I will upload to you the questions and 2018 Home Depot’s annual report. Please use the report to answer the questions. It should be super easy if you know the concept of cash outflow and cash inflow. Thanks. q4 and the second part of q3
ANNUAL REPORT 2018
LETTER TO SHAREHOLDERS
Dear Shareholders:
Fiscal 2018 was an exciting year for our company as we began our accelerated investment program to position the
business for long-term success. At our Investor & Analyst Conference in December of 2017, we outlined our strategic
vision to create the “One Home Depot” experience. We believe our One Home Depot strategy will further unlock the
frictionless shopping experience that we envisioned for our customers when we started talking about interconnected
retail nearly ten years ago. Back then, we were deliberate in our choice of the word interconnected because we believed
that for our customers, a great shopping experience is one that allows them to blend seamlessly the digital and physical
worlds.
Our strategic efforts are yielding solid returns. Now more than ever, customers view us as One Home Depot rather than
a brick & mortar retailer with a website. While our stores remain the hub of our business, our data tells us that many of
our in-store sales are influenced by an online visit and nearly 50 percent of all online U.S. orders are picked up inside our
stores. As our customers continue to blend the channels of engagement with The Home Depot, we are investing to drive
the One Home Depot experience. Last year we began a multi-year, approximately $11 billion investment program in our
stores, our associates, our digital experience, and our supply chain.
As I reflect on the first year of our investment journey, I am happy to report that we are on track with respect to our
strategic priorities. Although it is early days with a lot of work ahead, I would like to take this opportunity to share some
2018 investment highlights.
INVESTMENT HIGHLIGHTS
We believe that when a customer comes to one of our physical stores, it needs to be a great experience. Our customers
asked us to reduce several pain points around store navigation and checkout and we made great strides in 2018. We
implemented our enhanced wayfinding sign and store refresh package in nearly 1,300 stores, ahead of our initial plan.
We also made solid progress on the rollout of our re-designed front-end areas to facilitate faster checkout and are
adding automated lockers that make picking up an online order easier and more convenient. These in-store changes are
resonating, as customer service scores for checkout time satisfaction and ease of online order pickup have increased.
Our best-in-class customer experience is delivered by our orange-aproned associates who serve our customers every
day. The Company’s culture, opportunities for career growth, competitive wages and benefits are all part of attracting
and retaining talent. Additionally, we are implementing tools that generally make working at The Home Depot a better
experience. The enhancement of our in-store order management system, Order Up, and the rollout of our new Overhead
Management application on associate FIRST phones, have simplified operations and increased associate productivity.
These applications result in less time spent learning and navigating our systems, which means more time in the aisles
engaging our customers.
Our enhanced store and associate experience is complemented by investments we are making in an interconnected,
digital customer experience. In 2018 we continued to invest in our website and mobile applications, improving search
capabilities, site functionality, and product content. This ongoing focus on our digital properties, which fuels the
interconnected experience, continues to yield improved customer satisfaction scores, better conversion and increased
sales.
LETTER TO SHAREHOLDERS
Delivering a best-in-class interconnected shopping experience encompasses more than our digital properties and
physical store assets. As part of our investment program, we committed to a five year, $1.2 billion investment in our
supply chain to create the fastest, most efficient delivery network for home improvement goods. When finished, our
expanded network will enable same-day and next-day delivery capabilities for 90 percent of the U.S. population for both
parcel and big and bulky products. We told you that 2018 would be the year of the pilot as we test and learn with new
fulfillment centers, and we are now live with a number of these pilot facilities.
As we work on our longer-term supply chain build out, we remain focused on meeting our customer’s immediate delivery
needs. We made great progress with our store delivery enhancements in 2018, rolling out car and van Express Delivery
offerings that enable same-day and next-day delivery of store goods to over 40 percent of the U.S. population for car
delivery and over 70 percent coverage for van.
I am encouraged by the progress we have made over the past twelve months, and I am excited about the work and
opportunities ahead as we remain focused on enhancing the customer experience by investing in our business.
