Calculate all of the ratios from Chapter 13 for both companies (Lowe’s company)(The Home Depot Company) for 2021, based on their 2022 Annual Report or 10-K. (This is to be completed using formulas in Excel and submitted in MS Excel .xls or .xlsx – do not type answers in, must use Excel formulas). Please make sure to use Excel and to do it correctly.
Profitability:
1- Profit margin ratio
2- Gross margin ratio
3- Return on total assets
4- Return on equity
5- Basic earnings per share
I uploaded the annual reports for both companies and the formulas.
ANNUAL REPORT 2022
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended January 29, 2023
or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from
to
Commission file number 1-8207
THE HOME DEPOT, INC.
(Exact name of registrant as specified in its charter)
Delaware
95-3261426
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
2455 Paces Ferry Road
Atlanta, Georgia
(Address of principal executive offices)
30339
(Zip Code)
Registrant’s telephone number, including area code: (770) 433-8211
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol
Name of each exchange on which registered
Common Stock, $0.05 Par Value Per Share
HD
New York Stock Exchange
Securities registered pursuant to section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted
pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller
reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller
reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☒ Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company ☐ Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for
complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the
effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the
registered public accounting firm that prepared or issued its audit report. ☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the
registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based
compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
The aggregate market value of voting common stock held by non-affiliates of the registrant on July 29, 2022 was $308.0 billion.
The number of shares outstanding of the registrant’s common stock as of March 1, 2023 was 1,014,955,506 shares.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s proxy statement for the 2023 Annual Meeting of Shareholders are incorporated by reference in Part III of
this Form 10-K to the extent described herein.
TABLE OF CONTENTS
Commonly Used or Defined Terms
Forward-Looking Statements
ii
iii
PART I
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
Business.
Risk Factors.
Unresolved Staff Comments.
Properties.
Legal Proceedings.
Mine Safety Disclosures.
1
10
22
22
23
24
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities.
Reserved.
Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Quantitative and Qualitative Disclosures About Market Risk.
Financial Statements and Supplementary Data.
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.
Controls and Procedures.
Other Information.
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.
24
PART II
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
Item 9C.
PART III
Item 10. Directors, Executive Officers and Corporate Governance.
Item 11. Executive Compensation.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
Item 14. Principal Accountant Fees and Services.
25
25
32
33
62
63
65
65
65
66
66
66
66
PART IV
Item 15. Exhibit and Financial Statement Schedules.
Item 16. Form 10-K Summary.
67
71
SIGNATURES
72
Fiscal 2022 Form 10-K
i
Table of Contents
COMMONLY USED OR DEFINED TERMS
Term
Definition
ASU
BODFS
BOPIS
BORIS
BOSS
CDP
Comparable sales
DIFM
DIY
EH&S
EPA
ESG
ESPP
Accounting Standards Update
Buy Online, Deliver From Store
Buy Online, Pickup In Store
Buy Online, Return In Store
Buy Online, Ship to Store
The not-for-profit organization formerly known as the Carbon Disclosure Project
As defined in the Results of Operations section of MD&A
Do-It-For-Me
Do-It-Yourself
Environmental, Health, and Safety
U.S. Environmental Protection Agency
Environmental, social, and governance
Employee Stock Purchase Plan
Exchange Act
FASB
fiscal 2020
fiscal 2021
fiscal 2022
fiscal 2023
GAAP
IRS
LIBOR
MD&A
MRO
NOPAT
NYSE
PLCC
Pro
Restoration Plans
ROIC
SEC
Securities Act
SG&A
Securities Exchange Act of 1934, as amended
Financial Accounting Standards Board
Fiscal year ended January 31, 2021 (includes 52 weeks)
Fiscal year ended January 30, 2022 (includes 52 weeks)
Fiscal year ended January 29, 2023 (includes 52 weeks)
Fiscal year ending January 28, 2024 (includes 52 weeks)
U.S. generally accepted accounting principles
Internal Revenue Service
London interbank offered rate
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Maintenance, repair, and operations
Net operating profit after tax
New York Stock Exchange
Private label credit card
Professional customer
Home Depot FutureBuilder Restoration Plan and HD Supply Restoration Plan
Return on invested capital
Securities and Exchange Commission
Securities Act of 1933, as amended
Selling, general, and administrative
Fiscal 2022 Form 10-K
ii
Table of Contents
FORWARD-LOOKING STATEMENTS
Certain statements contained herein, as well as in other filings we make with the SEC and other written and oral
information we release, regarding our performance or other events or developments in the future constitute
“forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking
statements may relate to, among other things, the demand for our products and services; net sales growth;
comparable sales; the effects of competition; our brand and reputation; implementation of store, interconnected
retail, supply chain and technology initiatives; inventory and in-stock positions; the state of the economy; the state of
the housing and home improvement markets; the state of the credit markets, including mortgages, home equity
loans, and consumer credit; the impact of tariffs; issues related to the payment methods we accept; demand for
credit offerings; management of relationships with our associates, potential associates, suppliers and service
providers; cost and availability of labor; costs of fuel and other energy sources; international trade disputes, natural
disasters, climate change, public health issues (including the continuing impacts of the COVID-19 pandemic and the
related recovery), cybersecurity events, military conflicts or acts of war, supply chain disruptions, and other business
interruptions that could compromise data privacy or disrupt operation of our stores, distribution centers and other
facilities, our ability to operate or access communications, financial or banking systems, or supply or delivery of, or
demand for, our products or services; our ability to address expectations regarding ESG matters and meet ESG
goals; continuation or suspension of share repurchases; net earnings performance; earnings per share; dividend
targets; capital allocation and expenditures; liquidity; return on invested capital; expense leverage; changes in
interest rates; changes in foreign currency exchange rates; commodity or other price inflation and deflation; our
ability to issue debt on terms and at rates acceptable to us; the impact and expected outcome of investigations,
inquiries, claims, and litigation, including compliance with related settlements; the challenges of international
operations; the adequacy of insurance coverage; the effect of accounting charges; the effect of adopting certain
accounting standards; the impact of legal and regulatory changes, including changes to tax laws and regulations;
store openings and closures; financial outlook; and the impact of acquired companies on our organization and the
ability to recognize the anticipated benefits of any acquisitions.
Forward-looking statements are based on currently available information and our current assumptions, expectations
and projections about future events. You should not rely on our forward-looking statements. These statements are
not guarantees of future performance and are subject to future events, risks and uncertainties – many of which are
beyond our control, dependent on the actions of third parties, or currently unknown to us – as well as potentially
inaccurate assumptions that could cause actual results to differ materially from our historical experience and our
expectations and projections. These risks and uncertainties include, but are not limited to, those described in Part I,
Item 1A. Risk Factors, and elsewhere in this report and also as may be described from time to time in future reports
we file with the SEC. You should read such information in conjunction with our consolidated financial statements
and related notes and Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of
Operations in this report. There also may be other factors that we cannot anticipate or that are not described herein,
generally because we do not currently perceive them to be material. Such factors could cause results to differ
materially from our expectations. Forward-looking statements speak only as of the date they are made, and we do
not undertake to update these statements other than as required by law. You are advised, however, to review any
further disclosures we make on related subjects in our filings with the SEC and in our other public statements.
Fiscal 2022 Form 10-K
iii
Table of Contents
PART I
Item 1. Business.
INTRODUCTION
The Home Depot, Inc. is the world’s largest home improvement retailer based on net sales for fiscal 2022. We offer
our customers a wide assortment of building materials, home improvement products, lawn and garden products,
décor products, and facilities maintenance, repair and operations products. We also provide a number of services,
including home improvement installation services and tool and equipment rental. As of the end of fiscal 2022, we
operated 2,322 stores located throughout the U.S. (including the Commonwealth of Puerto Rico and the territories
of the U.S. Virgin Islands and Guam), Canada, and Mexico. The Home Depot stores average approximately
104,000 square feet of enclosed space, with approximately 24,000 additional square feet of outside garden area.
We also maintain a network of distribution and fulfillment centers, as well as a number of e-commerce websites in
the U.S., Canada and Mexico. When we refer to “The Home Depot,” the “Company,” “we,” “us” or “our” in this report,
we are referring to The Home Depot, Inc. and its consolidated subsidiaries.
The Home Depot, Inc. is a Delaware corporation that was incorporated in 1978. Our Store Support Center
(corporate headquarters) is located at 2455 Paces Ferry Road, Atlanta, Georgia 30339. Our telephone number at
that address is (770) 433-8211.
OUR BUSINESS
OUR STRATEGY
The retail landscape has changed rapidly over the past several years, with customer expectations constantly
evolving. In fiscal 2022, we continued to operate with agility to meet the challenges created by a fluid domestic and
global business environment, including supply chain disruptions, tight labor market conditions, and ongoing
inflationary pressures. Our ability to operate successfully and meet the needs of our customers was due in
significant part to our investments over the past several years aimed at creating an interconnected, frictionless
shopping experience that enables our customers to seamlessly blend the digital and physical worlds. Going forward,
we will leverage the momentum of these investments and continue to invest in our business in support of the
following goals:
•
•
•
We intend to provide the best customer experience in home improvement;
We intend to extend our position as the low-cost provider in home improvement; and
We intend to be the most efficient investor of capital in home improvement.
