1. US Retailers Present by Karen Lin & Haoying Guo

2. Industry Analysis

3. Retail Sector Establishments engaged in retailing merchandiseEstablishments engaged in retailing merchandise Generally without transformationGenerally without transformation Final step in the distribution of merchandiseFinal step in the distribution of merchandise

4. Retail Sector Highly Competitive IndustryHighly Competitive Industry Common Factors influence the industry:Common Factors influence the industry: –Cost of goods –Consumer debt level –Economic condition –Customer preference –Inflation –Employment –Weather Pattern

5. Retailers In the U.S. Economy Retailer trade takes up:Retailer trade takes up: –11.7% of national employment –12.9% of all establishments In 2003, the average retail trade employment is 14,911,500In 2003, the average retail trade employment is 14,911,500 In 2003,nonsupervisory workers' average hourly earnings were $11.90In 2003,nonsupervisory workers' average hourly earnings were $11.90

6. Monthly Sales For Retail In Millions2005 Jan2004 Dec2004 Nov2004 Oct 313,730315,078311,555292,856 Estimated Annual Sales: 3.6 Trillions

7. Value Retailing Definition:Definition: –The business of retailing famous-name, quality merchandise at prices at least 25% below the regular retail price. Most large retailers are belong to this catalog. (Such as Wal-Mart and Home Dept)Most large retailers are belong to this catalog. (Such as Wal-Mart and Home Dept) The value retailing sector ’ s share of total retail sales is 7.5%The value retailing sector ’ s share of total retail sales is 7.5%

8. Wal-Mart

9. Wal-Mart at a Glance  Wal-Mart Stores, Inc. is the world's largest retailer  The company employs more than 1.5 million associates worldwide  More than 138 million customers per week visit Wal-Mart stores worldwide

10. Senior Officers  H. Lee Scott --- President and CEO  Named in January 2000  25-year veteran  Other Senior Officers  Promoted internally

11. Operations  Wal-Mart Stores  Includes: Discount Stores, Supercenters and Neighborhood Markets  SAM’S CLUB  International  comprised of wholly owned operations in Argentina, Canada, Germany, South Korea, Puerto Rico and the U,K, the operations of joint ventures in China and operations of majority-owned subsidiaries in Brazil and Mexico.

12. U.S. Domestic Competitors

13. Key Success Factors Do the same things as other retailers but Better  "Every Day Low Prices"  Technology  Sales data sharing with major suppliers  Lasting Relationships with Suppliers  One-to-one relationship with medium and small suppliers.

14. How Wal-Mart Grows  Building new stores and Clubs in the attractive sites.  Recent Strategy: move towards grocery side  Adding more “Neighborhood Markets”

15. Expansion of 2004  Domestic  139 new Wal-Mart Stores  130 conversions and/or relocations from Discount Stores to Supercenters  13 SAM’S CLUBs opened  International  Square footage increased approximately 46 million square feet (or 8%)

16. Negative Impact of New Stores  Additional stores take sales away from existing units.  The comparative store sales will be reduced by approximately 1%.

17. Performance of 2004  Total Company net sales increased 11.6% from fiscal 2003 to $256.3 billion.  Total Assets increased 10.7% to $104.9 billion  International segment had an operating profit increase of 18.6% and a sales increase of 16.6%  4 billion tax paid takes up 1/446 of the total U.S. Federal taxes

18. Income Statement (millions)

19. Ratios 200420032002 Gross Margin22.5%22.3%22.0% (SG&A)/(Net Sales)17.5%17.4%17.2% (Interest costs)/(Net Sales) 0.32%0.42%0.58% (Net Income)/(Net Sales) 3.53%3.46%3.23%

20. Segments Ratios

21. Balance Sheet

23. Cash Flow Statement

25. Stocks  Initial Public Offering in 1970  200,000 shares for $16.5 per share  Up to March 14, 2005  4,234,866,944 shares outstanding (11 Stock splits)  $51.60 per share  Annual rate of return from 1970 to 2005  29.56% per year

26. Dividend  Began paying dividends in 1974  Increased the annual dividend payment every year  Paid out more than $11 billion to shareholders  2004, the annual dividend payment increased by 44%

27. Share Repurchase  Wal-Mart also has a share-repurchase program  Since beginning the program, Wal-Mart has repurchased more than $13 billion in shares.  In 2004, Board of Directors authorized the repurchase of another $7 billion

28. Options

29. 1-year Stock Chart

30. 1-years Comparison

31. Some Measures  Total Cash Per Share (mrq):1.3  Return on Assets (ttm):9.36%  Return on Equity (ttm):22.99%  Book Value Per Share (mrq):11.621  Dividend Yield:1.16%

32. 5-years Stock Chart

33. 5-year Comparison

34. Stock Chart Since Beginning

35. Can Wal-Mart Still Grow?  There is definitely room for growth:  In U.S., Wal-Mart sales are less than 10 percent of the retail market.  Even smaller market share outside US.  Problems:  The same business model works everywhere?  Intensive competitions in international market.

