Ok, we're on for 7 pm. i've got carolyn's and Mark's #s please pass along 
others and i'll originate the call from here.
mark, all of your points are good one's, less discuss them on teh call.
best,
jeff



	"Vavrek, Carolyn (US - San Francisco)" <cvavrek@deloitte.com>
	02/07/2001 12:25 PM
		 
		 To: Jeff.Dasovich@enron.com
		 cc: chin@haas.berkeley.edu, Mark Guinney <Mark_Guinney@watsonwyatt.com>, 
sama@haas.berkeley.edu
		 Subject: RE: HD Case: Proposed Plan

I like your ideas - much better developed than in the draft memo.  I'm free 
at 7pm.  My home number is 285-7385.  Just patch me in.
- cv 
Carolyn M. Vavrek 
Manager - Human Capital Advisory Services 
Deloitte & Touche 
50 Fremont Street 
San Francisco, CA  94105 
phone: 415-783-5137 
fax: 415-783-8760 
e-mail: cvavrek@deloitte.com 

-----Original Message----- 
From: Jeff.Dasovich@enron.com [mailto:Jeff.Dasovich@enron.com] 
Sent: Wednesday, February 07, 2001 8:26 AM 
To: Vavrek, Carolyn (US - San Francisco) 
Cc: chin@haas.berkeley.edu; Jeff.Dasovich@enron.com; Mark Guinney; 
sama@haas.berkeley.edu 
Subject: Re: HD Case: Proposed Plan 


Hi folks: 
Since we have only one page, the write up for number 4 will have to be very 
brief.  Before writing it, though, I wanted to offer a few bullets 
regarding what angle we might take, and let folks respond, comment, 
counter, etc. before writing it up.  I'll clean and beef up once we've 
agreed to the approach we'd like to take to question #4.  Finally, I can 
work from my office on this this evening, which means that I can use the 
conference call capability of my office phone to patch everyone in if we'd 
like to do a conference call. If that's what folks would like to do, I'd 
prefer to do the call at around 7 PM.  Just let me know. 
Best, 
Jeff 
The question for #4 is: 
Stock price is down 23%, significant debt has already been tapped to 
support massive growth and covenants on that debt restrict taking on a lot 
more debt. 
What should HD do w.r.t. current operations and future growth strategy? 
     In the near term focus less on growth and more on getting margins and 
EBIT growth back in line with results from previous years.  (Management's 
Letter to Shareholders alludes to this, but it's difficult to determine 
whether management is just paying lip service to the need to capitalize on 
the growth spurt and grown earnings, or continue on the growth effort.) 
     With respect to funding future (more moderate growth), the company 
does have some room to increase long-term debt (e.g., current ratio for 
1986 = 2.26).  It seems that HD would get better terms and have increased 
flexibility by issuing additional debt rather than relying on lines of 
credit.  As such, HD ought to look those sources of funding and fill in any 
"funding gaps" with funds from the line of credit. 
     Given the significant drop in stock price, HD is likely better off in 
the near term 1) moderating growth, 2) improving performance to generate 
cash internally, and 3) using long-term debt issuance to provide the funds 
needed.  Once performance and stock price improves, then HD should consider 
a stock issuance. 
How can company improve operating performance? 
   Reduce selling, store operating expenses and pre-opening expenses 
   Improve receivables turnover 
   Improve inventory turnover 
   Improve per store/sales 
   Consider closing poor-performing stores 
   All of which will improve margins 
Should company change its strategy?  If so how? 
   Shift from meteoric growth to moderate, targeted growth, and focus on 
   generating positive cash flow from operations 
   Focus on improving performance at existing stores; specifically focus on 
   controlling costs and asset turnover and productivity 
   Consider another debt issuance rather than rely extensively on credit 
   line in order to decrease cost of funds and increase flexibility 

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