...trends were all used in creating assumptive ratios and growth rates. With five year projected financials, Galeotafiore applied these projections to current company metrics in an effort to publish an accurate forecast. Before finalizing these projections, it is recommended that Value Line produce a detailed qualitative analysis to support the numbers. The purposes of this analysis are to 1) provide detailed forecast analysis for hardware giants Home Depot and Lowe’s. 2) compare these assumptions to the industries previous and potential performance 3) provide a judgment for Value Line readers for potential stock investment actions. Although these two companies have risen to the top of this industry it is recommended that investors hold their current investment position on both companies, as opposed to buy or sell. Problem Formulation As Galeotafiore prepares to release Value Line’s forecasts, there are several important factors that must be taken into consideration. Primarily, are the numbers used in the models for Home Depot, found in Exhibit 7, dependable? Can both companies be expected to achieve similar growth rates or has market saturation been reached? Next, is Galeotafiore properly accounting for macroeconomic trends? In the near future, interest rates are predicted to rise and new housing starts are expected to decline. Both companies perform better when these trends are moving in the opposite direction so current sales forecasts may be too aggressive. Lastly...
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...vendors. What makes your company differ from the others and what would you like consumers to know that set you apart. In today’s market competition is always a factor but it does not necessarily have to be a bad thing; there are advantages to having a competitor. Developing strategies for your competitor is key, “The underlying goal of strategy development is competitive differentiation,” (Kurtz, 2012, p. 230). The companies presented below demonstrate the perfect example of business competition. The home improvement industry has been experiencing rapid growth since the late 70’s. Due to the capital effect, consumers would spend high amounts of cash and credit on improving their most prized and expensive possession, their homes. As a result, the home improvement industry experienced quick development and progress. This is what led to the opening of two mega home improvement stores known as The Home Depot and Lowes Companies, INC. The Home Depot which was founded, “1978 in Atlanta, Georgia and has since become the world's largest home improvement retailer, operating more than 1,500 stores”, (Brumley, 2012). Although not as international as its competitor Home Depot, Lowes is a “$26 billion retailer of a complete line of home improvement products and equipment. The company serves more than seven million do-it-yourself and commercial business customers each week through 875 stores in 45 states,” (Brumley, 2012). The difference between a Lowe's store and a Home Depot has been fairly...
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...Audit of Home Improvement Retailors Home Depot and Lowe’s are both large successful home improvement retailers. This paper discusses the background of both companies and goes into detail about the financial ratios including profitability and liquidity ratios. The paper also discusses business risks, audit risks, and the proper audit procedures that are necessary. The paper focuses on audit procedures of three important asset accounts: Cash, inventories, and accounts receivable. Team Members: Julie November Shuai Guo Wenqian Zhu Yusi Zeng Zongxian Wang Background Yusi Zeng No matter if customers are a homeowner, renter, or Pro customer, as long as they are creators and want improve their houses, they would seek quality tailored experiences, and are on the lookout for new ideas to improve homes. The home improvement industry or hardware stores, in terms of public companies was an industry once ran by smaller companies and is now dominated by some of the largest retail companies in the world. DIY or do it yourself has become the business and in the United States Home Depot and Lowe's are the two largest competitors and are currently changing the landscape of the industry. Both of them are among the the many businesses, including home centers, paint stores, hardware stores, lumber yards and garden centers. The industry growth is very limited, and very slow...
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...Kyle Fortin Case 12: VALUE LINE PUBLISHING, OCTOBER 2002 From a profitability standpoint, Home Depot created value, according to their 12.3% WACC found in exhibit 3. They are consistently creating value in all years (97’-01’) beings their ROC is higher than their WACC. Considering the Industry ROE average was 17.1% in 1997 according to Wikinvest.com, Home Depot was a little behind the game as far as creating value for their investors. Home Depot’s Gross Margin increased steadily each year, indicating higher profits, as well as their operating margin increasing to a high in 99’ and leveling out around 2001 due to the economic factors erupting after 9/11. Their NOPAT margin is higher than their biggest competitor lowe’s so they were consistently producing more returns, in conjunction with greater sales figures. Home Depot is operating on relatively wide margins compared to its competitors; its substantial growth rate is quite high compared to Lowe’s which is easily explained by their innovative business strategy. The Home Depot at the end of 2000 stands on good financial footing. Their net revenues have grown 208% between FY 1995 and FY 2000. Home Depot continues its market saturation strategy which consistently grows their net revenues. Home Depot’s growth in net earnings over the same period has been 284%. The money that the firm is retaining as profits is larger than the total amount being brought into the company, indicative of a company that is realizing economies of...
