Home Depot

ANNUALREPORT2010

Dear Shareholders:

In 2010, we achieved our first year of positive sales growth since fiscal year 2006. Our comp sales increased by

2.9 percent, with total sales up 2.8 percent. Earnings per share from continuing operations were up 29.7 percent

from last year, reflecting positive sales growth, continuing benefits from our merchandising transformation

efforts and effective expense control.

Our sales growth occurred against a backdrop of continued weakness in the housing market. In the U.S., private

fixed residential investment as a percent of GDP reached a new 60 plus year low of 2.24 percent in the third

quarter of 2010. Despite this, we had positive comp sales for all four quarters of 2010, and by the end of 2010,

we were seeing strength across the U.S., as 49 of the 50 states had positive same store sales for the fourth quarter.

We view this as an indicator that our business can stabilize and improve even as the housing market remains

under stress.

As we look to 2011, we believe that GDP growth and improving customer sentiment will continue to lift our

business in the U.S. On the international front, our Canadian business had negative same store sales in the back

half of the year, reflecting the impact of the previous year’s home renovation tax credit. We expect this pressure

to continue in the beginning of 2011 but then dissipate later in the year. Our Mexican business posted its twentyninth quarter in a row of positive same store sales in the fourth quarter of 2010, and we expect it to continue this

trend in 2011. In China, we have reduced our store footprint, and we believe this will provide a more effective

platform for future performance and development.

In 2010, we continued to invest in our business. We maintained our focus on customer service, supply chain and

merchandising initiatives, as well as the development of our interconnected retail strategy.

Operationally, we made progress with customer service through...