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 (969)	7/21/2002 2:09:49 PM
From: Ausdauer	Read Replies (1) \| Respond to of 1169

Don, thanks for your reply and for your conviction. Your post is sobering. In creating large chain stores like HD and in trying to fund expansion, there must be some role for obtaining lease agreements rather than purchasing property outright. The cost of breaking a lease agreement may be substantial, but the cost of owning a property and a huge warehouse-like structure is also not inconsequential. The question I have is whether the off balance sheet debt related to the leases is out of proportion to other like companies and whether this type of indebtedness is unknown to the investment community at large. Do you think it is likely that they will need to close stores in the near term? We have a HD near our home that is filled with vehicles nearly every time I visit. The amount of home rehabilitation, restoration and renewal is high right now. I, too, find myself focusing on home maintenance. After all, with the market swooning many have become serious about home upkeep. Our streets are like an obstacle course with all the dumpsters out and about. And the rate of new home construction (with unfinished basements included) is astonishing. My neighbor works as a regional manager for Centex. They have been extremely busy since the interest rate cuts started taking effect. The installed base of new homes and older house stock continues to increase at a rapid rate. I listened to one of the NPR broadcasts from the National Press Club a few months ago and they interviewed the CEO of Fannie Mae. He explained that the success of Fannie Mae was linked to the strength of the housing market and the fact that it is truly a growth market. Unless our overall population starts to decline one has to imagine that housing and home improvement will also continue to climb. One psychological effect that the market has had is the emphasis of the importance of real estate. When I walk into my local hardware store and pick up a hammer or a 40 lb. bag of concrete or a gallon of paint and some brushes the cost seems so miniscule compared to the thousands of dollars that have been drained from my retirement accounts each of the past several weeks. I only see the home improvement trend increasing in strength. Having reviewed a number of companies, do you find that HD is unusual or exceptional in the dollar amount of the lease arrangements? Do rating agencies factor in the considerations you mentioned in their credit ratings? How does HD compare to other large chain retailers? Finally, yes, I am worried about credit levels. I read last week that the outstanding balance on one of Sears' credit cards was almost $7500 vs. only $1,500 a year ago. That is alarming. As for the dollar, I guess I am surprised by how strongly it performed the last 2 1/2 years. It will be difficult to see its value continue to decline, but it does seem inevitable. The size and rapidity of interest rate increases will be important. Thanks for taking time to post your thoughts. Aus Aus