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...based on the information given by the Five Forces model, how to influence or to exploit industry characteristics. Bargaining Power of Suppliers The term “suppliers” comprises all sources for inputs necessary to provide products. And “supplier power” refers to their relative bargaining power, which, when high, allows significant influence on the industry and expropriation of profits. Home Depot’s expense controls and cost initiatives – its core competencies – derive in part from efficient supply chain management. The company also plans to centralize purchasing operations and to decrease merchandise inventories, both of which will further reduce the power of its suppliers. That the primary source of both planned and actual efficiencies in this area, however, derive largely from cost initiatives and financial policy, points to the firm’s emphasis on cost leadership. But Lowe’s has already established centralized logistics systems based not so much on economies of scale or rigid accounting an on logistical flexibility. To determine the most efficient way to purchase inventory, Lowe’s looks at every product of every vendor individually. This method should decrease cost per product via four methods of distribution: flowing goods through regional centers, shipping by commodity focused consolidation, reloading distribution centers, and direct...
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...Introduction Whether you own your home or rent, chances are that at some point you will find yourself looking for something that will lead you to one of these two retail giants. The home improvement industry has evolved from small regional and locally owned hardware stores to these superstores. The top two in the industry are Home Depot and Lowe’s. Each has their eye on moving into international markets, each has superstores in all 50 states and each has evolved along different paths to reach their current positions. According to Fortune 500 Home Depot, Inc. is ranked at #25 and the second largest retailer in the US after Wal-Mart. Home Depot Inc. has its corporate headquarters in Atlanta Georgia. What began in 1979 as two 60,000-foot stores that resembled warehouses has grown to about 2,200 stores across North America, Puerto Rico, and China. Home Depot Inc. is publicly traded on the New York Stock Exchange as NYSE:HD. At the end of 2008 Home Depot Inc. employed 331,000 people. Home Depot sales recorded and posted in 2009 are $71,288.0 mil. Home Depot Inc. is the number one home improvement retailer with Lowe’s coming in second place with sales posted in 2009 at $48, 230.0 mil.. Founded in 1946 Lowe’s went from a small hardware store to the ninth largest retailer in the US. Lowe’s went public in 1961 and began trading on the New York Stock Exchange as NYSE:LOW in 1979. According to Fortune 500 Lowe’s Companies, Inc. is ranked at #47. Lowe’s Companies, Inc. are headquartered...
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...Accounting/Financial Analysis Of Lowe's Inc. Lowe’s is the world’s second largest home improvement retailer and operated 952 stores in forty five states at their fiscal year ending January 30, 2004. The company is currently in the midst of the most aggressive expansion in its history with 130 new stores opened in 2003 and another 140 slated for this year. Lowe’s saw 2003 sales reach approximately $30.8 billion, due largely to their focus on the retail customers and home-improvement projects. Fifty eight years ago Lowe’s began as North Wilkesboro Hardware Company, a neighborhood hardware store fittingly named after the small town it was located in. Owned by partners H. Carl Buchan and James Lowe, this concept was more than a living, it was a vision of creating a chain of hardware stores. The concept was easy and straight forward. Lowe’s concentrated on selling only hardware, appliances and hard-to-find building materials while eliminating wholesalers and dealing directly with manufacturers to establish a reputation of offering the lowest prices. The company went public in 1961 and began trading on the New York Stock Exchange in 1979 (NYSE:LOW). In 1982, Lowe’s had its first billion-dollar sales year, earning a record profit of $25 million, establishing them as an industry force. Lowe’s has posted extremely strong numbers in the past few years and the company has grown rapidly, swelling it’s store base from 500 to over 950. Sales have increased an average of 20% per year...
