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TRANSCRIPT
2
Private Residential Investment
Private Residential Investment as a % of GDP
60 yr average: 4.8%
Q108: 3.8%
Investment Declined $270+ Billion in Past 2 YearsInvestment Declined $270+ Billion in Past 2 YearsSource: Bureau of Economic Analysis (BEA)
2%
3%
4%
5%
6%
7%
8%
1950
1954
1958
1962
1966
1970
1974
1978
1982
1986
1990
1994
1998
2002
2006
3
Subprime & Alt-A
Source: Inside Mortgage Finance, The Lindsey Group
Subprime & Alt-A as Percent of Total Non-Home Equity Loan Mortgage Originations
Worst Part of the Mortgage Market is Behind UsWorst Part of the Mortgage Market is Behind Us
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
2001 2002 2003 2004 2005 2006 Q1 07 Q2 07 Q3 07 Q4 07
Alt-A
Subprime
Q1 08
4
Mortgage Equity Withdrawals
Source: Federal Reserve, Moody’s
Active Mortgage Equity Extraction (Quarterly)
$90B Decline in Quarterly Equity Extraction in Past 2 Years$90B Decline in Quarterly Equity Extraction in Past 2 Years
Includes home cash out refinancing and home equity withdrawal and does not include capital gains on sales
$144B
$54B
$ Billion
$0
$50
$100
$150
Q10
2
Q30
2
Q10
3
Q30
3
Q10
4
Q30
4
Q10
5
Q30
5
Q10
6
Q30
6
Q10
7
Q30
7
5
Vacancies
Source: Census
Vacant Housing Units as a Share of Total US Housing Stock
Will Take Time to Work Through ExcessesWill Take Time to Work Through Excesses
10%
11%
12%
13%
14%
15%
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
Q1
08
6
Long-term Fundamentals
2002 2008F
U.S. Owner households 73.4 77.1
U.S. Households 108.0 113.1
2012F
80.0
119.2
Source: Moody’s, and Harvard Joint Center for Housing Studies
Strong, Long-term Fundamentals Strong, Long-term Fundamentals
+5.1% +3.8%
+4.8% +5.4%
Percentage of Occupied Housing >35 Years Old
Millions
67.5%
70.0%
72.5%
75.0%
77.5%
80.0%
'82 '86 '90 '94 '98 '02 '06
7
Creating Shareholder Value
MaximizeReturn on
Capital
LongerTerm
ShortTerm
Exercise Disciplined
Capital Allocation
Build Sustained
Competitive Advantages
Increase Return on Existing Assets
FocusOn the Core
Business
8
Focus on the Core
Sell HD Supply
Close Landscape Supply
Close Floor Stores
Refocus Home Services [In Progress]
9
Exercise Disciplined Capital Allocation
Rationalize new store pipeline
Close under-performing stores
Recapitalization Plan [In Progress]
10
Increase Return on Existing Assets: Focused Investments
$180M Aprons on the Floor InitiativeReduced Voluntary Hourly Attrition by 14% Enhanced TrainingAdded ~3,000 Master Trade Specialists
Significant increase in maintenance spendImplemented Store Standards
Enhancing supply chain: Operating 3 RDCsTarget: 8 RDCs by year-endImproving in-stock
Implementing Merchandising Transformation Employing a Portfolio ApproachStrengthening local execution
Using analytics to better understand customersBid room volume increased 200+ percent
11
Customer Service
Every Day Value Proposition
Assortment
Real Estate
Brand
Customer Insight
Supply Chain
International Development
Build Sustained Competitive Advantages
“Passionate associates providing solutions, product authority, and knowledge to simplify home improvement, maintenance and repair”
12
2008 Outlook
2008 will be another difficult year
- Sales guidance down 4%-5%
- Earnings per share guidance down 19%-24%
Will continue to invest in our key priorities
Will continue to allocate capital in the most efficient manner
13
Sales Growth
Earnings Growth
EPS Growth
~3-5%
>Sales
DoubleDigit
Match or Exceed Market GrowthFocus on Our StoresSlowing New Store Growth
Leverage through Supply Chain and Operational Efficiencies
Exceed Earnings Growth through Disciplined Capital Allocation
Future Outlook (Normalized Environment)