We believe that these goals will help us grow faster than the market and deliver value to our shareholders. We are
steadfast in this commitment, while also recognizing that exercising corporate responsibility and being informed by
the needs of our other stakeholders, including our customers, associates, supplier partners, and communities,
creates value for all stakeholders, including our shareholders.
DELIVER SHAREHOLDER VALUE
We deliver on our objective to create shareholder value through our disciplined approach to capital allocation. Our
capital allocation principles are as follows:
•
•
•
First, we intend to reinvest in our business to drive growth faster than the market.
Second, after meeting the needs of the business, we look to pay a quarterly dividend, which we intend to
increase as we grow earnings.
Third, after reinvesting in our business and paying our dividend, we intend to return excess cash to our
shareholders through share repurchases.
In fiscal 2022, we invested $3.1 billion in capital expenditures to support our business, advance our goals, and
continue to build an interconnected customer experience. We also focused on driving productivity throughout the
business to lower our costs. The combination of reinvesting in the business to drive higher sales and supporting
productivity to lower costs creates what we refer to as a virtuous cycle, which has allowed us to improve the
customer experience, increase our competitiveness in the market, and deliver shareholder value.
In fiscal 2022, we returned over $14 billion to shareholders in the form of cash dividends and share repurchases.
Our capital allocation is discussed further in Part II, Item 7. Management’s Discussion and Analysis of Financial
Condition and Results of Operations.
Fiscal 2022 Form 10-K
1
Table of Contents
OUR CUSTOMERS
We serve two primary customer groups — consumers (including both DIY and DIFM customers) and professional
customers — and have developed varying approaches to meet their diverse needs:
DIY Customers
These customers are typically homeowners who purchase products and complete their own projects and
installations. Our associates assist these customers both in our stores and through online resources and other
media designed to provide product and project knowledge. We also offer a variety of clinics and workshops both to
share this knowledge and to build an emotional connection with our DIY customers.
Professional Customers (or “Pros”)
These customers are primarily professional renovators/remodelers, general contractors, maintenance professionals,
handymen, property managers, building service contractors and specialty tradespeople, such as electricians,
plumbers and painters. These customers build, renovate, remodel, repair, and maintain residential properties,
multifamily properties, hospitality properties, and commercial facilities, including education, healthcare, government,
institutional, and office buildings.
We have a number of initiatives designed to drive growth with our Pros, including a customized online experience, a
dedicated sales force, an extensive delivery network, our Pro Xtra loyalty program, enhanced credit offerings, and
inventory management programs. Building on our historical strength as a destination for urgent purchase needs, we
are investing in capabilities that will help us better serve our Pros’ planned purchase needs (in-store or via our
dedicated sales team), including our expanded supply chain capabilities and advance ordering through our
interconnected digital platforms. We believe that focusing on meeting the Pros’ planned purchase needs, particularly
for larger renovator/remodeler Pros, will help us drive growth and deliver value to our shareholders.
We extended our reach in the MRO marketplace with our fiscal 2020 acquisition of HD Supply, a leading national
distributor and provider of MRO products and related value-added services to multifamily, hospitality, healthcare,
and government housing facilities, among others, and in fiscal 2021 we integrated our legacy Interline Brands
business into HD Supply. Our MRO operations use a distribution center-based model that sells products primarily
through a professional sales force and through e-commerce platforms and print catalogs.
We recognize the great value our Pros provide to their clients, and we strive to make their jobs easier and help them
grow their businesses. We believe that investments aimed at deepening our relationships with our Pros are yielding
increased engagement and will continue to translate into incremental sales to these customers.
DIFM Customers
Intersecting our DIY customers and our Pros are our DIFM customers. These customers are typically homeowners
who use Pros to complete their project or installation. Currently, we offer installation services in a variety of
categories, such as flooring, water heaters, bath, garage doors, cabinets, cabinet makeovers, countertops, sheds,
furnaces and central air systems, and windows. DIFM customers can purchase these services in our stores, online,
or in their homes through in-home consultations. In addition to serving our DIFM customer needs, we believe our
focus on the Pros who perform services for these customers helps us drive higher product sales.
OUR PRODUCTS AND SERVICES
A typical The Home Depot store stocks approximately 30,000 to 40,000 items during the year, including both
national brand name and proprietary products. Our online product offerings complement our stores by serving as an
extended aisle, and we offer a significantly broader product assortment through our websites and mobile
applications, including homedepot.com, our primary website; homedepot.ca and homedepot.com.mx, our websites
in Canada and Mexico; hdsupply.com, our website for our MRO products and related services; blinds.com, our
online site for custom window coverings; and thecompanystore.com, our online site featuring textiles and décor
products.
We believe our merchandising organization is a key competitive advantage, delivering product innovation,
assortment and value, which reinforces our position as the product authority in home improvement. In fiscal 2022,
we continued to invest in merchandising resets in our stores to refine assortments, optimize space productivity,
introduce innovative new products to our customers, and improve visual merchandising to drive a better shopping
experience. At the same time, we remain focused on offering everyday values in our stores and online. To help our
merchandising organization keep pace with changing customer expectations and increasing desire for innovation,
localization, and personalization, we are continuing to invest in tools to better leverage our data and drive a deeper
level of collaboration with our supplier partners. As a result, we have continued to focus on enhanced
Fiscal 2022 Form 10-K
2
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merchandising information technology tools to help us: (1) build an interconnected shopping experience that is
tailored to our customers’ shopping intent and location; (2) provide the best value in the market; and (3) optimize our
product assortments. Our merchandising team leverages technology and works closely with our inventory and
supply chain teams, as well as our supplier partners, to manage our assortments, drive innovation, and adjust
inventory levels to respond to fluctuations in demand, which helped us navigate the challenges of continuing global
supply chain disruption in fiscal 2022. As cost pressures have risen in several product categories in the current
environment, our tools have helped our merchandising, finance and data analytics teams as they work with our
supplier partners to manage these pressures.
To complement our merchandising efforts, we offer a number of services for our customers, including installation
services for our DIY and DIFM customers, as noted above. We also provide tool and equipment rentals at locations
across the U.S. and Canada, providing value and convenience for both Pros and consumers. To improve the
customer experience and continue to grow this differentiated service offering, we are continuing to invest in more
locations (including piloting rental locations in Mexico), more tools, and better technology.
Sourcing and Quality Assurance
We maintain a global sourcing program to obtain high-quality and innovative products directly from manufacturers in
the U.S. and around the world. During fiscal 2022, in addition to our U.S. sourcing operations, we maintained
sourcing offices in Mexico, Canada, China, India, Vietnam and Europe. To ensure that suppliers adhere to our high
standards of social and environmental responsibility, we also have a global responsible sourcing program. Under
our supplier contracts, our suppliers are obligated to ensure that their products comply with applicable international,
federal, state and local laws. These contracts also require compliance with our responsible sourcing standards,
which cover a variety of expectations across multiple areas of social compliance, including supply chain
transparency, compliance with local laws, health and safety, environmental laws and regulations, compensation,
hours of work, and prohibitions on child and forced labor. To drive accountability with our suppliers, our standard
supplier buying agreement includes a factory audit right related to these standards, and we conduct factory audits
and compliance visits with non-Canada and non-U.S. suppliers of private branded and direct import products. Our
2022 Responsible Sourcing Report, available on our website at https://corporate.homedepot.com under
“Responsibility > Sourcing Responsibly,” provides more information about this program. In addition, we have both
quality assurance and engineering resources dedicated to establishing criteria and overseeing compliance with
safety, quality and performance standards for our private branded products.
Intellectual Property
Our business has one of the most recognized brands in North America. As a result, we believe that The Home
Depot® trademark has significant value and is an important factor in the marketing of our products, e-commerce,
stores and business. We have registered or applied for registration of trademarks, service marks, copyrights and
internet domain names, both domestically and internationally, for use in our business, including our proprietary
brands such as HDX®, Husky®, Hampton Bay®, Home Decorators Collection®, Glacier Bay®, Vigoro®, Everbilt® and
Lifeproof®. The duration of trademark registrations varies from country to country. However, trademarks are
generally valid and may be renewed indefinitely as long as they are in use and/or their registrations are properly
maintained.
We also maintain patent portfolios relating to our business operations, retail services, and products, and we seek to
patent or otherwise protect innovations we incorporate into our business. Patents generally have a term of twenty
years from the date they are filed. As our patent portfolio has been built over time, the remaining terms of the
individual patents across our patent portfolio vary. Although our patents have value, no single patent is essential to
our business. We continuously assess our merchandising departments and product lines for opportunities to expand
the assortment of products offered within The Home Depot’s portfolio of proprietary and exclusive brands.