PRODUCT AUTHORITY
While our journey towards the One Home Depot vision does involve a great deal of change, our passion to maintain
our position as the number one retailer in product authority for home improvement never will. We know that we must
keep pace with changing customer expectations. Innovation, localization and speed to market are critical, and we are
investing to achieve a first to market approach by arming our merchants with better tools, leveraging data to offer greater
personalization, and driving a deeper level of collaboration with our supplier partners.
Our professional and do-it-yourself customers shop at The Home Depot because we offer products and services at great
values. Our supplier partners work with us to bring new product innovation that saves our customers time and money.
We will continue to be the customer’s advocate for value, delivering the best products and services at the best value,
every single day.
VALUE FOR ALL STAKEHOLDERS
Underpinning our strategy to create the One Home Depot experience is our desire to create value for all stakeholders.
This includes our shareholders, our associates, our supplier partners and the communities that we serve. As we invest to
unlock the power of a truly interconnected, One Home Depot, we are enhancing our already strong foundation in order to
continue to deliver value for years to come.
While implementing year one of our investment program, our team delivered another year of record results. During fiscal
2018, sales grew 7.2 percent to $108.2 billion, with comparable sales growth of 5.2 percent for the total company and
5.4 percent in the U.S. We saw sales growth in all of our U.S. regions, Canada and Mexico. Our fiscal 2018 net earnings
were $11.1 billion, or $9.73 per share, a 33.5 percent increase in earnings per share from the prior year.
Our capital allocation philosophy is straightforward. We will continue to invest in the business to drive growth as well as
productivity and efficiency. We look to return a meaningful percentage of earnings to our shareholders through dividends
and share repurchases. In fact, during fiscal 2018, after investing in the business, we returned $14.7 billion to our
shareholders in the form of dividends and share repurchases.
As we look ahead, we expect our investments will result in continued growth and profitability. Our strong performance
in fiscal 2018 positions us well with respect to our 2020 financial targets. By fiscal 2020 we are aiming to grow our sales
to a range of $115 billion to $120 billion, with an operating margin range of 14.4 percent to 15.0 percent, and a return on
invested capital1 of more than 40 percent.
Return on invested capital, or ROIC, is defined as net operating profit after tax, a non-GAAP financial measure, for the most recent twelve-month
period, divided by the average of beginning and ending long-term debt (including current installments) and equity for the most recent twelve-month
period. For a reconciliation of net operating profit after tax to net earnings, the most comparable GAAP financial measure, and our calculation of ROIC,
see “Non-GAAP Financial Measures” on page 24 of the Annual Report on Form 10-K for the fiscal year ended February 3, 2019.
1
LETTER TO SHAREHOLDERS
OUR CULTURE
LIVING OUR VALUES
Increased our commitment to
$500M
for veteran causes by 2025
35,000
associates are U.S. military
veterans or reservists
Committed to training
20,000
skilled tradespeople over the
next 10 years
$13M
donated to associates in need
through The Homer Fund in 2018
95%
In 2019 we will celebrate our 40th anniversary. In 1979 our founders
established the culture of The Home Depot, and it remains our foundation.
The culture centers around our values and a leadership construct. It is the
lens through which we evaluate and manage important environmental, social
and governance (“ESG”) issues that impact our business. We organize our
approach to ESG around three key pillars: Focus on People, Strengthen
Communities and Operate Sustainably.
We focus on people by making The Home Depot a great place to work.
For us that means fostering an environment centered on our core value of
respect for all people, where diversity and inclusion are celebrated, and
people have the opportunity to develop and advance their careers. Our more
than 400,000 orange-blooded associates live our culture every day. They are
our single-greatest asset, and they differentiate us in the marketplace.
Our commitment to strengthen the communities in which we operate is
also rooted in one of our eight core values – doing the right thing. When
natural disasters strike, as they did once again in 2018, we work tirelessly
to deliver aid to those impacted. Beyond disaster relief, we continued to
positively impact the lives of military veterans and their families, and in 2018
we increased our commitment to $500 million dollars for veteran causes by
2025.
In 2018 The Home Depot Foundation also expanded its mission beyond
veteran causes and natural disasters, committing $50 million to train 20,000
tradespeople over the next 10 years in order to fill the growing skilled labor
gap in the U.S.
