Common-Size Income Statement
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Home Depot Inc. pages available for free this week:
- Income Statement
- Statement of Comprehensive Income
- Analysis of Liquidity Ratios
- DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin
- Analysis of Geographic Areas
- Enterprise Value (EV)
- Price to FCFE (P/FCFE)
- Present Value of Free Cash Flow to Equity (FCFE)
- Return on Assets (ROA) since 2005
- Price to Book Value (P/BV) since 2005
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Home Depot Inc., common-size consolidated income statement
Based on: 10-K (reporting date: 2026-02-01), 10-K (reporting date: 2025-02-02), 10-K (reporting date: 2024-01-28), 10-K (reporting date: 2023-01-29), 10-K (reporting date: 2022-01-30), 10-K (reporting date: 2021-01-31).
The common-size income statement reveals several noteworthy trends over the six-year period. Generally, the company experienced initial improvements in profitability followed by a gradual decline in recent years. Cost of sales as a percentage of net sales consistently represents the largest deduction, remaining relatively stable around the -66% mark, with a slight increase in the latest two years.
- Gross Profit
- Gross profit, expressed as a percentage of net sales, demonstrates a consistent, albeit slight, downward trend, decreasing from 33.95% in 2021 to 33.32% in 2026. This suggests a potential erosion of pricing power or increasing input costs not fully offset by sales price adjustments.
- Operating Expenses
- Operating expenses as a percentage of net sales show an initial decrease from 2021 to 2022, followed by a consistent increase through 2026, reaching 20.63%. This increase is driven by both Selling, General and Administrative expenses and Depreciation and Amortization. The rise in Selling, General and Administrative expenses is particularly pronounced in the later years, indicating potentially increasing administrative overhead or marketing costs.
- Operating Income
- Operating income as a percentage of net sales initially improved from 13.84% to 15.27%, peaking in 2023. However, it has since declined to 12.68% in 2026. This decline aligns with the increasing operating expenses and the slight decrease in gross profit margin, indicating a weakening of core operational profitability.
- Net Earnings
- Net earnings as a percentage of net sales mirrors the trend in operating income, increasing from 9.74% to 10.87% and then decreasing to 8.60% in 2026. The decline in net earnings is less pronounced than the decline in operating income, suggesting some benefit from interest income and other items, and a decreasing effective tax rate.
- Interest Expense & Other Income
- Interest expense as a percentage of net sales has increased over the period, from -1.02% to -1.46%. While interest income and other items initially remained stable, it shows a decrease in the latest year. The net effect of interest and other income (expense) is a growing negative percentage of net sales, contributing to the overall decline in profitability.
- Provision for Income Taxes
- The provision for income taxes as a percentage of net sales has decreased from 3.11% to 2.70% over the period. This decreasing tax rate partially offsets the decline in earnings before taxes, but is not sufficient to maintain net earnings at earlier levels.
In summary, the company demonstrated initial improvements in profitability, but recent trends indicate a weakening of financial performance. Increasing operating expenses, coupled with a slight decline in gross profit margin, are key drivers of this trend. While a decreasing tax rate provides some offset, the overall trajectory suggests a need for attention to cost management and operational efficiency.