COMPREHENSIVE PROBLEM 4 Home Depot, Inc. ANALYSIS OF THE FINANCIAL STATEMENTS OF A PUBLICLY OWNED CORPORATION This Comprehensive Problem is to acquaint you with the content of the fiscal year 2021 financial statements of Home Depot, Inc., reproduced in Appendix A of this textbook. (The 2021 financial statements are for the fiscal year ended January 30, 2022.) The problem contains three major parts, which are independent of one another: Part I is designed to familiarize you with the general contents of a company's financial statements; Part II involves analysis of the company's liquidity; and Part III analyzes the trend in its profitability.

If you work this problem as a group assignment, each group member should be prepared to discuss the group's findings and conclusions in class.

A good starting point for understanding the financial statements of a company such as Home Depot, Inc., is to understand the accounting policies used in preparing those statements. The first note accompanying the financial statements provides a description of the major accounting policies the company used. Many of the areas discussed in this note have been covered in this text.

Part I Annual reports include not only comparative financial statements but also other sources of information, such as:

A multi-year summary of selected information comparing key financial and other statistics for several years.

Selected Notes that accompany the financial statements.

Reports by management and by the independent auditors in which they express their respective responsibilities for the financial statements.

Discussion and analysis that present management's interpretation of the above information.

Instructions Answer each of the following questions and explain where in the statements, notes, or other sections of the annual report you located the information used in your answer.

How many years are covered in each of the primary comparative financial statements? Were all of these statements audited? Name the auditors. What were the auditors' conclusions concerning these statements?

Home Depot, Inc., combines its statement of retained earnings with another financial statement. Where are details about changes in the amount of retained earnings found?

Over the years presented, have the company's annual net cash flows been positive or negative from (1) operating activities, (2) investing activities, and (3) financing activities? Has the company's cash balance increased or decreased during each of these years?

Part II Assume that you are the credit manager of a medium-size supplier of building materials and related products. Home Depot wants to make credit purchases from your company, with payment due in 60 days.

Instructions As general background, read the first note to the financial statements, "Summary of Significant Accounting Policies." Next, compute the following for the 2021 and 2020 fiscal years. Round your current and quick ratios to two decimal places. Some calculations may require information from the selected financial information and management discussion and analysis.

Current ratio.

Quick ratio.

Page 695 Amount of working capital.

Change in working capital from the prior year.Working capital at the beginning of FY2020 was $4,395 million.

On the basis of your analysis in part a, does the company's liquidity appear to have increased or decreased during the most recent fiscal year? Does the 2021 change in cash and cash equivalents affect your decision?

Other than the ability of Home Depot to pay for its purchases, do you see any major considerations that should enter into your company's decision to sell products to Home Depot on credit? Explain.

Your company assigns each customer one of the four credit ratings listed below. Assign a credit rating to Home Depot, Inc., and write a memorandum explaining your decision. (In your memorandum, you may refer to any of your computations or observations in parts a through c, and to any information contained in the annual report.)

POSSIBLE CREDIT RATINGS Outstanding Little or no risk of inability to pay. For customers in this category, we fill any reasonable order without imposing a credit limit. The customer's credit is reevaluated annually.

Good Customer has good debt-paying ability but is assigned a credit limit that is reviewed every 90 days. Orders above the credit limit are accepted only on a cash basis.

Marginal Customer appears sound, but credit should be extended only on a 30-day basis and with a relatively low credit limit. Creditworthiness and credit limit are reevaluated every 90 days.

Unacceptable Customer does not qualify for credit.

Part III As general background, study the selected financial information.

Instructions Compute the following for the 2021 and 2020 fiscal years, rounding percents to one decimal place. Some calculations may require information from the selected financial information.

Percent change in net sales (relative to the prior year).

Percent change in net earnings.

Gross profit rate.

Net income as a percent of sales.

Return on average total assets.Total Assets at the beginning of FY2020 was $51,236 million.

Write a statement that describes your conclusion(s) concerning trends in Home Depot's profitability during the period covered in your analysis in part a above. Justify your conclusion(s).

Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors The Home Depot, Inc.:

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of The Home Depot, Inc. and subsidiaries (the Company) as of January 30, 2022 and January 31, 2021, the related consolidated statements of earnings, comprehensive income, stockholders' equity, and cash flows for each of the fiscal years in the three-year periodended January 30, 2022, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of January 30, 2022 and January 31, 2021, and the results of its operations and its cash flows for each of the fiscal years in the three-year period ended January 30, 2022, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of January 30, 2022, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated March 23, 2022 expressed an unqualified opinion on the effectiveness of the Company's internal control over financial reporting.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accountingfirm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidenceregarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Estimation of store shrink

As discussed in Note 1 to the consolidated financial statements, the majority of the Company's U.S. merchandise inventories are stated at the lower of cost (first-in, first out) or market as determined by the retail inventory method, which is based on a number of factors such as markups, markdowns, and inventory losses (or shrink). Shrink is the difference between the recorded amount of inventory and the physical inventory count. The Company calculates shrink based on actual inventory losses identified as a result of physical inventory counts during each fiscal period and estimated inventory losses occurring between physical inventory counts. The estimate for shrink occurring in the interim period between physical inventory counts is calculated on a store specific basis and is primarily based on recent shrink results.

We identified the evaluation of the estimation of store shrink occurring in the period between physical inventory counts and fiscal year-end as a critical audit matter. Evaluating the Company's estimation of shrink at the end of the fiscal year using interim inventory loss experience in U.S. retail stores involved auditor judgment.

The following are the primary procedures we performed to address this critical audit matter. We evaluated thedesign and tested the operating effectiveness of certain internal controls related to the process of developing theestimate of store shrink. We evaluated the appropriateness of the Company using interim physical inventorycounts to estimate inventory losses in U.S. retail stores at the end of the fiscal year by:

Evaluating the method and certain assumptions used; Testing the application of the method and certain assumptions used; Performing a current year trend analysis; and Performing a sensitivity analysis over the shrink reserve estimate.

/s/ KPMG LLP

We have served as the Company's auditor since 1979.

Atlanta, Georgia March 23, 2022

Table Summary: A table with a two-line heading for The Home Depot, Inc. has 3 columns and two section headers. The headers are titled Assets and Liabilities and Stockholders' Equity. Column 1 lists account names, while columns 2 and 3 are titled January 30, 2022, and January 31, 2021, and list dollar amounts. THE HOME DEPOT, INC. CONSOLIDATED BALANCE SHEETS in millions, except per share data January 30, 2022 January 31, 2021 Assets Current assets: Cash and cash equivalents $2,343 $7,895 Receivables, net 3,426 2,992 Merchandise inventories 22,068 16,627 Other current assets 1,218 963 Total current assets 29,055 28,477 Net property and equipment 25,199 24,705 Operating lease right-of-use assets 5,968 5,962 Goodwill 7,449 7,126 Other assets 4,205 4,311 Total assets $71,876 $70,581 Liabilities and Stockholders' Equity Current liabilities: Short-term debt $1,035 $ Accounts payable 13,462 11,606 Accrued salaries and related expenses 2,426 2,463 Sales taxes payable 848 774 Deferred revenue 3,596 2,823 Income taxes payable 158 193 Current installments of long-term debt 2,447 1,416 Current operating lease liabilities 830 828 Other accrued expenses 3,891 3,063 Total current liabilities 28,693 23,166 Long-term debt, excluding current installments 36,604 35,822 Long-term operating lease liabilities 5,353 5,356 Deferred income taxes 909 1,131 Other long-term liabilities 2,013 1,807 Total liabilities 73,572 67,282 Common stock, par value $0.05; authorized: 10,000 shares; issued: 1,792 shares at January 30, 2022 and 1,789 shares at January 31, 2021; outstanding: 1,035 shares at January 30, 2022 and 1,077 shares at January 31, 2021 90 89 Paid-in capital 12,132 11,540 Retained earnings 67,580 58,134 Accumulated other comprehensive loss (704) (671) Treasury stock, at cost, 757 shares at January 30, 2022 and 712 shares at January 31, 2021 (80,794) (65,793) Total stockholders' (deficit) equity (1,696) 3,299 Total liabilities and stockholders' equity $71,876 $70,581 See accompanying notes to consolidated financial statements.