Our commitment to operate sustainably goes back decades. As the world’s
largest home improvement retailer, we believe that we are in a unique
position to source products and foster ideas that not only help us operate
sustainably as a company, but also reduce the environmental impact of
our customers. In 2018 we continued our fantastic progress in this area.
In recognition of these efforts, CDP, an environmental impact non-profit,
named The Home Depot to its Climate Change “A” List for actions to cut
carbon emissions and mitigate climate risks.
As we look forward to 2019, I am incredibly excited about what lies ahead
for us as a company, but I am also reflective of how far we have come.
As we celebrate the 40th anniversary of our first store opening, it is worth
noting how the company has evolved and changed throughout the years,
while at the same time, staying true to a simple truth inherited from our
founders: “If you take care of the associates, they will take care of the
customer and everything else will take care of itself.”
of associates donated to
The Homer Fund
Craig Menear
March 28, 2019
FINANCIAL HIGHLIGHTS
$108.2B
$100.9B
SALES
$94.6B
2016
2017
2018
6.8%
5.6%
5.2%
COMPARABLE
SALES GROWTH
2016
2017
2018
$9.73
$7.29
$6.45
DILUTED EPS
2016
2017
2018
44.8%
34.2%
RETURN ON
INVESTED CAPITAL
31.4%
*
2016
2017
2018
*For a calculation of ROIC, please see page 24 of the Annual Report on Form 10-K for the fiscal year ended February 3, 2019.
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended February 3, 2019
or
¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from
to
Commission file number 1-8207
THE HOME DEPOT, INC.
(Exact name of registrant as specified in its charter)
Delaware
State or other jurisdiction of incorporation or organization
95-3261426
(I.R.S. Employer Identification No.)
2455 Paces Ferry Road, Atlanta, Georgia 30339
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code:
(770) 433-8211
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Name of each exchange on which registered
Common Stock, $0.05 Par Value Per Share
New York Stock Exchange
Securities registered pursuant to section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ý No ¨
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No ý
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days. Yes ý No ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted
pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit such files). Yes ý No ¨
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not
contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ý
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller
reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller
reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ý
Accelerated filer ¨
Emerging growth company ¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the
extended transition period for complying with any new or revised financial accounting standards
provided pursuant to Section 13(a) of the Exchange Act. ¨
Non-accelerated filer ¨
Smaller reporting company ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ¨ No ý
The aggregate market value of voting common stock held by non-affiliates of the registrant on July 29, 2018 was $225.3 billion.
The number of shares outstanding of the registrant’s common stock as of March 8, 2019 was 1,103,903,507 shares.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s proxy statement for the 2019 Annual Meeting of Shareholders are incorporated by reference in Part III of
this Form 10-K to the extent described herein.
TABLE OF CONTENTS
Commonly Used or Defined Terms
Cautionary Statement Pursuant to the Private Securities Litigation Reform Act of 1995
PART I
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
ii
iii
Business.
Risk Factors.
Unresolved Staff Comments.
Properties.
Legal Proceedings.
Mine Safety Disclosures.
1
8
15
15
17
18
18
Item 6.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities.
Selected Financial Data.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Quantitative and Qualitative Disclosures About Market Risk.
Financial Statements and Supplementary Data.
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.
Controls and Procedures.
Other Information.
19
28
29
59
59
61
PART II
Item 5.
PART III
Item 10. Directors, Executive Officers and Corporate Governance.
Item 11. Executive Compensation.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
Item 14. Principal Accounting Fees and Services.
19
61
62
62
62
62
PART IV
Item 15. Exhibits, Financial Statement Schedules.
Item 16. Form 10-K Summary.
