The Home Depot

The Home Depot

Comprehensive Case StudyCase #3

Retail Management | Mr. Real So

Mernelo, Desiree Ann Nulud, AngelicaOng, ZcharlieOperio, JerwinOrendain, HarrisPestaño, PatrickPalad, Bendict Joshua

Problem

Decrease in sales even if they have many branches in and outside the U.S.

Retail Management | Mr. Real So | The Home Depot

Comprehensive Case Study

SALES

Background (1/4)

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 (2/4)

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 (3/4)

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 (4/4)

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.



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 7.2% decrease in gross sales.



Gross Sales

Strength

• Advancement of information technologies

• Continuous improvement with regards to their logistics

• Well planned strategies

• Widely known company



ObjectiveTo 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.

Weaknesses

• 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




Opportunities

• Continuous expansion of international market

• Seasonality of demand




Threats

• Cannibalization of their own store branches

• Variety of competition

• Inflation/deflation of commodity of price




ACA’s (Alternative Course of Actions)

• 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.




Locations



Solution/ Conclusion

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.



Documents

The Home Depot