36. Recommendation  No one can beat Wal-Mart  Owns lots resource and quite experienced in Retailing  Takes time to expand internationally  In one year time zone, the Stock price is lowest. Buy For Long Term Investment

38. Retail Industry in Home Improvement  Home centers, lumberyard, and hardware stores were primary retail outlets.  US Retail Sales of Home Improvement Products, by Type of Store, 1998:

39. Industry Overview  Traditional retailers: lumberyards & hardware stores.  Home centre  A combination of the two  Size, concentration on the homeowner, one-stop shopping, self-service, customer convenience  Warehouse-type Home Centre  Created markets by making DIY materials affordable and accessible  Competition leads to acquisition & consolidation  (1) Home Depot (1/3 market share, 12.9%)  Competitors: Lowe’s Companies, Menard, Hechinger, Payless Cashways

40. Consumer  Professional builder  Contractor  DIYer  Boomers are key in home improvement market  New market: Female homeowner

41. About The Home Depot  Second largest retailer in the U.S.  Funded in 1978 in Atlanta, Georgia.  Co-founder: Arthur Blank & Bernard Marcus  The world’s largest home improvement retailer.  Operates more than 1,800 stores across North America.  Also in Mexico, the District of Columbia, and Puerto Rico.  Brisk pace in store expansion from less than 100 stores in 1989 to almost 800 in 1999.  Owns 82% of real estate.

42. Leadership Robert (Bob) L. Nardelli  Chairman, President and CEO  Joined HD in December 2000.  Former president and CEO of GE Power Systems.  Strategy: Enhancing the core retail network through distinctive and innovative merchandise, store modernization and technology investment; extending its business through new store formats, online sales and installation services; and by expanding to new geographies and professional customer segments.

43. Leadership – Exec. VP  Francis Blake Francis Blake  Business Development and Corporate Operations. (2002)  John Costello John Costello  Merchandising & Marketing. (November 2002)  Robert DeRodes Robert DeRodes  Executive Vice President & Chief Information Officer. (2002)  Dennis Donovan Dennis Donovan  Human Resources (April 2001)  Frank Fernandez Frank Fernandez  Secretary and General Counsel (April 2001)  Tom Taylor Tom Taylor  Home Depot Stores (1984)  Carol B. Tomé Carol B. Tomé  Executive Vice President & Chief Financial Officer (1995)

44. 3 Business Segments  Home Depot Flagship Stores  First three stores opened in Atlanta in 1979.  U.S. and Canadian stores range in size from 45,000 square feet to 165,000 square feet (avg. 106,000 sq. feet of enclosed space + 22,000 sq. feet in the outside garden area.)  Sells 40,000 to 50,000 different kinds of home improvement supplies, building materials, and lawn and garden products.  How-To Clinics, At-Home Services SM, Tool Rental Centers, Truck Rental.  National brands account 88%+ of the merchandise in the stores.  Exclusive brands  EXPO Design Center  Over 50 stores in major markets in 16 states and growing  Cater to design professionals with home decorating products & services.  Full design and installation services with project superintendents to oversee complete job  Other Home Depot Stores  Supply stores for commercial & industrial customers.  Landscape Supply stores for landscape & garden pros.

45. Merchandise Selection & Sales  Stores’ merchandise selection is based on particular customer and climate need, and on local building code requirements. Different stores don’t carry the same products, due to different merchandise demands in different geographical areas.  34% building materials, lumber, floor & wall coverings  27% plumbing, heating, lighting, electrical supplies  15% seasonal & specialty items  14% hardware & tools  10% paint and other products

46. Key Success Factors  Economies of scale  Low price  Level of customer service  Wide array of products “We are credited with having revolutionized the home improvement industry by offering an unparalleled selection of products and services under one roof.”

47. 3 Sources of Future Growth  Open new stores.  24-hour Home Depot outlets  Smaller villager’s hardware stores  Urban format stores  Cater to professional customers.  Female Homeowners

48. News - Summary  Over past 4 years, The Home Depot has increased sales by 60% and earnings per share by 105%.  Increase in cash dividends & share repurchase program.  Acquisition of home centres, supply companies, and distributors.  Oct 10, 2002 - The Home Depot announce to open two sourcing offices in Shanghai and Shenzhen 2002200320042005 Annual increase in Cash Dividend 20%24%25%23% Share Repurchase Program + $2 billion+ $1 billion Reach $7 billion + $2 billion

49. Recent Awards & Recognition  10 Best Boards in the United States, BusinessWeek (2002)  No. 13 Ranking, Fortune 500 (2003)  No. 22 Ranking in Profit, Forbes listing of America’s 500 Top Companies (2003)  Top 20 Companies for Leaders, CEO Magazine (2002)  Excellence in Employee Development, Retail Council of Canada (2002)  Best Friend Award for work with local communities & youth, LA’s Best (2002)  Flex Your Power Energy Conservation Award, Governor of California (2002)

50. Operational Highlights 2003 % chg 2002 % chg 2001 Store count1,707 11.4 2 1,532 14.9 3 1,333 Average ticket $ 51.15 3.48 $ 49.43 1.62 $ 48.64 Weighted avg. weekly sales per store $763,00 0 (1.17) $772,00 0 (4.93) $812,00 0 Weighted avg. sales per sq. foot $ 370.87 0.18 $ 370.21 (4.57) $ 387.93 By Oct. 31, 2004: 1754 stores.