62
66
SIGNATURES
67
i
Table of Contents
COMMONLY USED OR DEFINED TERMS
Term
Definition
ASR
ASU
BODFS
BOPIS
BORIS
BOSS
CDP
CFL
Comparable sales
DIFM
DIY
EH&S
EPA
ESPP
Exchange Act
FASB
fiscal 2013
fiscal 2014
fiscal 2015
fiscal 2016
fiscal 2017
fiscal 2018
fiscal 2019
FSC
GAAP
GRI
Interline
IRS
LIBOR
MD&A
MRO
NOPAT
NYSE
PLCC
Pro
Restoration Plan
ROIC
SEC
Securities Act
SG&A
Tax Act
Accelerated share repurchase
Accounting Standards Update
Buy Online, Deliver From Store
Buy Online, Pick-up In Store
Buy Online, Return In Store
Buy Online, Ship to Store
The not-for-profit organization formerly known as the Carbon Disclosure Project
Compact fluorescent light
As defined in the Results of Operations – Sales section of MD&A
Do-It-For-Me
Do-It-Yourself
Environmental, Health, and Safety
U.S. Environmental Protection Agency
Employee Stock Purchase Plan
Securities Exchange Act of 1934, as amended
Financial Accounting Standards Board
Fiscal year ended February 2, 2014 (includes 52 weeks)
Fiscal year ended February 1, 2015 (includes 52 weeks)
Fiscal year ended January 31, 2016 (includes 52 weeks)
Fiscal year ended January 29, 2017 (includes 52 weeks)
Fiscal year ended January 28, 2018 (includes 52 weeks)
Fiscal year ended February 3, 2019 (includes 53 weeks)
Fiscal year ended February 2, 2020 (includes 52 weeks)
Forest Stewardship Council
U.S. generally accepted accounting principles
Global Reporting Initiative
Interline Brands, Inc.
Internal Revenue Service
London interbank offered rate
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Maintenance, repair, and operations
Net operating profit after tax
New York Stock Exchange
Private label credit card
Professional customer
Home Depot FutureBuilder Restoration Plan
Return on invested capital
Securities and Exchange Commission
Securities Act of 1933, as amended
Selling, general, and administrative
Tax Cuts and Jobs Act of 2017
ii
Table of Contents
CAUTIONARY STATEMENT PURSUANT TO THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
Certain statements contained herein, as well as in other filings we make with the SEC and other written and oral
information we release, regarding our future performance constitute “forward-looking statements” as defined in the
Private Securities Litigation Reform Act of 1995. Forward-looking statements may relate to, among other things, the
demand for our products and services; net sales growth; comparable sales; effects of competition; implementation
of store, interconnected retail, supply chain and technology initiatives; inventory and in-stock positions; state of the
economy; state of the housing and home improvement markets; state of the credit markets, including mortgages,
home equity loans, and consumer credit; issues related to the payment methods we accept; demand for credit
offerings; management of relationships with our associates, suppliers and vendors; continuation of share
repurchase programs; net earnings performance; earnings per share; dividend targets; capital allocation and
expenditures; liquidity; return on invested capital; expense leverage; stock-based compensation expense;
commodity price inflation and deflation; the ability to issue debt on terms and at rates acceptable to us; the impact
and expected outcome of investigations, inquiries, claims, and litigation; the effect of accounting charges; the effect
of adopting certain accounting standards; the impact of the Tax Act and other regulatory changes; store openings
and closures; financial outlook; and the integration of acquired companies into our organization and the ability to
recognize the anticipated synergies and benefits of those acquisitions.
Forward-looking statements are based on currently available information and our current assumptions, expectations
and projections about future events. You should not rely on our forward-looking statements. These statements are
not guarantees of future performance and are subject to future events, risks and uncertainties – many of which are
beyond our control, dependent on actions of third parties, or currently unknown to us – as well as potentially
inaccurate assumptions that could cause actual results to differ materially from our expectations and projections.
These risks and uncertainties include, but are not limited to, those described in Item 1A, “Risk Factors,” and
elsewhere in this report and also as may be described from time to time in our future reports we file with the SEC.
Forward-looking statements speak only as of the date they are made, and we do not undertake to update these
statements other than as required by law. You are advised, however, to review any further disclosures we make on
related subjects in our periodic filings with the SEC.
iii
Table of Contents
PART I
Item 1. Business.