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...Lowe’s By You April 21st, 2014 University of Phoenix ECO-365 Introduction In the United States there are two major players in the home improvement industry. The biggest in The Home Depot. The other, while smaller having 502 less stores, is still a giant of the industry (Cramer, 2013). Through the recession Lowe’s stood while well The Home Depot fumbled. Lowe’s faces competition from opponents other than just The Home Depot as it expands beyond America. As Lowe’s seeks to enter the Canadian and Australian markets it will encounter more diversity than it has experiences so far. The complexities of doing business abroad and opening stores afar will become even more apparent as their international tactics change. Despite the challenges Lowe’s should expand further to become an even bigger player both nationally and globally. Global Competition’s Impact on Lowes In 2009, Lowes had 1,710 stores found throughout Canada and United States, 16 of these found outside the United States, with three stores in Mexico that opened in 2010, allowing for their exposure to bring them to a new level of sales internationally. (“Lowes Companies”, 2012) After much research it is found five competitors could impact Lowes, the #2 home improvement dealer in the world (Racine, 2012), but on different levels. The first competition is the main competition of Lowes, Home Depot, #1 in the world since 2005, (“Lowes Companies”, 2012) is expanding its sales by bringing in more Hispanics...
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...CONFORMING LETTER Home Depot Inc. Dear Home Depot Inc. Management, As a partner of KNAM LLC, it is my pleasure to present you with the results of our initial review. Included with these results is our assessment of Home Depot Inc.’s performance is our proposition of areas we’d like to review further to determine improvements, efficiency, functionality, and health of your organization. Background Your organization’s core service is in the DIY home improvement market. You sell goods that consumers need for home improvement as well as advice on said projects, contracting services, lawn and garden, and appliances and tools. Your organization was founded in 1978 with the purpose of providing DIY one-stop shopping. Since inception, Home Depot Inc. has grown to become a multinational company with foundations strongly in the United States with roots in the Canadian, Mexican, and Chinese markets. Shortly after inception, Home Depot Inc. enlisted on NASDAQ and the NYSE. Your company has seen considerable growth in its main business as well as developments in subsidiary businesses and services. Home Depot Inc. has become one of the fastest growing retailers in America and as such, you would like to review the operations of your organization to determine areas of further growth and areas that may need to be leaner. Objectives of the Operational Review As a result of our initial review and interviews with your executive management...
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...7/26/2014 Home Depot vs. Lowes As a recent home buyer, I know first-hand the importance and value of having a local home improvement store. Within the first 6 months as a property owner, I have spent numerous hours, visits and money buying the essentials to complete my home. I never thought of myself as a loyal customer to Home Depot (HD) vs. Lowes (LOW) but after researching the two competitors, I have found myself take pride and loyalty with Home Depot. In this report, I will provide you with a full analysis comparing and contrasting Home Depot and Lowes. My conclusions will yield that clearly there is a difference between both company’s values and strategies, but importantly, Home Depot is a stronger investment for the short-term and long-term. My recommendations will support holding stock with Home Depot or invest soon. Quantity: The Value of Market Share In America, “size of the US home improvement retail industry is approximately $129.2B by revenues, with Home Depot leading the market with a 58.9% share; together Home Depot and Lowe’s account for 97% of the market share by revenues,” stated by William Bias. The fact remains that brand recognition drives price. There is clearly brand recognition and more importantly, brand loyalty with Home Depot compared to Lowes. And where does the brand loyal derive from…Proximity. The humanity that dwells within us tends to migrate to common and frequent people and venues. We are creatures of habits and Home Depot has strategically...
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...The Home Depot Financial Management Project Company Financial Analysis For: Professor Ana Machuca Submitted by Team A: Betcher, Rhonda Cammack, Cheryl Desai, Shekhar Barnes, John Babatunde, Lasisi Adamson, Christopher Submission Date: February 26, 2012 TABLE OF CONTENTS EXECUTIVE SUMMARY: ...................................................................................... 3. COMPANY INTRODUCTION: ............................................................................... 5. FINANCIAL ANALYSIS: ......................................................................................... 8. WEIGHTED AVERAGE COST OF CAPTIAL (WACC): ........................................ 11. FUTURE CASH FLOWS: ...................................................................................... 16. HISTORICAL STOCK PRICE: .............................................................................. 22. SECURITY ANALYST’S REPORTS: .................................................................... 25. DIVIDEND and CAPITAL STRUCTURE: .............................................................. 26. CORPORATE GOVERNANCE: ............................................................................ 28. MERGER and INTERNATIONAL STRATEGY: .................................................... 29. REFERENCES: .....................................................................................................
