Home Depot Inc. said yesterday that increasing home sales and a growing consumer desire to improve older residences should fuel further expansion and solid earnings for the discount retailer.
An executive from the Atlanta-based chain, speaking at an Alex. Brown & Sons Inc. seminar in Baltimore yesterday, also noted that the company has taken less than 10 percent of the annual $126 billion do-it-yourself industry, despite ranking as the largest home improvement retailer in the United States. It generated sales of $9.2 billion last year, and $6.2 billion through the first six months of this year.
To augment its market penetration and build on its recent large sales and earnings increases, Home Depot intends to pursue an aggressive expansion plan.
"We have to continue to push the envelope," said Home Depot President and Chief Operating Officer Arthur M. Blank. "The records that we've set each year have to be improved upon."
Mr. Blank's comments came at the end of the first day of Alex. Brown's 16th annual consumer growth stock seminar, a three-day assemblage of more than 75 retailers, operators and consumer products suppliers, including Host Marriott Corp. and Starbucks Corp.
Opening additional stores is an approach that has served Home Depot well over its 15-year history.
"We think that the company will remain a high-growth situation through the end of the decade," Alex. Brown said in a report in August. "We believe Home Depot can expand its store base at a 25 percent clip with square footage rising 26-28 percent annually."
To that end, Home Depot will unveil its first Baltimore store today, a $10 million project at 6315 Eastern Ave., on the eastern edge of the city. The 103,000-square-foot store, which will employ about 150 workers, is its fifth outlet in the Baltimore area and its seventh in Maryland. Its other area stores are in White Marsh, Glen Burnie, Towson and Catonsville.
In all, the company operates 311 stores with more than 31 million square feet of retail space in 26 states. By the end of this year, it plans to have 340 stores, representing a more than 30 percent jump from a year ago.
Only one-quarter of those stores compete directly with the stores of the Lowe's Cos., Hechinger Co., Eagle Hardware & Garden and other home improvement retailers.
Future Home Depot growth projections are even more aggressive.
By its fiscal year 1998, Home Depot intends to operate 824 stores, a 165 percent increase over existing locations, according to the company's 1993 annual report.
The new stores are viewed as necessary if Home Depot is to continue the record sales and earnings that it has generated in each of the past six years. For instance, in 1993 it reported a net income of $457.4 million, or $1.01 a share, on net sales of $9.23 billion -- representing a 26.1 percent net earnings climb and a 29 percent sales growth over year-end 1992 results.
Through the first six months of this year, the company has reported a net income of $317.7 million, or 69 cents a share, on net sales of $6.2 billion. By its fiscal year 1995, Alex. Brown estimates that Home Depot will have net earnings of $807.6 million, or $1.73 a share, on net sales of $16.25 billion.