Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Non-Tech : Home Depot (HD) -- Ignore unavailable to you. Want to Upgrade?

To: Don Earl who wrote (957)	7/16/2002 11:30:32 PM
From: Captain Jack	Read Replies (1) \| Respond to of 1169

HHMmmmmm-- I visited the Niles OH store today. Well stocked and staffed also. The 40% off sale must be working as the parking lot was loaded. None of the items on my list was expected to be on sale-- so no surprise there. There was a surprise in the fact some outdoor items were on sale along with faucets-------- 60%! Will be heading back tomorrow with the checkbook in tow to fill the truck again. The only unusual thing noticed was there was no one readily available to help load-- no one in sight for about 5 minutes and I had a long, awkward, heavy item-- then a young man arrived with a smile and assisted. Help in the store was readily available. BTW-- passed Lowes a few blocks before HD,, their lot was well represented but not like the one at HD!

To: Don Earl who wrote (957)	7/20/2002 12:34:59 AM
From: Ausdauer	Read Replies (1) \| Respond to of 1169

Don, I read your frightening post. Why is their debt rating so good? siliconinvestor.com Is Fitch reliable? Aus

To: Don Earl who wrote (957)	7/20/2002 11:20:07 AM
From: David Lawrence	Respond to of 1169

Don, you are certainly entitled to interpret that data and reach your own conclusions. Personally, I think you are seeing gremlins where they don't exist. >>Off balance sheet lease agreements amount to close to a billion dollars. GAAP does not require capitalization of operating leases. Non-capitalized lease and other commercial obligations are typically disclosed as a footnote. If they capitalized the lease obligations, they would have a corresponding asset that would have to be regularly and arbitrarily revalued based on a variety of subjective factors. Why encourage that when it is unlikely that a material amount of these leases will be liquidated prior to their scheduled termination. It certainly would not improve transparency, and could even be manipulated, since change resulting from revaluation of the remaining life would have to flow to the income statement. So, what's your issue here? Can you cite a major retailer that capitalizes all of their operating leases on their balance sheet? At a glance, it looked to me like non-capitalized lease obligations were something like $7 Billion, not $1 Billion. Even if for some stupid reason they chose to capitalize them, their debt/equity ratio would only increase to 30%. I don't see anything sinister here. >Same store sales are down, which shouldn't be the case with low interest rates and a strong new construction market for the past year. It shouldn't be the case IF store growth is stagnant and no cannibalization is occurring. You have to look at same store growth within the context of overall sales and store unit growth. Total growth was there to the tune of $8 Billion. By comparison, Lowes grew their share of the total market by something like $3 Billion. "While these openings may initially have a negative impact on comparable store-for-store sales, we believe this "cannibalization" strategy increases customer satisfaction and overall market share by reducing delays in shopping, increasing utilization by existing customers and attracting new customers to more convenient locations. During fiscal 2001, approximately 30% of our stores were cannibalized by new store openings." In summary, many new stores coupled with cannibalization results in significant market share growth while diluting same-store growth. Not a bad trade-off, if you ask me, especially when you grow total sales by a whopping $8 Billion in a single year, without acquisition. Nothing flat or down about that. >>Interest payments are a current expense and any other treatment is cooking the books as far as I'm concerned. Huh? Interest expenses are often, in fact, are REQUIRED to be capitalized in certain circumstances according to GAAP. I don't know how you arrived at your numbers, but your opinion is not supported by fact. >>Legislation in the process of becoming law strikes me as having a huge potential to affect a company like Home Depot. There are NO large cap value plays out there until the endemic abuse of GAAP has been cured. Maybe, maybe not. However, I don't see anything here that constitutes an "abuse" of GAAP. Disclosure: I have no position in HD. Good luck on your puts.

To: Don Earl who wrote (957)	7/20/2002 11:29:40 AM
From: David Lawrence	Read Replies (1) \| Respond to of 1169

Oh yeah, I forgot this: >The recent $2 billion buy back announcement doesn't make much sense other than for hype value. If their budget is so tight it's necessary to cut essentials like inventory and staff, why spend $2 billion on stock with a par value of a penny a share? What on earth does the par value have to do with anything? If you reduce the share count, it accretes the value of the company to the remaining shares. I agree with you that the announcement of the buy back authorization may be more hype than substance, but there is nothing wrong with a company that uses their excess capital to buy back their own shares, especially a company with such an exemplary record of organic growth such as HD. Oh, and the par value is $0.05, not $0.01. :-)