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...Home Depot Failed in China Name: Chuanshi Liu ID: h701789460 Course: IB 207 Background Home Depot is the largest home improvement retailer in the world. It has about 2200 stores across the United States, Canada, and Mexican. It targets three main customer groups, which are D-I-Y customers, D-I-F-M customers and professional customers. Home depot is famous for its D-I-Y products and services. In 2006, after housing market turn down in the United States, Home Depot entered into the China home improvement market through a full M&A activity. It has twelve stores in Beijing, Shanghai, and other large cities in China. Home Depot served the similar services and products to Chinese customers, which also include the D-I-Y products. However, Home Depot did not succeed this time in China. From 2006 to 2012, the top managers in China area have been changed three times. Home Depot wanted to find out the solutions to this bad situation in local market. However, the situation was worsened when the building material market turned down in 2012, 12 main stores have been closed in local market. Top managers believe that the main reason for their failure is the cultural difference. The D-I-Y services and products do not fit the local culture. Changes and effects Business Environment There are changes in business environment for Home Depot. In United States, the biggest competitor for the Home Depot is Lowe's. They have very similar products and services. Both...
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...Background The Home Depot was founded in 1978 by Bernie Marcus and Arthur Blank in Atlanta, Georgia after they were fired from their executive post at the Handy Dan Home Improvement Centers in California. The founders began the home improvement company around their vision of “one-stop shopping for the do it yourselfer” opening their first two stores in 1979 in Atlanta, Georgia in a cavernous warehouses that dwarfed the competition stocking 25,000 stock keeping units (SKUs), much more than the average hardware store at that time, and staffing the stores with knowledgeable experts in home improvement and customer service. From the beginning, Home Depot was able to offer not only the best customer service in the industry by hiring employees knowledgeable and experienced in the business and by motivating the sales associates to develop relationships with the customers instead of seeing sales as a transaction, but by popularizing the concept of “do it yourself” (DIY) offering to homeowners and other individuals trainings workshops and clinics so customers could learn how to do it themselves. The Home Depot revolutionized the home improvement industry by bringing the know-how and the tools to the consumer and by saving them money. In 1980, Home Depot opened two more stores achieving annual sales of $22 million from all its four stores. By 1990, the company had opened 145 stores, employing 21,500 people, generating annual sales of $3.8 billion, and becoming the number one U.S. retailer...
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...Best Buy’s competitive strategy When I ask men to name their favorite store, the answer is almost always Home Depot, Lowes, or Best Buy. Companies that are so beloved usually have strong competitive advantages. The term “usually” is emphasized because it is not always the case—Borders was a beloved store by book readers and is now out of business. Home Depot and Lowes have strong competitive advantages, while Best Buy’s are eroding in a remarkably similar way to Borders. Home Depot and Lowes are often the largest home improvement stores in their city and carry the largest selection, which gives them the advantage of scale. Similarly, Best Buy has the advantage of being the largest brick and mortar source for electronics in most cities. Borders also had the advantage of being as big as or bigger than all of its competitor’s stores. The other advantage Home Depot, Lowes, and Best Buy share is locality. If you have a Home Depot five minutes away, you are unlikely to drive a half hour away to another store. And if Best Buy is the closest place to pick up a new television, computer, or Ipad, they will likely get your business. However, Borders was also the nearest bookstore for many people before it went bankrupt. In other words, scale and locality can be very weak competitive advantages. Online Sales The main difference between being a large home improvement retailer and a large electronics retailer is online sales. Most people are very unlikely to buy their...
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...Home Depot and PepsiCo Founded in 1978 by Bernard Marcus and Arthur Blank, The Home Depot is an American home improvement and construction product retailer. It operates stores in all fifty states, the District of Columbia, Puerto Rico, the Virgin Islands, Guam, Canada and Mexico. It is the largest home improvement retailer in the United States, next to Lowes. Founded in 1965, PepsiCo is an American food and beverage corporation formed between the merger of Pepsi-Cola and Frito Lay. PepsiCo has gone on to expand to include Tropicana, Quaker Oats, Gatorade and many more. Each generating sales of one billion dollars each and distributed in more than 200 countries (PepsiCo). As of 2011, PepsiCo employs approximately 297,000 people worldwide (PepsiCo). This paper will assess the above mentioned companies areas of leadership, management, organizational learning (training), and culture and compare and contrast to the structure The United States Army and Macy’s Department Store. Home Depot Leadership: In 2000 Marcus and Blank were replaced with Robert Nardelli, who pushed hard to make the company more efficient, bringing with him many new metrics to centralize operations, and to meet quarterly goals he even cut jobs of associates. Nardelli, a former General Electric top executive, arrived at Home Depot with a leadership style that was already outdated, an autocratic top –down style of command and control. Under Nardelli, Home Depot went from a retail business to a new contracting...
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