COMPETITION AND SEASONALITY
Our industry is highly competitive, very fragmented, and evolving. As a result, we face competition for customers for
our products and services from a variety of retailers, suppliers, service providers, and distributors and
manufacturers that sell products directly to their respective customer bases. These competitors range from
traditional brick-and-mortar, to multichannel, to exclusively online, and they include a number of other home
improvement retailers; electrical, plumbing and building materials supply houses; and lumber yards. With respect to
some products and services, we also compete with specialty design stores, showrooms, discount stores, local,
regional and national hardware stores, paint stores, specialty and mass digital retailers, warehouse clubs,
independent building supply stores, MRO distributors, home décor retailers, and other retailers, as well as with
Fiscal 2022 Form 10-K
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providers of home improvement services and tool and equipment rental. The internet facilitates competitive entry,
price transparency, and comparison shopping, increasing the level of competition we face.
Both in-store and online, we compete primarily based on customer experience, price, quality, product availability
and assortment, and delivery options. We also compete based on store location and appearance, presentation of
merchandise, and ease of shopping experience. Our Pros also look for a dedicated sales team, competitive credit
and pricing options, project planning tools, and product depth and job lot quantities, particularly for their planned
purchase needs. Furthermore, with respect to delivery options, customers are increasingly seeking faster and/or
guaranteed delivery times, low-price or free shipping, and/or convenient pickup options. Our ability to be competitive
on delivery and pickup times, options and costs depends on many factors, including the success of our supply chain
investments, described more fully under “Our Supply Chain” below.
Our business is subject to seasonal influences. Generally, our highest volume of sales occurs in our second fiscal
quarter, as we move into the spring season in the regions in which we operate.
INTERCONNECTED SHOPPING EXPERIENCE
We continue to enhance our capabilities to provide our customers with a frictionless interconnected shopping
experience across our stores, online, on the job site, and in their homes, focusing on continued investments in our
website and mobile apps to enhance the digital customer experience.
Digital Experience
Enhancements to our digital properties are critical for our increasingly interconnected customers, who often
research products online and check available inventory before going into one of our stores to view the products in
person or talk to an associate and then make their purchase in store or online. While in the store, customers may
also go online to access ratings and reviews, compare prices, view our extended assortment, and purchase
additional products. Our investments in a truly interconnected experience are focused on bringing together the
power of our physical retail presence and the frictionless interaction of our digital capabilities.
A significant majority of the traffic in our digital channels is on mobile devices. Mobile customers expect more
simplicity and relevancy in their digital interactions. As a result, we have made investments to our digital properties
to improve the overall presentation and ease of navigation for the user. We have also enhanced the “shopability” of
an online product by including more information on the product’s landing page, including related products and/or
parts of a collection, as well as various fulfillment options. We believe our focus on improving search capabilities,
site functionality, category presentation, product content, speed to checkout, and enhanced fulfillment options has
yielded higher traffic, better conversion and continued sales growth.
Further, we do not view the interconnected shopping experience as a specific transaction; rather, we believe it
encompasses an entire journey from inspiration and know-how, to purchase and fulfillment, to post-purchase care
and support. Customers expect more personalized messaging, so we are continuing to focus on connecting
marketing activities with the online and in-store experiences to create seamless engagement across channels. From
the inspirational point of the purchase journey to providing product know-how, we continue to invest in the
infrastructure and capabilities needed to deliver the most relevant marketing messages to our customers based
upon what is important to them today.
Store Experience
Our stores remain the hub of our business, and we continue to invest to improve the customer shopping experience
through easier navigation and increased convenience and speed of checkout. In fiscal 2022, we continued to
leverage the investments made in our stores over the past several years to operate effectively and meet changing
customer expectations. These investments include wayfinding signage and store refresh packages; self-service
lockers, online order storage areas at front entrances and curbside pickup to provide convenient pickup options for
online orders; electronic shelf label capabilities; and the re-design of front-end areas, including reconfigured service
desks, improved layouts in checkout areas, and expanded and enhanced self-checkout options. To improve the
customer’s experience in our stores, we have also empowered our customers with additional self-help tools,
including mobile app-enabled store navigation. Our app provides store-specific maps, which allow customers to
pinpoint the exact location of an item on their mobile devices. We believe these investments are driving higher
customer satisfaction scores, and we will continue to invest to improve the customer experience going forward.
Investing in Associate Productivity. We continually strive to improve our store operations for our associates. Our
goal is to remove complexity and inefficient processes from the stores to allow our associates to focus on our
customers. To this end, we have continued to focus our efforts in such areas as optimizing product flow to decrease
the amount of time a store associate spends locating product and to improve on-shelf product availability; creating a
Fiscal 2022 Form 10-K
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simpler order management system; expanding in-aisle, real-time mobile learning tools for our associates’ own
development and to assist with customer questions; and using labor model tools to better align associate activity
with customer needs. For several years, our associates have used web-enabled handheld devices to help them
more efficiently meet the needs of the business and serve customers. In fiscal 2022, we began rolling out the next
generation of digital phones to our stores, which we call “hdPhones,” so that each associate will have a digital
device during their shift. The new devices offer enhanced functionality to allow associates to readily query inventory,
access applications that support customer service, and drive on-shelf availability of product.
Investing in Safety. We are committed to maintaining a safe shopping and working environment for our customers
and associates. We empower trained EH&S associates to evaluate, develop, implement and enforce policies,
processes and programs on a Company-wide basis. Our EH&S policies are woven into our everyday operations
and are part of The Home Depot culture. Common program elements include daily store inspection checklists (by
department); routine follow-up audits from our store-based safety team members and regional, district and store
operations field teams; equipment enhancements and preventative maintenance programs to promote physical
safety; departmental merchandising safety standards; training and education programs for all associates, with
varying degrees of training provided based on an associate’s role and responsibilities; and awareness,
communication and recognition programs designed to drive operational awareness and an understanding of EH&S
matters.
OUR SUPPLY CHAIN
We continue to focus on building best-in-class competitive advantages in our supply chain to be responsive to our
customers’ expectations for how, when and where they choose to receive our products and services. As part of
enhancing the interconnected shopping experience, we continue to invest in expanding our supply chain network,
with the goal of achieving the fastest, most efficient and most reliable delivery capabilities in home improvement.
Our efforts are focused on ensuring product availability and increasing the speed and reliability of delivery for our
customers while managing our costs. Our supply chain investments have helped us to operate effectively and meet
our customers’ needs throughout the challenging environment over the past few years.
We centrally forecast and replenish the vast majority of our store products through sophisticated inventory
management systems and utilize our network of distribution centers to serve both our stores’ and customers’ needs.
Our supply chain includes multiple distribution center platforms in the U.S., Canada, and Mexico tailored to meet the
needs of our stores and customers based on types of products, location, transportation, and delivery requirements.
These platforms include rapid deployment centers, stocking distribution centers, bulk distribution centers, and direct
fulfillment centers, among others. As part of the expansion of our supply chain, we have invested to further
automate and mechanize our rapid deployment center network to drive efficiency and faster movement of product.
We are also continuing to expand our fulfillment network, investing in a significant number of new fulfillment facilities
to drive speed and reliability of delivery for our customers and to help us ultimately meet our goal of reaching 90%
of the U.S. population with same or next day delivery for extended home improvement product offerings, including
big and bulky products. These facilities include omni-channel fulfillment centers, which deliver product directly to
customers, and market delivery operations, which function as local hubs to consolidate freight for dispatch to
customers for the final mile of delivery, with a focus on appliances. In fiscal 2022, we realized our goal to control
more of our appliance delivery end-to-end and began managing all of our appliance delivery volume through our
market delivery operations. We have also added flatbed distribution centers, which handle large items like lumber
and building materials that are transported on flatbed trucks. As of the end of fiscal 2022, we have opened a number
of additional fulfillment facilities, and we will continue to build out our fulfillment network to support our business. Our
network is designed to create a competitive advantage with unique, industry-leading capabilities for home
improvement needs for both Pros and consumers.
In addition to our distribution and fulfillment centers, we leverage our stores as a network of convenient customer
pickup, return, and delivery fulfillment locations. Our premium real estate footprint provides a distinct structural and
competitive advantage. For customers who shop online and wish to pick up or return merchandise at, or have
merchandise delivered from, our stores, we have implemented four interconnected retail programs: BOSS, BOPIS,
BODFS, and BORIS. We also provide curbside pickup to complement our BOPIS offerings, in addition to the selfservice lockers at the front entrance of many of our stores. We also offer express car and van delivery service that
covers over 80% of the U.S. population. For fiscal 2022, approximately 50% of our U.S. online orders were fulfilled
through a store. We also continue to focus on developing new capabilities to improve both efficiency and customer
experience in our store delivery program. Our strategic intent is to have a portfolio of efficient, timely and reliable
sources and methods of delivery to choose from, optimizing order fulfillment and delivery based on customer needs,
inventory locations and available transportation options.