Page A-3 Table Summary: A table with a two-line heading for The Home Depot, Inc. has 4 columns. Column 1 lists account names, while columns 2 to 4 are titled Fiscal 2021, Fiscal 2020, and Fiscal 2019 and list dollar amounts. THE HOME DEPOT, INC. CONSOLIDATED STATEMENTS OF EARNINGS in millions, except per share data Fiscal 2021 Fiscal 2020 Fiscal 2019 Net sales $151,157 $132,110 $110,225 Cost of sales 100,325 87,257 72,653 Gross profit 50,832 44,853 37,572 Operating expenses: Selling, general and administrative 25,406 24,447 19,740 Depreciation and amortization 2,386 2,128 1,989 Total operating expenses 27,792 26,575 21,729 Operating income 23,040 18,278 15,843 Interest and other (income) expense: Interest and investment income (44) (47) (73) Interest expense 1,347 1,347 1,201 Interest and other, net 1,303 1,300 1,128 Earnings before provision for income taxes 21,737 16,978 14,715 Provision for income taxes 5,304 4,112 3,473 Net earnings $16,433 $12,866 $11,242 Basic weighted average common shares 1,054 1,074 1,093 Basic earnings per share $15.59 $11.98 $10.29 Diluted weighted average common shares 1,058 1,078 1,097 Diluted earnings per share $15.53 $11.94 $10.25 See accompanying notes to consolidated financial statements.

Page A-4 Table Summary: A table with a two-line heading for The Home Depot, Inc. has 4 columns. Column 1 lists account names, while columns 2 to 4 are titled Fiscal 2021, Fiscal 2020, and Fiscal 2019 and list dollar amounts. THE HOME DEPOT, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME in millions Fiscal 2021 Fiscal 2020 Fiscal 2019 Net earnings $16,433 $12,866 $11,242 Other comprehensive (loss) income, net of tax: Foreign currency translation adjustments (77) 60 53 Cash flow hedges 9 8 8 Other 35 3 Total other comprehensive (loss) income, net of tax (33) 68 64 Comprehensive income $16,400 $12,934 $11,306 See accompanying notes to consolidated financial statements.

Page A-5 Table Summary: A table with a two-line heading for The Home Depot, Inc. has 4 columns and 5 section headers. The headers are titled Common Stock, Paid-in Capital, Retained Earnings, Accumlated Other Comprehensive Loss, and Treasury Stock. Column 1 lists account names, while columns 2 to 4 are titled Fiscal 2021, Fiscal 2020, and Fiscal 2019 and list dollar amounts. THE HOME DEPOT, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY in millions Fiscal 2021 Fiscal 2020 Fiscal 2019 Common Stock: Balance at beginning of year $89 $89 $89 Shares issued under employee stock plans 1 Balance at end of year 90 89 89 Paid-in Capital: Balance at beginning of year 11,540 11,001 10,578 Shares issued under employee stock plans 194 229 172 Stock-based compensation expense 398 310 251 Balance at end of year 12,132 11,540 11,001 Retained Earnings: Balance at beginning of year 58,134 51,729 46,423 Cumulative effect of accounting changes 26 Net earnings 16,433 12,866 11,242 Cash dividends (6,985) (6,451) (5,958) Other (2) (10) (4) Balance at end of year 67,580 58,134 51,729 Accumulated Other Comprehensive Loss: Balance at beginning of year (671) (739) (772) Cumulative effect of accounting changes (31) Foreign currency translation adjustments, net of tax (77) 60 53 Cash flow hedges, net of tax 9 8 8 Other, net of tax 35 3 Balance at end of year (704) (671) (739) Treasury Stock: Balance at beginning of year (65,793) (65,196) (58,196) Repurchases of common stock (15,001) (597) (7,000) Balance at end of year (80,794) (65,793) (65,196) Total stockholders' (deficit) equity $(1,696) $3,299 $(3,116) See accompanying notes to consolidated financial statements.

