Home Depot Has Been Operating Efficiently In The Last Few Years, And Here’s Why

Home Depot (NYSE:HD) operates large stores, with an average store size as large as 104,000 square feet, to accommodate various home improvement products ranging from outdoor categories to kitchen appliances. The retailer is expected to have added close to 30 stores between 2012-2017, with 19 stores already added between 2012 and Q1 fiscal year 2016. What has been commendable is that Home Depot has added these extra stores into its vast network of operations smoothly, without any rise in the average total cost (SG&A costs + lease payments) per square feet in the last few years. In fact, the real value of total costs has declined, if the inflation rate is taken into consideration, implying how Home Depot has been operating efficiently.

Just for comparison, retailers such as GAP Inc and Abercrombie & Fitch typically have store sizes less than 15,000 square feet. This is the reason why the average cost per square feet is lower for Home Depot, which has larger store spaces, as compared to the apparel companies. For example, as compared to GAP Inc and Abercrombie & Fitch’s estimated average cost per square feet of $94 and $243 respectively for 2016, Home Depot’s average cost per square feet stands at $71.

Have more questions on Home Depot? See the links below.

• Home Depot Or Lowe’s — Which Retailer Is Doing Better In 2016?
• Home Depot Vs. Lowe’s – Who Is Better At Inventory Management?
• Home Depot Beats Consensus Estimates And The Trend Of Declining Sales For Retailers In Q1
• Where Will Home Depot’s Revenue And EBITDA Growth Come From Over The Next Three Years?
• How Has Home Depot’s Revenue And EBITDA Composition Changed Over 2012-2016E?
• What’s Home Depot’s Fundamental Value Based On Expected 2016 Results?
• What Is Home Depot’s Revenue And EBITDA Breakdown?
• By What Percentage Have Home Depot’s Revenues And EBITDA Grown Over The Last Five Years?

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