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CORPORATE RESPONSIBILITY AND HUMAN CAPITAL MANAGEMENT
We view environmental, social and governance matters through the lens of our business, with an understanding that
if we support our associates, our customers, our supplier partners, and the communities we serve, we also support
our business and create long-term value for our shareholders. As a result, we believe that ESG is fundamentally
embedded in our operations and culture. We organize our efforts around three pillars: (1) Focus on Our People, (2)
Operate Sustainably, and (3) Strengthen Our Communities. Highlights of each of these pillars are set forth below.
For further information on our three pillars and other ESG-related matters, see our annual ESG Report, available on
our website at https://corporate.homedepot.com/responsibility.
Focus on Our People
Our culture and our associates provide intangible and hard-to-replicate competitive advantages, which have been
key to helping us navigate challenging market conditions. Our associates are essential to providing the experience
and service that our customers demand. To preserve and protect that customer experience, we focus on cultivating
a compelling associate experience, which we believe supports our ability to attract and retain our associates. This
includes investing in competitive wages and benefits while also providing the culture, tools, training and
development opportunities that make working at The Home Depot an enjoyable and rewarding experience. These
actions are the foundation of our key tenets of putting customers first and taking care of our associates.
Culture and Values. The Home Depot has a strong commitment to ethics and integrity, and we are a values- and
culture-centric business. Our commitment to our core values drives our approach to human capital management.
Our culture is based on our servant leadership philosophy represented by the inverted pyramid, which puts primary
importance on our customers and our associates by positioning them at the top, with senior management at the
base in a support role. We bring our culture to life through our core values, which serve as the foundation of our
business and as the guiding principles behind the decisions we make every day.
Our values also guide our efforts to create an environment that will help us attract and retain skilled associates in
the competitive marketplace for talent. We empower our associates to deliver a superior customer experience by
living our values, and we position our associates to embody our core values by integrating the importance of our
culture into ongoing development programs, performance management practices, and rewards programs. Leaders
participate in programs designed to build and strengthen our culture, such as training on leadership skills, crossfunctional collaboration, inclusiveness, and associate engagement, and all associates receive annual training on
unconscious bias. Our core values are at the root of our human capital management programs.
Our Workforce. At the end of fiscal 2022, we employed approximately 471,600 associates, of whom approximately
46,500 were salaried, with the remainder compensated on an hourly basis. Set forth below is the geographic
makeup of our workforce:
Geographic Location
United States
Canada
Mexico
Other (1)
Total
Number of Associates
% of Total Workforce
418,900
34,500
17,900
300
471,600
88.8%
7.3%
3.8%
0.1%
100%
————
(1) Includes associates in our sourcing organization located in China, Vietnam, India, Italy, Poland and Turkey.
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Talent Attraction and Development. As we attract and hire new associates, we strive to create a customer-like
experience for jobseekers as they progress through the steps of our recruiting process by focusing on speed and
personalization. We employ targeted marketing practices through our careers website, which personalizes the
user’s experience based on jobseeker location and searching behavior. Jobseekers can also apply for roles from
anywhere using desktop or mobile devices. Once a jobseeker has applied for a role and has been selected to move
forward in the recruiting process, we provide self-service by allowing candidates to schedule or reschedule pre-hire
activities directly from their mobile device. Lastly, we created a quick hiring process for candidates by leveraging
job-matching automation that matches candidates to jobs that fit their needs.
We offer all of our associates the opportunity to benefit from robust development opportunities. Our Home Depot
University, or “HDU,” program, is a key part of this development, offering relevant content through multiple
platforms, including instructor-led classes, e-learning, mobile learning, and additional online resources. We invest in
ongoing growth and development by integrating our culture and values into our performance management
practices, providing coaching through continuous leader support, and empowering our associates to learn new skills
at their own pace through mobile applications our associates can access at any time. We equip our leaders with the
tools they need to develop themselves and their teams through several programs designed to help them lead
inclusively, empower their teams, and serve as mentors for our associates.
In fiscal 2022, we supported both associate development and engagement by starting the year with a new store
leadership structure. We created new management positions in our stores focused on the customer service
experience, increasing the number of managers on the floor at any given time. This new structure frees up time for
other store leaders to devote to associate training and development. The result is an improved customer and
associate experience, while also providing new career paths for associates.
Associate Engagement. Associate engagement is the emotional commitment associates have to The Home
Depot. It is vital to our culture and to our success. We create an engaging workplace by continuously listening to
and acting on associate feedback. We provide several pulse check surveys to associates throughout the year that
help us determine how emotionally connected those associates are to our customers, the Company, their jobs,
fellow associates, and leaders. In addition, our annual Voice of the Associate survey, which includes all associates,
serves as our primary means of gauging associates’ level of engagement within their roles. We use the feedback
from these surveys to help improve the overall associate experience. We also maintain a digital associate
engagement platform that links associates with common interests and fuels connections to co-workers and
Company leaders. Additionally, we have a number of programs to recognize stores and individual associates for
exceptional customer service and demonstrating our core values.
Diversity, Equity and Inclusion. Guided by our core values and grounded in our culture, we believe that having a
diverse, equitable and inclusive Company is key to our success. We are focused on building a workplace and retail
space that reflect the customers and communities we are proud to serve. We strive to maintain a Company where
our associates are valued and respected and feel a sense of belonging in the workplace, so that they can provide
the customer experience that supports our business. Our Office of Diversity, Equity and Inclusion supports our focus
on associate diversity, supplier diversity, and engagement with our communities. Below is the fiscal 2022 diversity
data for our U.S. associates:
Race/Ethnicity
Associate Population
U.S. Workforce
U.S. Managers & Above (1)
U.S. Officers
% Minority
48%
39%
26%
% White
Gender
% Undisclosed
50%
60%
73%
2%
1%
2%
% Female
38%
35%
29%
% Male
% Undisclosed
62%
65%
69%
1%
0%
2%
————
(1) Does not include officers.
Note: Certain percentages may not sum to totals due to rounding.
As a Company, we have identified several priorities designed to guide our efforts to enhance diversity, equity and
inclusion. We believe these associate-, supplier- and community-focused priorities will further enhance our
customers’ experience and make a sustainable difference within the workplace, marketplace, and community:
•
Associate Engagement
◦ Increase diverse representation throughout our organization
◦ Create an environment where every associate feels included and valued for who they are
◦ Promote equal opportunity in recruitment, hiring, training, development and advancement
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•
Supplier Diversity
◦ Increase use of and spend with diverse suppliers
◦ Develop diverse suppliers by providing mentorship and sharing resources
•
Community Engagement
◦
◦
Partner with organizations on programs designed to close the wealth gap
Support programs that advance education for all
Compensation and Benefits. Consistent with our core values, we take care of our people by offering competitive
compensation and comprehensive benefits programs. We continuously make wage investments to ensure our
compensation packages reflect the evolving circumstances across our markets, and our profit-sharing program for
hourly associates provides semi-annual cash awards for performance against our business plan. We transitioned
from the enhanced pay and benefits we provided for our associates in fiscal 2020 to alleviate some of the
challenges presented by the COVID-19 pandemic to permanent compensation enhancements for our frontline,
hourly associates, which we have continued to make since fiscal 2020. Our associates can take advantage of a
range of benefits, including healthcare and wellness programs, vacation and leave of absence benefits including
parental leave and paid sick/personal time off, a 401(k) match, our ESPPs, personal finance education and advisory
services, assistance programs to help with managing personal and work-life challenges, family support programs,
and educational assistance.
Operate Sustainably
We have a long-standing and substantial commitment to sustainable business operations, understanding that if we
make our operations more efficient and sustainable, we can support both our business and the environment. This
philosophy extends from the products and services we offer to our customers; to our store construction,
maintenance and operations; to our supply chain and packaging initiatives; to our ethical sourcing program. As we
strive to operate sustainably, we have focused on efforts that help protect the climate, reduce our environmental
impact, and source products responsibly, and we have set goals to drive progress in these areas.
Our 2022 ESG Report, available on our website at https://corporate.homedepot.com/responsibility, includes more
information on our goals, as well as specific initiatives we have in place to help achieve these goals. Below are
highlights of our sustainability strategy.
Our Environmental Goals. We currently have several goals to help address climate impact and reduce our
environmental footprint:
Year Announced
Goal
Goal Date
Status
2018
Cleaning Products Chemical Reduction: Eliminate certain
added chemicals from residential household cleaning products
sold in-store or online by the end of fiscal 2022
2022
Complete (1)
2018
Science-Based Carbon Emissions Targets: Reduce Scope 1
and 2 carbon emissions by 2.1% per year, with the goal to
achieve a 40% reduction by the end of fiscal 2030 and a 50%
reduction by the end of fiscal 2035
2030; 2035
In Process
2019
Recyclable Packaging: Exclude expanded polystyrene foam
(EPS) and polyvinyl chloride (PVC) film from the packaging of
private-brand products we sell, replacing them with easier-torecycle materials by the end of fiscal 2023
Renewable/Alternative Energy Sources: Produce or procure,
on an annual basis, 335 megawatts of renewable or alternative
energy by the end of fiscal 2025
2023
In Process
2025
In Process
100% Renewable Electricity: Produce or procure renewable
electricity equivalent to the needs for all Home Depot facilities
worldwide by the end of fiscal 2030
2030
In Process
2020
2021
————
(1) A de minimis number of suppliers are still in the process of reformulating and transitioning their product assortment.
