2. Private Residential Investment
Private Residential Investment as a % of GDP
8%
7%
6%
60 yr average: 4.8%
5%
4%
Q108: 3.8%
3%
2%
1970
1974
1978
1982
1986
1990
2002
2006
1950
1954
1958
1962
1966
1994
1998
Investment Declined $270+ Billion in Past 2 Years
2
Source: Bureau of Economic Analysis (BEA)
3. Subprime & Alt-A
Subprime & Alt-A as Percent of Total
Non-Home Equity Loan Mortgage Originations
45%
40%
Alt-A
35%
Subprime
30%
25%
20%
15%
10%
5%
0%
2001 2002 2003 2004 2005 2006 Q1 07 Q2 07 Q3 07 Q4 07 Q1 08
Worst Part of the Mortgage Market is Behind Us
3
Source: Inside Mortgage Finance, The Lindsey Group
4. Mortgage Equity Withdrawals
Active Mortgage Equity Extraction (Quarterly)
$150 $ Billion $144B
$100
$50
$54B
$0
Q104
Q304
Q105
Q305
Q106
Q307
Q102
Q302
Q103
Q303
Q306
Q107
Includes home cash out refinancing and home equity withdrawal
and does not include capital gains on sales
$90B Decline in Quarterly Equity Extraction in Past 2 Years
4
Source: Federal Reserve, Moody’s
5. Vacancies
Vacant Housing Units as a
15%
Share of Total US Housing Stock
14%
13%
12%
11%
10%
Q1 08
1996
1997
1998
1999
2000
2001
2002
2003
2007
2004
1990
1991
1992
1993
1994
1995
2006
2005
Will Take Time to Work Through Excesses
5
Source: Census
6. Long-term Fundamentals
2002 2008F 2012F
Millions
+4.8% +5.4% 119.2
U.S. Households 108.0 113.1
U.S. Owner +5.1% +3.8%
73.4 77.1 80.0
households
80.0%
Percentage of Occupied Housing >35 Years Old
77.5%
75.0%
72.5%
70.0%
67.5%
'82 '86 '90 '94 '98 '02 '06
Strong, Long-term Fundamentals
6
Source: Moody’s, and Harvard Joint Center for Housing Studies
7. Creating Shareholder Value
Focus Increase
Exercise Build
On the Core Return on Maximize
Disciplined Sustained
Return on
Business Existing
Capital Competitive
Capital
Assets
Allocation Advantages
Short Longer
Term Term
7
8. Focus on the Core
Sell HD Supply
Close Landscape Supply
Close Floor Stores
Refocus Home Services [In Progress]
8
9. Exercise Disciplined Capital Allocation
Rationalize new store pipeline
Close under-performing stores
Recapitalization Plan [In Progress]
9
10. Increase Return on Existing Assets:
Focused Investments
$180M Aprons on the Floor Initiative
Reduced Voluntary Hourly Attrition by 14%
Enhanced Training
Added ~3,000 Master Trade Specialists
Significant increase in maintenance spend
Implemented Store Standards
Enhancing supply chain: Operating 3 RDCs
Target: 8 RDCs by year-end
Improving in-stock
Implementing Merchandising Transformation
Employing a Portfolio Approach
Strengthening local execution
Using analytics to better understand customers
Bid room volume increased 200+ percent
10
11. Build Sustained Competitive Advantages
Customer Service
Every Day Value Proposition
Assortment
Real Estate
Brand
Customer Insight
Supply Chain
International Development
“Passionate associates providing solutions, product authority, and
knowledge to simplify home improvement, maintenance and repair”
11
12. 2008 Outlook
2008 will be another difficult year
- Sales guidance down 4%-5%
- Earnings per share guidance down 19%-24%
Will continue to invest in our key priorities
Will continue to allocate capital in the
most efficient manner
12
13. Future Outlook (Normalized Environment)
Sales Match or Exceed Market Growth
~3-5%
Growth Focus on Our Stores
Slowing New Store Growth
Leverage through Supply
Earnings >Sales Chain and Operational
Growth Efficiencies
Double
EPS Exceed Earnings Growth
through Disciplined
Growth Digit
Capital Allocation
13
