home depot Paul Raines Presentation

Paul RainesEVP - U.S. Stores

2008Investor & Analyst Conference

Store Operations

2

Store Operations

Commitment to Service:Multi-year investment to reach our labor standardsAprons on the FloorFoundational investments

Home Services

Understanding Our Customers –Focusing on Two Segments:

ProMulticultural

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Labor Standards History

1979: Home Depot invented engineered labor standards for home improvement

1990s: Store Operations systematically gathered data in the formof validation studies

2006-2007: Launched comprehensive effort to apply engineered time studies across all departments & volumes

1979 2005 2006 & 2007

Inventedengineered

labor standards

Startedconducting

new time studies

Comprehensiveeffort to set a

new laborstandard

Validationstudies

1990s

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Labor Studies

Conducted 1,200 hours of labor studies

Studies encompassed stores throughout the U.S. with different volumes

Example: Plumbing Weekly Task Allocation

Balance Between Service and TaskingBalance Between Service and Tasking

Stock/Returns4.4%

Meetings4.3% Training

4.6%

Admin/General Tasks8.4%

Reports4.9%

Safety7.4%

Dept Maintenance

13.7% CustomerService52.3%

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Labor Standards Future State

OtherOperatingExpense

Labor

Total Operating Expense

Reduce Operating Cost to Invest in LaborReduce Operating Cost to Invest in Labor

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Aprons on the Floor

Key Initiatives Description

Day Freight

HRM Restructure

Call Centers

Merchandising Execution Team

Shifted 121 hours per week from nights to days in 1,100+ stores

Realigned the HR field structure to a district-level support model

Closed 3 U.S. call centers

Replaced third party service teams with new in-house Merchandising Execution Team (MET) for seasonal resets

Will Exceed 2008 Goal of $180MWill Exceed 2008 Goal of $180M

$

DayFreight

HRMRestructure

Call Centers

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Incentive: Hourly rate increase as a result of becoming certified (new associates only)

Incentive: One time bonus upon completion of the following: (1) Core Department certification guide, or (2) The two adjacent department PK Certification Guides

Assessment, Skills and Knowledge in:Customer service skills

Product knowledge down to the merchandising class level

Department services (cutting keys, blinds, special services, etc.)

Home Services

PK Certified PK Expert

Training: Product Knowledge Certification

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Associate Tenure Continues to Increase, with Store Managers Averaging 9.9 Years

Associate Tenure Continues to Increase, with Store Managers Averaging 9.9 Years

Attrition and Tenure

Voluntary Attrition(U.S. Only)

Source: HRIS

1.6%2.0%2.4%2.8%3.2%3.6%4.0%4.4%4.8%5.2%

Feb Mar Apr May June July Aug Sept Oct Nov Dec Jan

Volu

ntar

y A

ttriti

on %

2006

2007

2008

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Foundational Investments: Maintenance

Since implementing Programmatic Approach to Maintenance, we have:

Restriped all parking lots

Spiffed and polished 898 floors

Installed T5 lighting in more than 99% stores

Touched over 1,800 U.S. Stores

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Foundational Investments: Store Standards

Launched in Fall 2007

Creates a consistent shopping experience –clean and wide open aisles for customers to easily navigate

Touches the entire store – parking lots, entrance/exits, aisles, receiving, etc.

Ongoing governance and sharing of best practices

2006 2007 2008

7.30

7.50

7.70

7.90

8.10

8.30

Mea

n (1

-10

scal

e)

Feb Mar Apr MayJun Jul Aug Sep Oct NovDec Jan

Voice of the Customer“Clear and Uncluttered”

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Home Services Strategy

Improved quality and continued focus on execution− 35% reduction in complaints per transaction− Improved Voice-of-the-Customer results from 8.1 in Q1 2006

to 8.5 in Q1 2008Rationalized or exited programs − Home Elevation, Awnings, Home Security, Storm Rooms,

Cleary Buildings, Putting Greens, Pergolas, Artificial Turf, Irrigation, Smart Home, Whole House Fan, Mailboxes, Lock and Hardware and Sump Pump Replacement

Integrated with Operations and Merchandising− Aligned with stores − Blended view of product and install− Collaborative strategy with merchants

Simplifying the Experience for Our CustomersSimplifying the Experience for Our Customers

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Understanding Customers: Pro Customer Opportunity

Only 27.5% of Our Professional CustomersUse One of Our “Pro” Services

Only 27.5% of Our Professional CustomersUse One of Our “Pro” Services

Source: 2007 survey of Dunnhumby, Pro Team tracking reports, MaPS survey

Percent of HD Customers and Sales100%

Pro30.9%

DIY69.1%

Other72.5%

Home DepotCredit Card

% of Customers Pro Sales0

20

40

60

80

Pro DeskManaged Accounts

27.5%

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Customer Insight: Dunnhumby

Leading provider of retail customer insights

Results based on performance

- Tesco – 15 years of strong performance

- Kroger – 18 quarters of strong performance

Created a Pro model leveraging years of HD data and Dunnhumby analytics

To Better Understand Our CustomersTo Better Understand Our Customers

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Understanding the Pro

Model the behavior of Pros using all of our sources

- Home Depot Credit Cards

- Managed Accounts

- SIC Segmentation

- VOC Survey

Identified behavior of known Pros and model this behavior against customer base

Flagged all customers as Pros or Consumers

Understand product category

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Driving value from our Pro customers

25%Associated Department Sales –Average Per ProRelevantRelevant

100%Power Rank of 4 Core Metrics

Associated Store Sales –Average Per Pro

$ Pro Sales

Pro Penetration

Core Metric

25%

25%

25%

Weight“R”

ReturnReturn

ResultsResults

ReachReach

Answering the “4 R’s” will Determine if Products are Driving Value from Our Pro

Answering the “4 R’s” will Determine if Products are Driving Value from Our Pro

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Identify How Pros Spend

High

HighLow

Leadership SKUs

Purchased frequently by Pros

Hig

h pe

rcen

tage

of

Pros

tota

l spe

ndProduct X

Product Y

Leadership SKU: Purchased Frequently and High % of Total Pro Spend

Leadership SKU: Purchased Frequently and High % of Total Pro Spend

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Hispanic Customers: Population is growing at 3.8% (general market population growing at 1%)

14% of households will be Hispanic by 2010

Hispanic purchasing power is increasing at a rate faster than population growth at 5.7%

− Buying power expected to surpass $1 trillion by 2010

20% of home ownership growth for the next 15 years will come from Hispanic population

Understanding Customers: Multicultural Marketing

Source: U.S. Census Bureau

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Understanding Customers: Multicultural Marketing

What have we done?Bilingual staffing goalsBilingual signageCreated a cross-functional teamTargeted marketing and merchandising programs

What are we seeing? 86% Hispanic unaided brand awareness34% Hispanic share of wallet

Puedes Hacerlo. Podemos Ayudarte.(You can do it. We can help.)

Puedes Hacerlo. Podemos Ayudarte.(You can do it. We can help.)