Mernelo, Desiree Ann

Nulud, Angelica
Ong, Zcharlie
Operio, Jerwin
Orendain, Harris
Pestaño, Patrick
Palad, Bendict Joshua
Retail Management | Mr. Real So

The Home Depot

Comprehensive Case Study
Case #3
 Retail Management | Mr. Real So | The Home Depot

Decrease in sales even if they have many branches in and

outside the U.S.

SALES

Problem
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 Retail Management | Mr. Real So | The Home Depot

The Home Depot, Inc. is the world’s largest home depot

improvement retailer based on net sales for the fiscal year
ended January 31, 2010. The Home Depot stores sell a wide
assortment of building materials, home improvement and
lawn and garden products and it also provide a number of
services. The Home Depot stores average approximately
105,000 square feet of enclosed space, with approximately
24,000 additional square feet of outside garden area.

Background (1/4)
Comprehensive Case Study
 Retail Management | Mr. Real So | The Home Depot

The Home Depot stores sere three primary customer

groups: Do-It-Yourself (“D-I-Y”) Customers, Do-It-For-Me
(“D-I-F-M”) Customers and professional customers.

Background (2/4)
Comprehensive Case Study
 Retail Management | Mr. Real So | The Home Depot

Net Sales for fiscal 2009 decreased 7.2% to $66.2 billion from $71.3 billion
for fiscal 2008. The decrease in Net Sales for fiscal 2009 reflects the impact
of negative comparable store sales as well as the net impact of fewer open
stores in fiscal 2009 versus fiscal 2008. During the fiscal the firm saw the
relative strength in our Building Materials, Flooring, Paint, Plumbing and
Garden/Seasonal product categories as comparable store sales in these areas
were above the Company average for fiscal 2009. Comparable store sales
for our Lumber, Hardware, Electrical, Kitchen/Bath and Millwork product
categories were below the Company average for fiscal 2009. it does not also
help that fluctuating exchange rates negatively impacted our total Company
sales by approximately $565 million for fiscal 2009 compared to last year.
In addition, Selling, General and Administrative expenses (“SG&A”)
decreased.

Background (3/4)
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 Retail Management | Mr. Real So | The Home Depot

Our SG&A results for fiscal 2009 reflect the impact of a negative comparable
store sales environment, offset by a lower cost of credit associated with the
private label credit card program and solid expense control. For fiscal 2009,
the penetration of the private label credit card sales was 25.1% compared to
28.1% for fiscal 2008, with all the decreasing factor for fiscal 2009, operating
income increased. . Under the retail inventory method, Merchandise
Inventories are stated at cost, which is determined by applying a cost-to-retail
ratio to the ending retail value of inventories. As our inventory retail value is
adjusted regularly to reflect market conditions, our inventory valued under the
retail method approximates the lower of cost or market. During the period
between physical inventory counts in our stores, we accrue for estimated
losses related to shrink on a store-by-store basis, but Actual shrink results did
not vary materially from estimated amounts for fiscal 2009, 2008 or 2007.

Background (4/4)
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 Retail Management | Mr. Real So | The Home Depot

To lessen the saturation of the market without closing any

of their existing branch, so by the end of the fiscal year
2011 the company will regain the 7.2% decrease in gross
sales.

Gross Sales

Objective
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 Retail Management | Mr. Real So | The Home Depot

• Advancement of information technologies

• Continuous improvement with regards to their logistics
• Well planned strategies
• Widely known company

Objective
To lessen the saturation of the market
without closing any of their existing
branch, so by the end of the fiscal year
2011 the company will regain the

Strength
7.2% decrease in gross sales.

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 Retail Management | Mr. Real So | The Home Depot

• Relying on their third (3rd) party supplier

• Changes in their accounting standards/system
• Involved in a number of legal proceedings
• Few the Rapid Deployment Center (RDC)
• Poor customer service
Objective
To lessen the saturation of the market
without closing any of their existing
branch, so by the end of the fiscal year
2011 the company will regain the

Weaknesses
7.2% decrease in gross sales.

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 Retail Management | Mr. Real So | The Home Depot

• Continuous expansion of international market

• Seasonality of demand

Objective
To lessen the saturation of the market
without closing any of their existing
branch, so by the end of the fiscal year
2011 the company will regain the

Opportunities
7.2% decrease in gross sales.

Comprehensive Case Study

 Retail Management | Mr. Real So | The Home Depot

• Cannibalization of their own store branches

• Variety of competition
• Inflation/deflation of commodity of price

Objective
To lessen the saturation of the market
without closing any of their existing
branch, so by the end of the fiscal year
2011 the company will regain the

Threats
7.2% decrease in gross sales.

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 Retail Management | Mr. Real So | The Home Depot

• To put their the Rapid Deployment Center (RDC) sites

in some of their branches.
• Maximize sales according to the seasonality of demand
through promotions.
• To orient their employees on how to manage their
customers well.
Objective
To lessen the saturation of the

ACA’s (Alternative
market without closing any of
their existing branch, so by the
end of the fiscal year 2011 the

Course of Actions)
company will regain the 7.2%
decrease in gross sales.

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 Retail Management | Mr. Real So | The Home Depot

Locations
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 Retail Management | Mr. Real So | The Home Depot

With all those three ACAs mentioned, we think that the best possible solution
would be to put Rapid Deployment Center (RDC) sites in some of their
branches. Because this we think would help Home Depot to achieve their
objectives. As what is stated above, it does not only lessen one factor but
multiple factors that ads up to the cost of the firm. It also helps the firm to
deliver more quickly to other branches, since they are nearer to them lessening
the ratio of one (1) RDC to more or less hundred of Home Depot branches. It
also ads to the few number of RDCs in U.S, according to the report for the
fiscal 2009, Home Depot had 30 lumber distribution centers and 36
conventional distribution centers internationally and 12 RDCs within the U.S.
They are planning to put up new RDCs for the fiscal 2010 meaning they
might acquire or lease new places to obtain their goal, with this strategy, the
firm can get lower costs in putting up new RDCs since they will use the
existing place of some of their branches. Accordingly, they will not loss any
sales that they can have if they will convert the place solely for RDC, because
they can still operate the retail store while having RDC in the same location.

Solution/ Conclusion
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