These goals follow the completion of a number of previously announced goals, including goals related to reducing
store electricity use, eliminating certain chemicals from products we sell, and helping customers reduce their
greenhouse gas emissions and water use and save on electricity costs.
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Our Environmental Programs and Initiatives. In order to progress against our goals, we have a number of
environmentally-focused programs and initiatives, including:
•
•
•
•
•
•
•
•
Store Operations and Renewable/Alternative Energy. We have reduced store energy consumption through
initiatives such as LED lighting upgrades; installation of energy-efficient HVAC systems; participation in
demand mitigation; on-site alternative or renewable energy projects such as fuel cells and solar panels; and
contracts with off-site wind and solar power providers. We have continued to work toward our goal to
produce or procure renewable electricity equivalent to the electricity needs for all Home Depot facilities by
the end of fiscal 2030. We have also continued our focus on saving water, implementing smart irrigation
systems capable of reducing irrigation-related water use in more than 500 U.S. stores.
Product Offerings. Through our Eco ActionsTM program, we have helped our customers more easily identify
products related to five areas: carbon emissions, circularity, responsible chemistry, sustainable forestry, and
water use. Under our Eco Actions program, we sell ENERGY STAR® certified appliances; WaterSense®labeled bath faucets, showerheads, aerators, toilets, and irrigation controllers; LED light bulbs; tankless
water heaters; and many other products. These products, through proper use, help our customers save
money on their utility bills and reduce their environmental impact. Through Eco Actions, we also provide
customers with resources, such as project tutorials, to take individual action on environmental issues.
In-Store Recycling Programs. We offer customer-facing recycling programs in the U.S., including in-store
recycling programs for compact fluorescent light bulbs, rechargeable batteries, and lead acid batteries.
Chemical Strategy. We are committed to increasing our assortment of products that meet high
environmental standards, and we encourage our suppliers to invest in developing environmentallyinnovative products. We periodically evaluate our Chemical Strategy to ensure our approach and goals are
appropriate.
Sustainable Packaging. In addition to our goal related to eliminating EPS and PVC from our private-brand
products, we are continually working with our suppliers to find ways to make product packaging more
recyclable or simply use less materials, such as through the reduction of single-use plastics.
Supply Chain Optimization. Through our supply chain initiatives such as space sharing and optimization
technology, we are working to maximize our use of every mile to make our supply chain more efficient. We
also utilize hydrogen fuel cell technology in a number of our forklifts to make our supply chain even more
environmentally responsible.
CDP Participation. We are a long-standing participant in the annual CDP Climate Change reporting
process. CDP is an independent, international, not-for-profit organization providing a global system for
companies and cities to measure, disclose, manage, and share environmental information. In February
2023, we received a score of “B” from CDP. We have also announced that we plan to begin participating in
CDP’s Forests reporting process.
Assessment of SBTi Goals. In fiscal 2021, we announced plans to adopt, by the end of fiscal 2023, new
Science Based Targets Initiative (SBTi) goals to reduce Scope 1, 2 and 3 emissions in line with Paris
Agreement goals. Adoption of SBTi goals would build on our current science-based goals to reduce Scope
1 and 2 carbon emissions by 2.1% per year, to achieve a 40% reduction by the end of fiscal 2030 and a
50% reduction by the end of fiscal 2035. In fiscal 2022, we continued to work on evaluating potential SBTi
goals.
Over the past several years, our commitment to sustainable operations has resulted in a number of environmental
awards and recognitions. In 2022, we received the following awards: an EPA WaterSense® Partner of the Year
Award for our commitment to offering and promoting water-efficient products; an EPA SmartWay High Performer
Award, which recognized us as an industry leader in improving freight efficiency and environmental performance; an
EPA Safer Choice Partner of the Year Award, which recognizes achievement in products with safer chemicals that
furthers innovative source reduction; and an EPA ENERGY STAR® Partner of the Year Award for our contribution to
promoting energy efficiency.
Strengthen our Communities
One of our core values is “Giving Back,” and we support our communities in a number of ways. The Home Depot
Foundation focuses on improving the homes and lives of U.S. veterans, assisting communities affected by natural
disasters, and training skilled tradespeople to fill the labor gap. The Company and The Home Depot Foundation are
partnering with industry leaders on training programs to train the next generation of skilled tradespeople and help
them find careers in the home improvement industry through our Path to Pro program, which includes a new career
networking site to connect skilled tradespeople to industry Pros. Our Team Depot associate volunteers also extend
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the mission of the Home Depot Foundation in communities across the country, donating thousands of volunteer
hours each year on a wide variety of projects.
We partner with diverse suppliers and organizations to further support our diversity, equity and inclusion efforts. As
noted above, our Office of Diversity, Equity and Inclusion partners with community organizations on programs
designed to close the wealth gap and enhance education outcomes across underserved and underrepresented
communities. To further advance diversity, equity and inclusion in our communities, we have a supplier diversity
program through which we provide supplier development and other resources to our diverse suppliers, and in fiscal
2021 we launched a Tier II supplier diversity program that aims to drive more spending from our direct suppliers to
diverse suppliers. In fiscal 2022, the Company joined the Billion Dollar Roundtable Inc., or BDR, a not-for-profit
organization that promotes supplier diversity excellence and best practices. The BDR consists of U.S.-based
corporations that spend $1.0 billion or more annually with minority- and woman-owned suppliers. We are working to
cultivate a supplier base that creates long-lasting growth and mutual business success, while reflecting the diversity
of our customers and strengthening the communities in which our customers and associates live.
Please see our 2022 ESG Report for additional information about our efforts to support the communities we serve.
GOVERNMENT REGULATION
As a company with both U.S. and international operations, we are subject to the laws of the U.S. and foreign
jurisdictions in which we operate and the rules and regulations of various governing bodies, which may differ among
jurisdictions. Compliance with these laws, rules and regulations has not had, and is not expected to have, a material
effect on our capital expenditures, results of operations, or competitive position as compared to prior periods.
AVAILABLE INFORMATION
Our internet website is www.homedepot.com. We make available on the Investor Relations section of our website,
free of charge, our Annual Reports to shareholders, Annual Reports on Form 10-K, Quarterly Reports on Form 10Q, Current Reports on Form 8-K, Proxy Statements, and Forms 3, 4 and 5, and amendments to those reports, as
soon as reasonably practicable after filing such documents with, or furnishing such documents to, the SEC.
We include website addresses throughout this report for reference only. The information contained on these
websites is not incorporated by reference into this report.
Item 1A. Risk Factors.
Our business, results of operations, and financial condition are subject to numerous risks and uncertainties. In
connection with any investment decision with respect to our securities, you should carefully consider the following
risk factors, as well as the other information contained in this report and our other filings with the SEC. Additional
risks and uncertainties not presently known to us or that we currently deem immaterial may also impair our business
operations. Should any of these risks materialize, our business, results of operations, financial condition and future
prospects could be negatively impacted, which in turn could affect the trading value of our securities. You should
read these Risk Factors in conjunction with Part II, Item 7. Management’s Discussion and Analysis of Financial
Condition and Results of Operations and our consolidated financial statements and related notes in Item 8.
STRATEGIC RISKS
Strong competition could adversely affect prices and demand for our products and services and could
decrease our market share.
Our industry is highly competitive, highly fragmented, and evolving. As a result, we face competition for customers
for our products and services from a variety of retailers, suppliers, service providers, and distributors and
manufacturers that sell products directly to their respective customer bases. These competitors range from
traditional brick-and-mortar, to multichannel, to exclusively online, and they include a number of other home
improvement retailers; electrical, plumbing and building materials supply houses; and lumber yards. With respect to
some products and services, we also compete with specialty design stores, showrooms, discount stores, local,
regional and national hardware stores, paint stores, specialty and mass digital retailers, warehouse clubs,
independent building supply stores, MRO distributors, home décor retailers, and other retailers, as well as with
providers of home improvement services and tool and equipment rental. The internet facilitates competitive entry,
price transparency, and comparison shopping, increasing the level of competition we face.
We compete primarily based on customer experience, price, quality, product availability and assortment, and
delivery options, both in-store and online. We also compete based on store location and appearance, presentation
of merchandise, and ease of shopping experience. Our Pros also look for a dedicated sales team, competitive credit
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and pricing options, project planning tools, and product depth and job lot quantities, particularly for their planned
purchase needs. Furthermore, customers are increasingly shopping online and seeking faster and/or guaranteed
delivery times, low-price or free shipping, and/or convenient pickup options. Our ability to be competitive on delivery
and pickup times, options and costs depends on many factors, including leveraging the momentum of our strategic
investments in our supply chain and our interconnected retail capabilities to further enhance the customer shopping
experience. Failure to successfully manage these factors and offer competitive delivery and pickup options could
negatively impact our profit margins and the demand for our products.
