The Home Depot

The statements confirm the episode's operating claims almost line for line. Gross margin is 33.3 percent, the level the hosts say the Nardelli years settled on. Cost of sales divided by average merchandise inventories gives 4.5 turns a year, the figure the hosts quote against Lowe's 3.3 and Costco's 13. And the 1979 financing trick is still on the balance sheet: accounts payable covered 51 percent of inventory at the end of fiscal 2024 and 45 percent at the end of fiscal 2025, which is the hosts' "about half of their inventory is financed by the suppliers" expressed as two numbers.

Return on equity is a different kind of number. Net earnings of $14,156 million against average stockholders' equity of about $9,700 million is 145 percent, and the decomposition shows why that figure describes the capital structure rather than the business: net margin of 8.6 percent, asset turnover of 1.64, and a leverage term of about 10, because average assets of $100.6 billion sit on an equity base of under $10 billion. Treasury stock of $95,971 million at cost stands against retained earnings of $94,537 million. Nearly every dollar the company has ever retained has gone to buying its own shares, 806 million of them held in treasury against 996 million outstanding, and in fiscal 2018, 2019 and 2021 equity was negative. Return on assets, 14 percent, is the comparable figure; the leverage term is the buyback history.

The fiscal 2025 cash-flow statement shows the episode's capital-allocation story in one column. Operating cash flow was $16.3 billion against capital expenditures of $3.7 billion and $5.4 billion of acquisitions. Dividends took $9.2 billion. Repurchases were zero, after $7.95 billion in fiscal 2023 and $649 million in fiscal 2024, because the $17.6 billion SRS purchase in fiscal 2024 was financed with $10 billion of new long-term debt and the buyback was paused. The hosts' "they actually pause stock buybacks here" is that zero.

The reading rule this suggests: once buybacks have engineered equity toward zero, ROE and the DuPont leverage factor stop describing the operating business, and the comparisons that still carry information are margin, inventory turns, return on assets, and cash returned against cash generated.

“They have what we mentioned earlier, where at any given time, about half of their inventory is financed by the suppliers who they haven't paid yet.”

Ben Gilbert · Acquired, The Home Depot (2026-09-14) · ch. Home Depot Today: Pro & DIY