Home Depot Financial Analysis

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Conclusions Based on Analysis According to the annual reports from both Home Depot and Lowe’s, Home Depot held an advantage over Lowe’s in the big box home improvement retail industry. As of 2016, Home Depot operates 2,278 stores in the United States, Canada and Mexico, and Lowe’s operates 2,129 stores worldwide. The metrics collected to measure the financial performance of these two large scale competitors in the retail industry are very important to determine the overall success of the company. Key financial metrics to be considered for retailers include profit margin, inventory turns and sales per square foot. The profit margin that a company maintains is a very important measure of success and health of the company, it can be calculated…show more content…
According to Statista.com, Home Depot is the leader in both sales per square foot as well as sales per employee. These advantages in efficiency of operations have allowed Home Depot to also attain an advantage over Lowe’s in total net income per employee as well. A number of factors can contribute to Lowe’s being behind in these areas in comparison to Home Depot, those include too much or unnecessary square footage in each store, overstaffing and other general work inefficiencies. When looking at all of these factors, it can be determined that while both companies are growing profits and revenue steadily, Home Depot is doing it at a much more efficient…show more content…
Financially speaking, Home Depot has an advantage over Lowe’s in most of the applicable metrics. Lowe’s does possess low debt to equity ratio and is not highly debt leveraged so this gives the company the ability to improve and make strategic decisions based on the needs of their customers. Over the last three year average the companies are both growing at a similar rate in revenue and earnings. Both companies must make the correct strategic decisions in the coming years to adjust and maintain their position and grow their advantages over the competition over time while minimizing their own
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