Page A-6 Table Summary: A table with a two-line heading for The Home Depot, Inc. has 4 columns and 4 section headers. The headers are titled Cash Flows from Operating Activities, Cash Flows from Investing Activities, Cash Flow from Financing Activities, and Supplemental Disclosures. Column 1 lists account names, while columns 2 to 4 are titled Fiscal 2021, Fiscal 2020, and Fiscal 2019 and list dollar amounts. THE HOME DEPOT, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS in millions Fiscal 2021 Fiscal 2020 Fiscal 2019 Cash Flows from Operating Activities: Net earnings $16,433 $12,866 $11,242 Reconciliation of net earnings to net cash provided by operating activities: Depreciation and amortization 2,862 2,519 2,296 Stock-based compensation expense 399 310 251 Changes in receivables, net (435) (465) (170) Changes in merchandise inventories (5,403) (1,657) (593) Changes in other current assets (330) 43 (135) Changes in accounts payable and accrued expenses 2,401 5,118 32 Changes in deferred revenue 775 702 334 Changes in income taxes payable (51) (149) 44 Changes in deferred income taxes (276) (569) 202 Other operating activities 196 121 184 Net cash provided by operating activities 16,571 18,839 13,687

Cash Flows from Investing Activities: Capital expenditures (2,566) (2,463) (2,678) Payments for businesses acquired, net (421) (7,780) Other investing activities 18 73 25 Net cash used in investing activities (2,969) (10,170) (2,653) Cash Flows from Financing Activities: Proceeds from (repayments of) short-term debt, net 1,035 (974) (365) Proceeds from long-term debt, net of discounts and premiums 2,979 7,933 3,420 Repayments of long-term debt (1,532) (2,872) (1,070) Repurchases of common stock (14,809) (791) (6,965) Proceeds from sales of common stock 337 326 280 Cash dividends (6,985) (6,451) (5,958) Other financing activities (145) (154) (140) Net cash used in financing activities (19,120) (2,983) (10,798) Change in cash and cash equivalents (5,518) 5,686 236 Effect of exchange rate changes on cash and cash equivalents (34) 76 119 Cash and cash equivalents at beginning of year 7,895 2,133 1,778 Cash and cash equivalents at end of year $2,343 $7,895 $2,133 Supplemental Disclosures: Cash paid for income taxes $5,504 $4,654 $3,220 Cash paid for interest, net of interest capitalized 1,269 1,241 1,112 Non-cash capital expenditures 421 274 136 See accompanying notes to consolidated financial statements.

Page A-7 THE HOME DEPOT, INC. SELECTED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Business

The Home Depot, Inc., together with its subsidiaries (the "Company," "Home Depot," "we," "our" or "us"), is a home improvement retailer that sells a wide assortment of building materials, home improvement products, lawn and garden products, dcor items, and facilities maintenance, repair and operations products, and provides a number of services, in stores and online. We operate in the U.S. (including the Commonwealth of Puerto Rico and the territories of the U.S. Virgin Islands and Guam), Canada, and Mexico.

Consolidation and Presentation

Our consolidated financial statements include our accounts and those of our wholly-owned subsidiaries. Intercompany transactions are eliminated in consolidation. Our fiscal year is a 52- or 53-week period ending on the Sunday nearest to January 31st. All periods presented include 52 weeks.

Use of Estimates

We have made a number of estimates and assumptions relating to the reporting of assets and liabilities, the disclosure of contingent assets and liabilities, and reported amounts of revenues and expenses in preparing thesefinancial statements in conformity with GAAP. While we believe these estimates and assumptions are reasonable, actual results could differ from these estimates, including changes due to uncertainty in the current economic environment resulting from the COVID-19 pandemic.