We use our marketing, advertising and promotional programs to drive customer traffic and compete more effectively,
and we must regularly assess and adjust our efforts to address changes in the competitive landscape. Intense
competitive pressures from one or more of our competitors, such as through aggressive promotional pricing or
liquidation events, or our inability to adapt effectively and quickly to a changing competitive landscape, could
adversely affect our prices, our margins, or demand for our products and services. If we are unable to timely and
appropriately respond to these competitive pressures, including through the delivery of a superior interconnected
customer experience or through maintenance of effective sales and marketing, advertising or promotional programs
leveraging both our digital and physical platforms, our market share and our financial performance could be
adversely affected. In addition, we are operating in a highly inflationary environment. If inflation increases beyond
our ability to control our related costs, we may not be able to adjust prices to sufficiently offset the effect of the
various cost increases without negatively impacting consumer demand, or it may adversely affect our ability to
compete based on price.
We may not timely identify or effectively respond to consumer needs, expectations or trends, which could
adversely affect our relationship with our customers, the demand for our products and services, and our
market share.
The success of our business depends in part on our ability to identify and respond promptly to evolving trends in
demographics; shifts in consumer preferences, expectations and needs; and unexpected weather conditions, public
health issues (including pandemics and related impacts), natural disasters, or changes in the macroeconomic
environment that impact our customers, while also managing appropriate inventory levels in our stores and
distribution or fulfillment centers and maintaining an excellent customer experience. It is difficult to successfully
predict the products and services our customers will demand. As our customers expect a more personalized
experience, our ability to collect, use and protect relevant customer data is important to our ability to effectively meet
their expectations. Our ability to collect and use that data, however, is subject to a number of external factors,
including the impact of legislation or regulations governing data privacy and security and customer expectations
around data collection and use. In addition, each of our primary customer groups has different needs and
expectations, many of which evolve as the demographics in a particular customer group change. Customer
preferences and expectations related to sustainability of products and operations are also changing. If we do not
successfully differentiate the shopping experience to meet the individual needs and expectations of or within a
customer group, we may lose market share with respect to those customers.
Customer expectations about the methods by which they purchase and receive products or services are also
becoming more demanding. Customers routinely and increasingly use technology and a variety of electronic
devices and digital platforms to rapidly compare products and prices, read product reviews, determine real-time
product availability, and purchase products, and new channels and tools to expand the customer experience appear
and change rapidly. Our Pros also look for additional capabilities, including a dedicated sales team, competitive
credit and pricing options, project planning tools, and product depth and job lot quantities, particularly for their
planned purchase needs. Once products are purchased, customers seek alternate options for delivery of those
products, including advance ordering through digital platforms for Pros, and they often expect quick, timely, and lowprice or free delivery and/or convenient pickup options. We must continually anticipate and adapt to these changes
in the shopping and purchasing process by continuing to adjust and enhance the online and in-store customer
experience as well as our delivery options. The coordinated operation of our network of physical stores, distribution
facilities, and online platforms is fundamental to the success of our interconnected strategy. We cannot guarantee
that our current or future fulfillment options will be maintained and implemented successfully or that we will be able
to meet customer expectations on delivery or pickup times, options and costs. In addition, as our customers
continue to leverage our enhanced interconnected shopping and fulfillment options, a greater concentration of
online sales with direct fulfillment could result in a reduction in the amount of traffic in our stores, which would, in
turn, reduce the opportunities for cross-selling of merchandise that such traffic creates and could reduce our overall
sales and adversely affect our financial performance. A greater concentration of online sales with direct fulfillment
could also result in higher costs for delivery, potentially impacting our profit margins.
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Failure to provide a relevant or effective online customer experience in a timely manner that keeps pace with
technological developments and dynamic customer expectations; to maintain appropriate inventory; to provide quick
and low-price or free delivery alternatives and convenient pickup options; to differentiate the customer experience
for our primary customer groups; to effectively implement an increasingly localized merchandising assortment; or to
otherwise timely identify or respond to changing consumer preferences, expectations and home improvement needs
could adversely affect our relationship with our customers, the demand for our products and services, and our
market share.
A positive brand and reputation are critical to our business success, and, if our brand and reputation are
damaged, it could negatively impact our relationships with our customers, current and potential associates,
suppliers, vendors, and shareholders, and, consequently, our business and results of operations or the
price of our stock.
Our brand and reputation are critical to attracting customers, current and potential associates, suppliers and
vendors to do business with us. We must continue to manage and protect our brand and reputation. Negative
incidents can erode trust and confidence quickly, and adverse publicity about us could damage our brand and
reputation; undermine our customers’ confidence in us; reduce demand for our products and services; affect our
ability to recruit, engage, motivate and retain associates; attract regulatory scrutiny; and impact our relationships
with current and potential suppliers and vendors. Further, our actual or perceived position or lack of position on
social, environmental, governance, political, public policy, economic, geopolitical, or other sensitive issues, and any
perceived lack of transparency about those matters, could harm our reputation with certain groups. Customers are
also increasingly using social media to provide feedback and information about our Company, including our
products and services, in a manner that can be quickly and broadly disseminated. Negative sentiment about the
Company shared over social media, or misinformation from fraudulent accounts impersonating the Company, could
impact our brand and reputation, whether or not it is based in fact.
The execution of initiatives to expand our supply chain and enhance the interconnected shopping
experience could disrupt our operations in the near term, and these initiatives might not provide the
anticipated benefits or might fail.
We continue to invest in our interconnected retail strategy, including by making significant investments to expand
our supply chain. These investments are designed to streamline our operations to allow our associates to continue
to provide high-quality service to our customers; simplify customer interactions; provide our customers with a more
interconnected shopping experience; better address Pro planned purchase needs; and create the fastest, most
efficient delivery network for home improvement products. Failure to choose the right investments and implement
them in the right manner and at the right pace could disrupt our operations. Executing our interconnected retail
strategy requires continual investment in our operations and information technology systems, as well as the
development and execution of new processes, systems and support. Building out our supply chain also involves
significant real estate projects as we expand our distribution network, requiring us to identify and secure available
locations with appropriate characteristics needed to support the different types of facilities. If we are unable to
effectively manage the volume, timing, nature, location, and cost of these investments, projects and changes, our
business operations and financial results could be materially and adversely affected. The cost and potential
problems, defects of design, and interruptions associated with the implementation of these initiatives, including
those associated with managing third-party service providers, employing new online tools and services,
implementing new technologies, implementing and restructuring support systems and processes, securing
appropriate facility locations, and addressing impacts on inventory levels, could disrupt or reduce the efficiency of
our operations in the near term, lead to product availability issues, and impact our profitability.
In addition, our stores are a key element of our interconnected retail strategy, serving as the hub of our customers’
interconnected shopping experience. We have an aging store base that requires maintenance, investment, and
space reallocation initiatives to deliver the shopping experience that our customers desire. We also need to identify
and secure available locations with appropriate characteristics for new stores to ensure we can continue to serve
our customers effectively. Our investments in our stores may not deliver the relevant shopping experience our
customers expect or fully support an interconnected shopping experience. We must also maintain a safe store
environment for our customers and associates, as well as protect against loss or theft of our inventory (also called
“shrink”), including as a result of organized retail crime. High rates of shrink, which we continue to experience, or an
unsafe store environment, requires operational changes that may increase costs and adversely impact the customer
and associate experience.
Our investments to enhance our interconnected shopping experience and expand our supply chain might not
provide the anticipated benefits, might take longer than expected to complete or realize anticipated benefits, or
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might fail altogether, each of which could adversely impact our competitive position and our financial condition,
results of operations, or cash flows.
If we are unable to effectively manage and expand our alliances and relationships with certain suppliers of
both brand name and proprietary products, we may be unable to effectively execute our strategy to
differentiate ourselves from our competitors.
As part of our focus on product differentiation, we have formed strategic alliances and exclusive relationships with
certain suppliers to market products under a variety of well-recognized brand names. We have also developed
relationships with certain suppliers to allow us to market proprietary products that are comparable to national
brands. Our proprietary products differentiate us from other retailers and generally carry higher margins than
national brand products. If we are unable to manage and expand these alliances and relationships, maintain
favorable terms with current suppliers, or identify alternative sources for comparable brand name and proprietary
products, we may not be able to effectively execute product differentiation, which may impact our sales and gross
margin results.
Our strategic transactions involve risks, which could have an adverse impact on our business, financial
condition and results of operations, and we may not realize the anticipated benefits of these transactions.
