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HOME DEPOT:

FINANCIAL PLANNING GURUS

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Home Depot was founded in 1978 and is the largest home improvement retailer in the

United Stated with locations in all fifty states and its territories, Canada, and Mexico (Wikipedia,

2019). The intention of founders, Bernard Marcus, Arthur Blank, Ron Brill, and Pat Farrah from

the company’s inception, was to “build home improvement superstores, larger than any of their

competitors facilities.” and by 1981, the Home Depot reached this goal when it went public,

raising $4.093 million (Wikipedia, 2019).

Despite the company’s initial success, it hasn’t been without a few setbacks over the

forty-one years since its founding. In 1984, Bowater Home Center from Bowater Inc. for $40

million which caused the company to have financial difficulties and cease its expansion until

1986 (Wikipedia, 2019). While net sales were $432.8 million in 1984 vs. $256.2 million in

1983, the decision to acquire Bowater limited the amount of cash flow the company had and

therefore, inhibited its ability to expand further until recuperating from the cost of expansion in
1986. Executives had the foresight to understand that investing in long-term assets may cause a

setback in the short-term and limit cash flow, but would eventually lead to growth for years to

come. While this acquisition posed a possible financial risk, it was also set to pose significant

financial gains. The risk was worth it and after two years flat sales, the company began to
steadily climb again.

Home Depot continued to acquire companies as years went on, such as Maintenance
Warehouse in 1997 for $245 million, Apex Supply in 1999, and Your Other Warehouse in 2001

(Wikipedia, 2019). With the acquisition of Del Norte in 2002, the company became

multinational by entering the Mexican market (Wikipedia, 2019).

Despite maintaining a relatively steady climb financially, the Home Depot made a less
lucrative business decision with its acquisition of Del Norte by establishing Home Depot
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Landscape Supply which only lasted five years before it was scrapped due to poor sales

(Wikipedia, 2019). However, its furniture and lighting brand launched in 2005 and the Home

Depot Decorators Collection, launched in 2006 have been great successes and have only

increased the company’s net income over the years (Wikipedia, 2019).

With a steady financial track record, Home Depot acquired Hughes Supply in 2006 for

$3.2 billion and renamed it HD Supply in 2007 (Wikipedia, 2019). With the new rebranding, the

company sold HD Supply to three private equity firms for a handsome sum of $10.3 billion

(Flaherty, 2007).

Despite great financial gains due to savvy business acquisitions and sales, Home Depot

did not go unscathed during the 2008-2008 financial crisis. Due to a decline in sales, several

thousand employees were laid off and 54 stores closed nationwide (Wikipedia, 2019). The

company’s quick action to decrease short-term and long-term assets helped them stay afloat
during the worst financial crisis since the Great Depression. While laying off thousands of

employees and closing dozens of stores is not a decision any executive team wants to make, it is

a decision that helped maintain Home Depot as one of the United State’s top retailers.

It is evident that the executives behind Home Depot’s financial planning are both savvy

and ambitious. Due to the great handling of their financial planning, including, acquisitions,

long-term assets and maintenance of cash flow, the company has been able to weather very
difficult times over its 41 year tenure. Home Depot is a great example of a multinational firm

with a great understanding of financial planning.

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References

Flaherty, M., Jacobs, K. (2007, June 19). Home Depot to buy back stock, sell supply unit.

Reuters Business News. Retrieved from

https://www.reuters.com/article/us-homedepot-supply/home-depot-to-buy-back-stock-

sell-supply-unit-idUSN1946213820070620

Home Depot Annual Report. (1983). Retrieved from

https://ir.homedepot.com/~/media/Files/H/HomeDepot-IR/reports-and-

presentations/annual-reports/annual-report-1983.pdf

Home Depot Annual Report. (1986). Retrieved from

https://ir.homedepot.com/~/media/Files/H/HomeDepot-IR/reports-and-
presentations/annual-reports/annual-report-1984.pdf

Home Depot Market Summary. (14 July 2019). Retrieved from

https://www.google.com/search?rlz=1C5CHFA_enUS827US827&tbm=fin&q=NYSE:+

HD&stick=H4sIAAAAAAAAAONgecRoyi3w8sc9YSmdSWtOXmNU4-

IKzsgvd80rySypFJLgYoOy-

KR4uLj0c_UNzKuyq8ryeBaxcvhFBrtaKXi4AAC8Gw6eRQAAAA&biw=1422&bih=6
96#scso=_qrsrXZLfK77C0PEPusuiwAg2:0

Home Depot Website. (2019). The Home is Where Our Story Begins. Retrieved from
https://corporate.homedepot.com/about/history
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Wikipedia Contributors. (2019, July 2014). The Home Depot. In Wikipedia, The Free

Encyclopedia. Retrieved 16:29, July 14, 2019, from

https://en.wikipedia.org/w/index.php?title=The_Home_Depot&oldid=906277354