plans reflect that commitment," said Frank Blake, chairman & CEO. "While the current home improvement market remains challenging, the long-term fundamentals of our company are strong, and we believe we can improve our performance and grow at, or faster than, the market beyond 2007. That's why we are making significant investments in our associates and our stores." The Company's five key priorities and the anticipated investment that will be applied to each are outlined below. Total investment in these priorities in fiscal 2007 is projected to be approximately $2.2 billion, comprised of $1.6 billion in capital spending and $600 million in expense. Associate Engagement The Home Depot's goal is to provide a unique warehouse shopping experience characterized by available, helpful and knowledgeable associates. Customers know that the orange apron means something special, and the Company intends to focus on know-how and service as a competitive edge. During 2007, the Company plans investments in associate engagement to total $360 million, including recruitment of master trade specialists, a simplified staffing model, technology-enabled customer assistance, and redesigned compensation and reward plans. Product Excitement Product innovation, more focused promotions and everyday low pricing will drive The Home Depot's merchandising initiatives in 2007. The Company expects to invest $260 million in 2007 on merchandising resets, product innovation, pricing strategies and sourcing initiatives. Product Availability Keeping the right quantities of merchandise on the store shelves is a key priority for 2007 and beyond. The Home Depot will focus on improving its in- stock position by investing in its logistics capabilities, including demand forecasting and distribution. The Company plans to invest $275 million in these efforts. Shopping Environment The Home Depot consistently hears through surveys that customers want to shop in safe, clean and uncluttered stores. In 2007, the Company plans investments to total $865 million to support the shopping experience, including sustained maintenance and merchandising reset programs. Own the Pro The Home Depot's goal is to be the number one destination for pro customers, primarily repair and remodel professionals. During 2007, the Company expects to spend $415 million on programs such as loyalty programs, a pro bid room to handle large customer orders with volume discounts, direct ship programs, credit programs and other specialty sales initiatives. "Our 2007 sales and earnings per share targets reflect the reality of the home improvement market and our commitment to invest for the long-term health of our business," said Carol Tome, CFO & executive vice president -- Corporate Services.
  2. 2. 2007 Financial Targets * Total sales growth of 0 percent to 2 percent, with HD Supply growing from 13 percent of total sales to approximately 15 percent of total sales by the end of the year * Retail comps in the negative mid-single-digit area * Approximately 115 new store openings; 4.6 percent square footage growth * Diluted earnings per share decline of 4 percent to 9 percent * Capital expenditures to increase 29 percent to $4.5 billion, focused on new stores and retail reinvestment 2007 financial targets reflect 52 weeks and do not include the impact of the 53rd week. The Company will have 53 weeks of operating results in its fiscal 2007 financial results. Including the impact of the 53rd week, consolidated sales are expected to increase by 1 percent to 2 percent, and diluted earnings per share are expected to decline by 3 percent to 8 percent. Retail Outlook Beyond 2007, the Company believes that investments made in its retail business will allow sales in the retail business to return to above market growth rates. Additionally, the Company expects that these investments will drive productivity, which will cause earnings to grow faster than sales. Coupled with its commitment to share repurchases, the Company anticipates diluted earnings per share growth of more than 10 percent annually. The overall retail outlook beyond 2007 is as follows: * Annual sales growth of approximately 5 percent * Annual earnings growth greater than 5 percent * Annual diluted earnings per share growth of 10 percent or more Capital Allocation Outlook The Company outlined its intent to use available cash after investing to deliver a predictable dividend payout targeting approximately 30 percent, to generate value-creating share repurchases and to maintain a high return on invested capital. "Speed, flexibility and entrepreneurial spirit are hallmarks of The Home Depot and will guide our decision making in 2007," said Blake. "We have aligned our leaders and resources around our five key priorities, and we believe this strategy will deliver the most value for our customers, associates and shareholders." The Home Depot(R) is the world's largest home improvement specialty retailer, with more than 2,163 retail stores in all 50 states, the District of Columbia, Puerto Rico, U.S. Virgin Islands, 10 Canadian provinces, Mexico and China. Through its HD Supply(SM) businesses, The Home Depot is also one of the largest diversified wholesale distributors in the United States, with nearly 1,000 locations in the United States and Canada offering products and services for building, improving and maintaining homes, businesses and municipal infrastructures. In fiscal 2006, The Home Depot had sales of $90.8 billion and earnings of $5.8 billion. The Company employs approximately 355,000 associates and has been recognized by FORTUNE magazine as the No. 1 Most Admired Specialty Retailer and the No. 13 Most Admired Corporation in America for 2006. The Home Depot's stock is traded on the New York Stock Exchange (NYSE: HD) and is included in the Dow Jones industrial average and Standard & Poor's 500 index. HDG Certain statements contained herein, including any statements related to Net Sales growth, comparable store sales, state of the housing market, implementation of store initiatives, Net Earnings performance, earnings per share, store openings and closures, capital allocation and expenditures, margins, return on invested capital, declaration of dividends and share repurchases, strategic direction and the demand for our products and services, constitute "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995. These statements are based on currently available information and are based on our current expectations and projections about future events. Risks and uncertainties include but are not limited to: economic conditions in North America; our ability to develop relationships with a sufficient number of qualified suppliers; changes in our cost structure, including fluctuating commodity prices; the availability of sourcing channels consistent with our strategy of differentiation; the effect of changes in our leadership on our operations and strategic direction; the strategic evaluation of HD Supply, including whether or not any transaction will occur and the terms, timing and conditions associated with any such transaction; conditions affecting new store development, such as our ability to find suitable store
  3. 3. locations, obtain required permits and open stores on schedule; conditions affecting customer transactions and average ticket, including, but not limited to, weather conditions; the success of our technology initiatives in improving and streamlining operations and customers' in-store experience; our ability to identify and respond to evolving trends in demographics and consumer preferences; our ability to design stores that appeal to customers; the costs of redesigning stores in light of evolving customer expectations; the success of new store formats and businesses; the relative success of our expansion strategy, including our ability to identify acquisition opportunities, particularly in markets outside the United States, and our ability to complete acquisitions on financially attractive terms and integrate them with our other businesses; our ability to create appropriate distribution channels for key sales platforms; our ability to successfully execute our online strategy; our ability to attract, train and retain highly qualified associates; the impact of new accounting standards; subjective assumptions, estimates and judgments by management related to complex accounting matters; decisions by management related to possible asset impairments; the impact of competition; regulation, government inquiries or investigations and litigation matters; and possible restatement or adjustment of financial statements. Undue reliance should not be placed on such forward- looking statements, as they speak only as of the date hereof and we undertake no obligation to update these statements to reflect subsequent events or circumstances except as may be required by law. Additional information regarding these and other risks and uncertainties is contained in our periodic filings with the SEC, including our Annual Report on Form 10-K for the fiscal year ended January 29, 2006. SOURCE The Home Depot Financial Community, Diane Dayhoff, Sr. Vice President of Investor Relations, +1-770-384-2666, or diane_dayhoff@homedepot.com, or News Media, Paula Drake, PR Manager, +1-770-384-3439, or paula_drake@homedepot.com, both of The Home Depot http://www.homedepot.com Copyright (C) 2007 PR Newswire. All rights reserved News Provided by COMTEX

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