We regularly consider and enter into strategic transactions, including mergers, acquisitions, investments, alliances,
and other growth and market expansion strategies. We generally expect that these transactions will result in sales
increases, cost savings, synergies, enhanced capabilities or various other benefits. Assessing the viability and
realizing the benefits of these transactions is subject to significant uncertainty. For each of our acquisitions, we need
to determine the appropriate level of integration of the target company’s products, services, associates, and
information technology, financial, human resources, compliance, and other systems and processes, and then
successfully manage that integration into our corporate structure. Integration can be a complex and time-consuming
process, and if the integration is not fully successful or is delayed for a material period of time, we may not achieve
the anticipated synergies or benefits of the acquisition. In addition, the integration of businesses may create
complexity in our financial systems, internal controls, technology and cybersecurity systems, and operations and
may make them more difficult to manage. Even if the target companies are successfully integrated, the acquisitions
may fail to further our business strategy as anticipated, expose us to increased competition or challenges with
respect to our products or services, and expose us to additional risks and liabilities. Strategic transactions may also
be subject to significant regulatory uncertainty. The changing enforcement landscape may result in additional costs
or delays that affect the anticipated outcome of a transaction. Any failure in the execution of a strategic transaction
or investment, our approach to the integration of an acquired asset or business, or achievement of synergies or
other benefits could result in slower growth, higher than expected costs, the recording of an impairment of goodwill
or other intangible assets, and other actions which could adversely affect our business, financial condition and
results of operations.
OPERATIONAL RISKS
Our success depends upon our ability to attract, develop and retain highly qualified associates to provide
excellent customer service and to support our strategic initiatives while also controlling our labor costs.
Our customers expect a high level of customer service and product knowledge from our associates. To meet the
needs and expectations of our customers, we must attract, develop and retain a large number of highly qualified
associates and maintain a productive relationship with those associates. Our ability to meet our labor needs while
controlling labor costs is subject to numerous external factors, including increased market pressures with respect to
prevailing wage rates, unemployment levels, and health and other insurance costs; the impact of legislation or
regulations governing labor relations, employment, immigration, minimum wage, and healthcare benefits; changing
demographics and expectations among the workforce; public health concerns; and our reputation within the labor
market. We also compete with other retail businesses for many of our associates in hourly positions, and we invest
significant resources in training and motivating them to maintain a high level of job satisfaction. These positions
often have high turnover rates, which can lead to increased training and retention costs, particularly in a competitive
labor market. We have faced and may continue to face additional challenges in recruiting and retaining associates
due to wage pressure; flexible scheduling needs; disruption in the availability of childcare; challenges related to a
remote or hybrid working environment for associates who work in our store support centers; and health and safety
concerns. We are also subject to labor union efforts to organize groups of our associates from time to time and, if
successful, those organizational efforts may decrease our operational flexibility and efficiency, and/or otherwise
negatively impact our operations or reputation. These factors, together with growing competition among potential
employers, have resulted in and may continue to result in increased salaries, benefits, or other employee-related
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costs, and/or may impair our ability to recruit and retain associates, which could have an adverse impact on our
business operations, financial condition and results of operations.
In addition, to execute our interconnected retail strategy, including our supply chain investments, we must attract
and retain a large number of skilled professionals, including technology professionals, to implement our ongoing
technology and other investments. The market for these professionals is very competitive. An inability to provide
wages and/or benefits, including remote or hybrid work flexibility, that are competitive within the markets in which we
operate could adversely affect our ability to retain and attract associates. Further, changes in market compensation
rates may adversely affect our labor costs.
Additionally, our ability to successfully execute organizational changes, including management transitions within the
Company’s senior leadership, and to effectively motivate and retain associates is critical to our business success. If
we are unable to locate, attract or retain qualified associates, or manage leadership transitions successfully, our
ability to effectively manage our strategy may be negatively impacted, the quality of service we provide to our
customers may decrease, and our financial performance may be adversely affected.
A failure of a key information technology system or process could adversely affect our business.
We rely extensively on information technology systems and related personnel to collect, process, retain, manage,
transmit, and protect transactions and data. Some of these systems are managed or provided by third-party service
providers, including certain cloud platform providers. In managing our business, we also rely heavily on the integrity
of, security of, and consistent access to, operational and financial data for information such as sales, customer data,
supplier data, associate data, job applicant data, partner data, demand forecasting, merchandise ordering, inventory
replenishment, supply chain management, payment processing, order fulfillment, customer service, and postpurchase matters. For these information technology systems, applications, and processes to operate effectively, we
or our service providers must maintain and update them. Delays in the maintenance, updates, upgrading, or
patching of these systems, applications or processes could impair, and on occasion have impaired, their
effectiveness or could expose us to security risks. Our systems and the third-party systems with which we interact
are subject to and on occasion have experienced damage or interruption from a number of causes, including power
and other critical infrastructure outages; computer and telecommunications failures; computer viruses; data or
security breaches; internal or external data theft or misuse; cyber-attacks, including the use of malicious codes,
worms, phishing, smishing, vishing, spyware, denial of service attacks, and ransomware; responsive containment
measures by us that may involve voluntarily taking systems offline; natural disasters and catastrophic events such
as fires, floods, earthquakes, tornadoes, hurricanes, or other extreme weather events; public health concerns, such
as pandemics and quarantines; military conflicts, acts of war, terrorism or civil unrest; other systems outages;
inadequate or ineffective redundancy; and design or usage errors or malfeasance by our associates, contractors or
third-party service providers. In addition, as more business activities have shifted online, and as many of our store
support associates continue to work in a remote or hybrid environment, we face an increased risk due to the
potential failure of internal or external information technology infrastructure as well as increased cybersecurity
threats and attempts to breach our security networks.
Although we and our third-party service providers seek to maintain our respective systems effectively and to
successfully address the risk of compromise of the integrity, security and consistent operations of these systems,
such efforts are not always successful. As a result, we or our service providers could experience errors,
interruptions, delays or cessations of service in key portions of our information technology infrastructure, which
could significantly disrupt our operations or impair data security; impact our ability to operate or access
communications, financial or banking systems; be costly, time-consuming and resource-intensive to remedy; and
adversely impact our reputation and relationship with our customers, suppliers, shareholders or regulators.
In addition, we are currently making, and expect to continue to make, substantial investments in our information
technology systems, infrastructure and personnel, in certain cases with the assistance of strategic partners and
other third-party service providers. These investments involve replacing existing systems, some of which are older,
legacy systems that are less flexible and efficient, with successor systems; outsourcing certain technology and
business processes to third-party service providers; making changes to existing systems, including the migration of
applications to the cloud; maintaining or enhancing legacy systems that are not currently being replaced; or
designing or cost-effectively acquiring new systems with new functionality. These efforts can result in significant
potential risks, including failure of the systems to operate as designed, potential loss or corruption of data, failures in
security processes and internal controls, cost overruns, implementation delays or errors, disruption of operations,
and the potential inability to meet business and reporting requirements. Any system implementation and transition
difficulty may result in operational challenges, security failures, reputational harm, and increased costs that could
adversely affect our business operations and results of operations.
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Disruptions in our customer-facing technology systems could impair our interconnected retail strategy and
give rise to negative customer experiences.
Through our information technology systems, we are able to provide an improved overall shopping and
interconnected experience that empowers our customers to shop and interact with us from a variety of electronic
devices and digital platforms. We use our digital platforms as sales channels for our products and services, as
methods of providing inspiration, and as sources of product, project, and other relevant information to our customers
to help drive sales. We also have multiple online communities, digital platforms, and knowledge centers that allow
us to inform, assist and interact with our customers. The retail industry is continually evolving and expanding, with a
significant increase in sales initiated online and via mobile applications. We may not be successful at managing this
increased volume and related delivery options without interruption in the future. Additionally, we must effectively
respond to new developments and changing customer preferences with respect to a digital and interconnected
experience. We continually seek to enhance all of our online and digital properties to provide a personalized, userfriendly interface for our customers. Disruptions, delays, failures or other performance issues with our customerfacing technology systems, either due to increased volume, system modifications, or other factors, or a failure of
these systems to meet our or our customers’ expectations, could impair the value they provide, adversely impact
our sales, and negatively affect our relationship with our customers.
Disruptions in our supply chain and other factors affecting the availability and distribution of our
merchandise could adversely impact our business.
Disruption within our logistics or supply chain network, such as the industry-wide supply chain challenges resulting
from the COVID-19 pandemic, have in the past and may in the future adversely affect our ability to receive and
deliver inventory in a timely manner, impair our ability to meet customer demand for products, and result in lost
sales, increased supply chain costs, and/or damage to our reputation. Such disruptions may result from damage or
destruction to our distribution or fulfillment centers or those of our supply chain service providers; weather-related
events; cybersecurity incidents or attacks; natural disasters; international trade disputes, trade policy changes or
restrictions, or import- or export-related governmental sanctions or restrictions; customs actions, including
regulatory enforcement inquiries, holds, detentions, and exclusions; quotas, tariffs or other import-related taxes;
strikes, lock-outs, work stoppages or slowdowns; shortages of supply chain labor, including truck drivers; shipping
capacity constraints, including shortages of related equipment; raw material or other shortages; third-party contract
disputes or inability to maintain favorable contract terms; supply or shipping interruptions or costs; increased costs
or unavailability of fuel; military conflicts or acts of war, as well as any related sanctions or other government or
private responses; acts of terrorism; public health issues, including pandemics or quarantines (such as the
COVID-19 pandemic) and related shut-downs, re-openings, or other actions by government regulators or others;
civil unrest; or other factors beyond our control. In recent years, ports in the U.S. and elsewhere have been
impacted by capacity constraints, port congestion and delays, periodic labor disputes, security issues, weatherrelated events, and natural disasters. Disruptions to our supply chain due to any of the factors listed above could
negatively impact our financial performance or financial condition.