Introduction
The Home Depot, Inc. is the world’s largest home improvement retailer based on net sales for fiscal 2018. We offer
our customers a wide assortment of building materials, home improvement products, lawn and garden products,
and décor products and provide a number of services, including home improvement installation services and tool
and equipment rental. As of the end of fiscal 2018, we had 2,287 The Home Depot stores located throughout the
U.S. (including the Commonwealth of Puerto Rico and the territories of the U.S. Virgin Islands and Guam), Canada,
and Mexico. The Home Depot stores average approximately 104,000 square feet of enclosed space, with
approximately 24,000 additional square feet of outside garden area. We also maintain a network of distribution and
fulfillment centers, as well as a number of e-commerce websites. When we refer to “The Home Depot,” the
“Company,” “we,” “us” or “our” in this report, we are referring to The Home Depot, Inc. and its consolidated
subsidiaries.
The Home Depot, Inc. is a Delaware corporation that was incorporated in 1978. Our Store Support Center
(corporate office) is located at 2455 Paces Ferry Road, Atlanta, Georgia 30339. Our telephone number at that
address is (770) 433-8211.
Our Business
Our Strategy
Our two primary objectives are growing market share with our customers and delivering shareholder value. We
have historically been guided by three principles to drive growth: delivering an exceptional customer experience,
leading in product authority, and maintaining a disciplined approach to capital allocation. These principles reflect
how we fundamentally run our business. As the retail landscape continues to evolve, we must become more agile in
responding to the changing competitive environment and customer preferences. Our customers expect to be able to
buy how, when and where they want. We believe that providing a seamless and frictionless shopping experience
across multiple channels, featuring curated and innovative product choices, personalized for the individual
shopper’s need, which are then delivered in a fast and cost-efficient manner, is a key enabler for our future success.
This is what we call the One Home Depot experience. In late 2017, we announced that we would be investing
approximately $11 billion over a multi-year period in our stores, associates, digital experience and supply chain to
drive value for our customers, our associates, our suppliers and our shareholders. To accomplish this, we are
executing against five key strategies designed to drive growth in our business:
•
•
•
•
•
Connect associates to customer needs
Interconnected experience: stores to online, and online to stores
Connect products and services to customer needs
Connect product to shelf, site and customer
Innovate our business model and value chain
Taken together, these strategies are helping us to create the One Home Depot experience that our customers
demand. Below are some of the ways we have been investing in that experience during fiscal 2018.
Connect Associates to Customer Needs
We serve two primary customer groups and have different approaches to meeting their needs:
•
DIY Customers. These customers are typically home owners who purchase products and complete their
own projects and installations. Our associates assist these customers both in our stores and through online
resources and other media designed to provide product and project knowledge. We also offer a variety of
clinics and workshops both to share this knowledge and to build an emotional connection with our DIY
customers.
•
Professional Customers (or “Pros”). These customers are primarily professional renovators/remodelers,
general contractors, handymen, property managers, building service contractors and specialty tradesmen,
such as electricians, plumbers and painters. These customers build, renovate, remodel, repair and maintain
residential properties, multifamily properties, hospitality properties and commercial facilities, including
education facilities, healthcare facilities, government buildings and office buildings. We recognize the great
value our Pro customers provide to their clients, and we strive to make the Pros’ job easier and help them
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grow their business. We believe that investments aimed at deepening our relationships with our Pro
customers are yielding increased engagement and will continue to translate into incremental spend. As part
of our continued commitment to invest in Pro customer relationships and the significant market opportunity
these customers represent, we have created an enhanced Pro customer experience, both online and instore.
At the end of 2018, we announced a new consolidated, go-to-market strategy for all of our Pro initiatives,
including our MRO business (formerly known as Interline), under “The Home Depot Pro” banner. With The
Home Depot Pro, Pros have access to a comprehensive offering that includes a combination of our vast
store network, a best-in-class dedicated sales force, quality and affordable products from trusted brands, an
extensive delivery network and online business solutions. We provide specialized programs such as an
expanded MRO assortment, inventory management solutions, custom product offerings, in-store Pro desk
and Pro services, and enhanced credit programs. We also provide and are continuously working to improve
our delivery options for Pros, including pick up in-store, direct to job site delivery or ship-to home, to allow
us to deliver when, where and how our customers demand. Online, our Pros receive a personalized
experience based on their business, their needs, their industry and their purchasing behavior.
