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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Don Earl who wrote (16066)	1/4/2003 12:53:29 AM
From: James Clarke	Read Replies (1) \| Respond to of 78594

great post. Not saying I agree with you, I don't know HD well enough and I'm a small cap manager so have no reason to, but great post

To: Don Earl who wrote (16066)	1/4/2003 6:57:36 AM
From: Dave	Respond to of 78594

Don, I've been thinking about buying some Home Depot and would you be willing to mention a few of their "really dumb moves"?

To: Don Earl who wrote (16066)	1/4/2003 10:32:41 AM
From: Mark Marcellus	Read Replies (1) \| Respond to of 78594

Don, For off balance sheet debt, I get 4.4 Billion at the end of FY '01, which is actually down slightly from FY '00. With cash of 2.5B, operating cash flow of 6B, PP&E of 15.3B, and LT debt of 1.5B, this really isn't unreasonable, IMO, even if you look at this as real debt (which you should). I should mention that I don't have the same issues with the operating leases, conceptually at least, that you do. It does seem to me a legitimate way of structuring these things. The fact that analysts are too lazy or stupid to include them in debt totals is a separate matter that doesn't invalidate the concept itself, in my mind. Re the management, that's really the issue. I've looked at it and I think that the problems they are experiencing are inherited from the old management, which clung to a 1980's style retail model for far too long. I think the moves that Nardelli has made are intelligent responses to the current environment that will pay off in the long run. Others (including many current and former HD employees) would beg to differ. Time will tell. For that matter, I will certainly be revisiting this when the FY '02 10k comes out. There are a couple of what I consider to be common misconceptions with this company. First, SSS is not the big issue here. Rightly or wrongly, the company is aggressively cannibalizing sales in their existing store base. (For that matter, the bar on comps is set pretty high for this quarter, and will continue to be into next year.) The big issue is the company's ability in the long term to continue to increase overall sales and cash flow, how they do it is relatively unimportant. Second, this is not primarily a Lowe's vs. HD story. The hard lines sector is very fragmented, and between them Lowe's and HD have less than 20% of their market. Certainly they will compete head to head in many cases, but there is plenty of room for both of them to grow.

To: Don Earl who wrote (16066)	1/5/2003 6:40:49 AM
From: Richard Query	Respond to of 78594

Don, I am confused on your post, I read that HD was ranked #1 in quality of earnings.

To: Don Earl who wrote (16066)	1/5/2003 11:16:05 AM
From: Bob Rudd	Read Replies (1) \| Respond to of 78594

Don: <<Accounts payable have increased by $2 billion in the 9 months ended November 3, and a 10% drop in same store sales is NOT what you want to see at peak inventory levels, especially when the inventory still has to be paid for>>Actually you DO want to see payables rising with inventory because that indicates that vendors are financing the inventory. In tough times, vendors sometimes offer extended terms to retailers to get them to buy more. This is a benefit to the retailer that improves turnover and return on invested capital. The vendor, OTOH, may be considered to be stuffing the channel which is why an outsize AR rise is such a red flag.

To: Don Earl who wrote (16066)	2/9/2003 12:50:13 PM
From: - with a K	Respond to of 78594

FYI on HD and women shoppers vs. LOW: Do Women Prefer Lowe's or Home Depot? 08:53 a.m. 02/09/2003 By Karen Jacobs ATLANTA (Reuters) - Home improvement industry observers have long believed Lowe's Cos.(LOW)appeals more to women, but a new study finds the retailer attracts no more female shoppers than its larger rival, Home Depot Inc.(HD) A survey of 8,200 U.S. households by Forrester Research of Cambridge, Mass., found that 45 percent of customers at both home center stores were female. The study, conducted in the second half of last year, was not commissioned by Lowe's or Home Depot. "What really stuck out at me was how similar these consumers are," said Forrester's Christopher Kelley, who analyzed the survey. "Whether you're a Lowe's shopper or a Home Depot shopper, it's more about whether you're a home improvement person than anything else." Women have been getting more attention from home-goods retailers. A national study by Lowe's last year found 94 percent of female home owners complete a home project on their own at least once every five years. Home Depot has noticed steady growth in the number of women attending its how-to clinics to learn how to install ceramic tile or ceiling fans. Home improvement industry analysts have said in the past that Lowe's had an edge with women, with securities firms such as Natexis Bleichroeder saying the retailer's wide aisles and bright lighting are more appealing to females. Home Depot has conceded it may have undermarketed to women in the past, but said it will not focus marketing efforts on any particular customer. "We will not drop a gender to add a gender," Chief Executive Robert Nardelli told a recent investor conference. Forrester's study found Lowe's and Home Depot shoppers had many things in common. For example, the average age of the Home Depot shopper was 50, compared with 49 for Lowe's. Thirty-eight percent of Home Depot shoppers have a college degree, compared with 35 percent at Lowe's. There were some differences. Home Depot shoppers have a higher average income, at $60,800, compared with $54,000 for Lowe's customers. "I think that is more a function of geography than anything else," Kelley said, noting Home Depot, with 1,500 stores in the United States, Canada and Mexico, is more dominant in the richest U.S. markets than Lowe's, which has more than 850 stores in 44 states. But as Lowe's continues to expand to larger markets such as the U.S. Northeast, Kelley said, "the average income of the Lowe's shoppers is bound to increase." Kelley suggested both retailers could benefit from technological improvements such as self-service checkouts, which Home Depot has installed at its busiest stores. In morning New York Stock Exchange trading on Friday, Home Depot shares eased 13 cents to $21.50, while Lowe's stock was up one cent to $34.65.