If our efforts to maintain the privacy and security of customer, associate, job applicant, business partner,
and Company information are not successful, we could incur substantial costs and reputational damage
and could become subject to litigation and enforcement actions.
Our business, like that of most retailers, involves the collection, processing, retention, management, transmission,
and deletion of personal information (including identifiers, internet activity, preferences, and payment information)
from our customers, associates, job applicants, and business partners, as well as confidential Company information.
We also work with third-party service providers that provide technology, systems and services that we use in
connection with the handling of information. Our information systems, and those of our third-party service providers,
are vulnerable to continually evolving data protection and cybersecurity risks. Unauthorized parties have in the past
gained access, and will continue to attempt to gain access, to these systems and data through fraud or other means
of deceiving our associates or third-party service providers. Hardware, software or applications we develop or obtain
from third parties may contain exploitable vulnerabilities, bugs, or defects in design, maintenance or manufacture or
other problems that could unexpectedly compromise information security. We have experienced and continue to
face the ongoing risk of exploitation of our software providers and our software development and implementation
process, including from coding and process vulnerabilities and the installation of so-called back doors that provide
unauthorized access to systems and data. The increased use of a remote workforce has also expanded the
possible attack surface areas. In addition, the risk of cyber-attacks has increased in connection with Russia’s
invasion of Ukraine and the resulting geopolitical conflict. In light of this and other geopolitical events, nation-state
actors or their supporters may launch retaliatory cyber-attacks, and may attempt to cause supply chain and other
third-party service provider disruptions, or take other geopolitically-motivated retaliatory actions that may disrupt our
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business operations, result in data compromise, or both. Nation-state actors have in the past carried out, and may in
the future carry out, cyber-attacks to achieve their aims and goals, which may include espionage, monetary gain,
disruption, and destruction. To achieve their objectives, nation-state actors and other cyber criminals have used and
may continue to use numerous attack vectors and methods, including use of stolen passwords, social engineering,
phishing, smishing, vishing, identity spoofing, ransomware or other disruptive and destructive malware, supply chain
compromises, and man-in-the-middle and denial of service attacks. The methods used to obtain unauthorized
access, disable or degrade service, or sabotage systems are constantly changing and evolving, increasing in
frequency and sophistication, and may be difficult to anticipate or detect for long periods of time.
To protect against unauthorized access to or use of data, prevent data loss, preserve data integrity, and protect our
own access to systems, we have implemented and regularly review and update systems, processes, and
procedures; third-party assessments and testing; and annual associate training and other specific training initiatives.
However, the ever-evolving threats mean that we and our third-party service providers and business partners must
continually evaluate and adapt our respective systems and processes and overall security environment, as well as
those of companies we acquire. There is no guarantee that the measures we take will be adequate to safeguard
against all threats, including vulnerabilities, data security breaches, system compromises or misuses of data. As we
saw in connection with the data breach we experienced in 2014, any significant compromise or breach of our data
security, whether external or internal, or misuse of customer, associate, job applicant, business partner, or Company
data, could result in significant costs, including costs to investigate and remediate, as well as lost sales, fines,
lawsuits, regulatory investigations, and damage to our reputation. Furthermore, because the techniques used to
obtain unauthorized access, disable or degrade service, or sabotage systems change frequently and may not
immediately produce signs of anomalous activity or compromise, we may be unable to anticipate these techniques
or to implement adequate preventative measures. Additionally, as occurred in the case of the data breach we
experienced in 2014, we or our third-party service providers may not discover any security breach, vulnerability or
compromise of information for a significant period of time after the occurrence of a security incident.
In addition, data governance failures can adversely affect our reputation and business. Our business depends on
our customers’, associates’, job applicants’ and business partners’ willingness to entrust us with their personal
information. Events that adversely affect that trust, including inadequate disclosure to our customers, associates,
job applicants, or business partners of our uses of their information or failing to keep our information technology
systems and our customers’, associates’, job applicants’ and business partners’ personal information secure from
significant attack, theft, damage, loss or unauthorized disclosure or access, whether as a result of our action or
inaction (including human error or malfeasance) or that of our service providers or other third parties, could
adversely affect our brand and harm our reputation. Further, the regulatory environment related to data privacy and
cybersecurity is constantly changing, with new and increasingly rigorous requirements applicable to our business.
The implementation of these requirements has also become more complex. Maintaining our compliance with
evolving requirements, including state privacy laws, requires significant effort and cost, requires changes to our
business practices, and may limit our ability to collect and use certain data to support the customer experience. In
addition, failure to comply with applicable requirements could subject us to fines, sanctions, governmental
investigations, lawsuits or reputational damage. Additionally, our cyber insurance coverage may not be adequate for
liabilities or costs actually incurred, and we cannot be certain that insurance will continue to be available to us on
economically reasonable terms, or at all, or that any insurer will not deny coverage of a future claim.
We are subject to payment-related risks that could increase our operating costs, expose us to fraud or theft,
subject us to potential liability, and potentially disrupt our business.
We accept payments using a variety of methods, including credit and debit cards, our private label credit cards,
cash, checks, PayPal, installment loan programs, trade credit, and gift cards, and we may offer new payment
options over time. Acceptance of these payment options subjects us to rules, regulations, contractual obligations
and compliance requirements, including payment network rules and operating guidelines, data security standards
and certification requirements, and rules governing electronic funds transfers. These requirements may change over
time or be reinterpreted, making compliance more difficult, costly, or uncertain. For certain payment methods,
including credit and debit cards, we pay interchange and other fees, which may increase over time and raise our
operating costs. We rely on third parties to provide payment processing services, including the processing of credit
cards, debit cards, and other forms of electronic payment. If these companies become unable to provide these
services to us, or if their systems are compromised, it could potentially disrupt our business. The payment methods
that we offer, and the selling channels in which we operate, also subject us to potential fraud and theft by threat
actors, who are becoming increasingly more sophisticated, seeking to obtain unauthorized access to or exploit
weaknesses that may exist in our sales, payments and payment processing systems. If we fail to comply with
applicable rules or requirements for the payment methods we accept, or if payment-related data is compromised
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due to a breach or misuse of data, we may be liable for costs incurred by payment card issuing banks and other
third parties or we may be subject to fines and higher transaction fees, or our ability to accept or facilitate certain
types of payments may be impaired. In addition, our customers could lose confidence in certain payment types,
which may result in a shift to other payment types or potential changes to our payment systems that may result in
higher costs. As a result, our business and operating results could be adversely affected.
Our business is subject to seasonal influences, and uncharacteristic or significant weather conditions,
climate change, natural disasters, as well as other catastrophic events, could impact our operations.
Natural disasters, such as hurricanes, tropical storms, fires, floods, droughts or water scarcity, tornadoes, and
earthquakes; unseasonable, unexpected or extreme weather conditions, whether as a result of climate change or
otherwise; acts of terrorism or violence, including active shooter situations; public health concerns, such as
pandemics and quarantines and related shut-downs, re-openings, or other actions by government regulators or
others; civil unrest; military conflicts or acts of war, as well as any related sanctions or other government or private
responses; or similar disruptions and catastrophic events can affect consumer spending and confidence and
consumers’ disposable income, particularly with respect to home improvement or construction projects, and could
have an adverse effect on our financial performance. These types of events can also adversely affect our work force
and prevent associates and customers from reaching our stores and other facilities. They can also, temporarily or
on a long-term basis, disrupt or disable operations of stores, support centers, and portions of our supply chain and
distribution network, including causing reductions in the availability of inventory and disruption of utility services. In
addition, these events may affect our information systems and digital platforms, resulting in disruption to various
aspects of our operations, including our ability to transact with customers and fulfill orders; to communicate with our
stores, facilities, store support centers or senior management; or to access financial or banking systems.
Unseasonable, unexpected or extreme weather conditions such as excessive precipitation, warm temperatures
during the winter season, or prolonged or extreme periods of warm or cold temperatures, could render a portion of
our inventory incompatible with customer needs.
Furthermore, the long-term impacts of climate change, whether involving physical risks (such as extreme weather
conditions) or transition risks (such as regulatory or technology changes) are expected to be widespread and
unpredictable. These changes over time could affect, for example, the availability and cost of or demand for certain
consumer products, commodities, and energy (including utilities), which in turn may impact our ability to procure
certain goods or services for the operation of o…
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