Pro customers are not one-size-fits-all, and The Home Depot Pro offers the level of value-added services
that our diverse Pro customers demand. Our Pro loyalty program, Pro Xtra, provides Pros with benefits
related to useful business services, exclusive product offers and a purchase monitoring tool to enable
receipt lookup and job tracking of purchases across all forms of payment. We will continue to invest in the
Pro customer experience to provide the services, solutions, support, and online tools they need to grow
their businesses.
Intersecting our DIY customers and our Pros are our DIFM customers. These customers are typically home owners
who engage with Pros to complete their project or installation, instead of completing the project or installation
themselves. DIFM customers can purchase a variety of installation services in our stores, online or in their homes
through in-home consultations. Our installation programs include many categories, such as flooring, cabinets and
cabinet makeovers, countertops, furnaces and central air systems, and windows. We believe that changing
demographics are increasing the demand for our installation services, particularly for our “baby boomer” customers
who may have historically been DIY customers but who are now looking for someone to complete a project for
them. We also believe our focus on serving the Pros who perform services for our DIFM customers will help us drive
higher product sales.
We help our customers finance their projects by offering PLCC products through third-party credit providers. Our
PLCC program includes other benefits, such as a 365-day return policy and, for our Pros, commercial fuel rewards
and extended payment terms. In fiscal 2018, our customers opened approximately 4.8 million new The Home Depot
private label credit accounts, and at the end of fiscal 2018 the total number of The Home Depot active account
holders was approximately 16 million. PLCC sales accounted for approximately 23% of net sales in fiscal 2018.
We strive to provide an outstanding customer experience by putting customers first and taking care of our
associates. Our customer experience begins with excellent customer service, and our associates are key to
delivering on that experience. Our goal is to remove complexity and inefficient processes from the stores to allow
our associates to focus on our customers. To this end, in fiscal 2018 we continued to invest in freight handling
capabilities as part of an end-to-end initiative to optimize how product flows from suppliers to our shelves. Among
other benefits, this initiative improves our on-shelf availability while decreasing the amount of time a store associate
spends locating product on the receiving dock or in overhead storage. We deployed our new overhead
management application on our FIRST phones, our web-enabled handheld devices, in fiscal 2018, which helps
associates locate product stored in overhead storage quickly and accurately, saving time, improving the customer
experience, and assisting with inventory management. In addition, we launched a new order management system
called “Order Up” to consolidate certain of our existing legacy systems into a simple and intuitive user interface that
requires minimal training and significantly decreases associate time required to create, sell, manage and edit
orders. These efforts allow our associates to devote more time to the customer and make working at The Home
Depot a better experience.
During fiscal 2018, we also enhanced our labor model to better align associate activity with customer needs, shifting
from a model based on the number of transactions to one that correlates to the specific volume of activity within
each store down to the department level. This change, which is now live in all stores, allows us to better allocate our
workforce to provide a best-in-class customer experience.
At the end of fiscal 2018, we employed approximately 413,000 associates, of whom approximately 29,000 were
salaried, with the remainder compensated on an hourly or temporary basis. To attract, reward, and retain qualified
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personnel, we seek to maintain competitive salary and wage levels in each market we serve. We also have a
number of programs to recognize stores and individual associates for exceptional customer service. In fiscal 2018,
as part of our strategic investments, we made a number of investments in our associates, including changes to our
benefits programs to eliminate a waiting period for new hires and an enhanced paid maternity and parental leave
program. We measure associate satisfaction regularly, and we believe that our employee relations are very good.
Interconnected Experience: Stores to Online, and Online to Stores
Our customers are shopping and interacting with us differently today than they did several years ago. As a result,
we have taken a number of steps to provide our customers with a seamless and frictionless interconnected
shopping experience across our stores, online, on the job site, and in their homes.
We do not view the customer experience as a specific transaction; rather, we believe it encompasses an entire
process from inspiration and know-how, to purchase and fulfillment and to post-purchase care and support. From
the inspirational point of the purchase journey to providing product know-how, we are investing in the infrastructure
and processes needed to deliver the most relevant marketing messages to our customers based upon what is
important for them t