51. Financial Statements

52. Financial Highlights – Income Statement USD$ (in million)2003 % of Sales 2002 % of Sales 2001 Net Sales$ 64,816$ 58,247$ 53,553 Gross Profit$ 20,580 31.75% $ 18,10831.11%$ 16,147 Total Operating Expenses$ 13,734 21.19% $ 12,27821.08%$ 11,215 Interest Expense$ (62) 0.096% $ (37)0.064%$ 4,957 Net Income$ 4,3046.64%$ 3,6646.29%$ 3,044 2003 2003 vs. 2002 2002 2002 vs. 2001 2001 Basic Earning per Share $ 1.88 19.7% $ 1.5720.77%$ 1.30 Diluted Earning per Share$ 1.88 20.5% $ 1.5620.93%$ 1.29 # of Outstanding Shares2,275,220 K (2.51%) 2,333,740 K(0.52%)2,345,888 K # of Outstanding Shares (Jan 31, 2005): 2,195,960 K

53. Financial Highlights – Balance Sheet 200320022001 Cash$ 2,826 M$ 2,188 M$ 2,477 M Cash / #of Shares$ 1.24$ 0.94$ 1.06 Merchandise Inventories/Total Asset 26.36%27.78%25.48% Net Property & Equip. / Total Asset 58.26%57.21%58.25% Total Assets$ 34,437 M$ 30,011 M$ 26,394 M Stockholders’ Equity $ 22,407 M$ 19,802 M$ 18,082 M ROA 12.50%12.21%11.53% ROE 19.21%18.50%16.83% Book Value per Share $ 11.041

54. Financial Highlights – Statement of Cash Flows USD$ (in million)200320022001 Net Cash from Operations$ 6,545$ 4,802$ 5,963 Capital Expenditures (3,508) (2,749) (3,393) Net Cash Used in Financing Activities (1,931) (2,165) (173) Repurchase of Common Stocks (1,554) (2,000)– Cash Dividends Paid to Stockholders (595) (492) (396) Free Cash Flow = CFO – Cap Exp – Preferred Div – Debt Repayment + New Debt Issues = $ 3,028 M

55. Option – Exec. Compensation

56. Option - continue

57. The Percent of Class column indicates beneficial ownership of less than 1%, based on 2,241,907,929 shares of common stock outstanding as of April 1, 2004

58. Derivatives  Objective: to decrease the volatility of earnings and cash flow associated with fluctuations in interest rates.  Several interest rate swaps with a total notional amount of $475M that swap fixed rate interest on our $500M 53/8% Senior Notes for variable interest rates equal to LIBOR plus 30 to 245 basis points and expire on April 1, 2006.  At February 1, 2004, the fair market value of these agreements was $19 million.

59. Direct Competitor Comparison Company HD Home Depot LOW Lowe’s Companies Retail Industry (Home Improve) Market Cap 83.42B43.78B133.97M Employees 299,000116,0005,190 K Revenue Growth (ttm) 11.30%16.40%13.10% Revenue (ttm) 73.09B36.46B1.20B Gross Margin (ttm) 33.42%33.73%25.23% EBITDA (ttm) 7.93B4.61B1.56M Operating Margin (ttm) 10.84%9.70%2.48% Net Income (ttm) 5.00B2.18B31.00M EPS (ttm) 2.2582.701.58 P/E Ratio (ttm) 16.8220.9516.49

60. Stock Quote – Summary  Traded on the NYSE  Included in the Dow Jones Industrial Average and Standard & Poor's 500 Index.  Symbol: HD  Current Price: $37.99  52-week Range: $32.34 - 44.30  EPS (ttm): $2.26  P/E Ratio (ttm): 16.82  Dividend & Yield: $0.40 (1.03%)  Price/Sales (ttm): 1.17  Price/Book (mrq): 3.52  Beta: 1.279

61. Stock Price – 1 Year Chart

62. 1 Year Chart: Home Depot vs. Dow and S&P

63. Stock Price – 5 Year Chart

64. 5 Year Chart: Home Depot vs. Dow and S&P

65. Stock Price – Since 1984

66. Recommendation  Expansion opportunity in foreign market  Canada & Mexico  Pay out cash dividends  Good return  HD’s 1.03% vs. Lowe’s 0.28% BUY for long term investment