Cash Equivalents

We consider all highly liquid investments purchased with original maturities of three months or less to be cash equivalents. Our cash equivalents are carried at fair market value and consist primarily of money market funds.

Receivables

The following table presents components of receivables, net:

Table Summary: A table has 3 columns. The column headers are titled In Millions, January 30, 2022, and January 31, 2021. Column 1 lists account names, while columns 2 and 3 list dollar amounts. in millions January 30, 2022 January 31, 2021 Card receivables $ 1,028 $ 992 Rebate receivables 1,170 987 Customer receivables 703 571 Other receivables 525 442 Receivables, net $ 3,426 $ 2,992 Card receivables consist of payments due from financial institutions for the settlement of credit card and debit card transactions. Rebate receivables represent amounts due from vendors for volume and co-op advertising rebates. Customer receivables relate to credit extended directly to certain customers in the ordinary course of business. The valuation allowance related to these receivables was not material to our consolidated financial statements at the end of fiscal 2021 or fiscal 2020.

Merchandise Inventories

Inventory cost includes the amount we pay to acquire inventory, including freight and import costs, as well as operating costs associated with our sourcing and distribution network, and is net of certain vendor allowances. The majority of our merchandise inventories are stated at the lower of cost (first-in, first-out) or market, as determined bythe retail inventory method, which is based on a number of factors such as markups, markdowns, and inventory losses (or shrink). As the inventory retail value is adjusted regularly to reflect market conditions, inventory valued using the retail method approximates the lower of cost or market. Certain subsidiaries, including retail operations in Canada and Mexico, and distribution centers, record merchandise inventories at the lower of cost or net realizable value, as determined by a cost method. These merchandise inventories represent approximately 43% of the total merchandise inventories balance. We evaluate the inventory valued using a cost method at the end of each quarter to ensure that it is carried at the lower of cost or net realizable value, and the adjustments recorded to merchandise inventories valued under a cost method were not material to our consolidated financial statements at the end of fiscal 2021 or fiscal 2020.

Page A-8

Physical inventory counts or cycle counts are taken on a regular basis in each store and distribution center to ensure that amounts reflected in merchandise inventories are properly stated. Shrink (or in the case of excess inventory, swell) is the difference between the recorded amount of inventory and the physical inventory count. We calculate shrink based on actual inventory losses identified as a result of physical inventory counts during each fiscal period and estimated inventory losses between physical inventory counts. The estimate for shrink occurring in the interim period between physical inventory counts is calculated on a store-specific basis and is primarily based on recent shrink results. Historically, the difference between estimated shrink and actual inventory losses has not been material to our annual financial results.

Due to changes in operating conditions during fiscal 2020 as a result of the COVID-19 pandemic, we used the results from a sample of stores that were able to conduct physical inventories as a basis for estimating shrink for those stores at which physical inventory counts were temporarily suspended during fiscal 2020. We believe the sample of stores that were selected for inventory counts in fiscal 2020 provided a reasonable basis for estimating shrink where a physical inventory count was not performed in fiscal 2020. During fiscal 2021, we performed all regularly scheduled physical inventory counts, including store locations where physical inventory counts were suspended during fiscal 2020, and the difference between estimated shrink and actual inventory losses was not material.

Property and Equipment

Buildings and related improvements, furniture, fixtures, and equipment are recorded at cost and depreciated using the straight-line method over their estimated useful lives. Leasehold improvements and assets held under finance leases are amortized using the straight-line method over the original term of the lease or the useful life of the asset, whichever is shorter.

The following table presents the estimated useful lives of our property and equipment:

Table Summary: A table has 2 columns. Column 1 lists account names, while column 2 is titled Life and lists years. Life Buildings 5 - 45 years Furniture, fixtures and equipment 2 - 20 years Leasehold improvements 5 - 45 years We capitalize certain costs, including interest, related to construction in progress and the acquisition and development of software. Costs associated with the acquisition and development of software are amortized using the straight-line method over the estimated useful life of the software, which is three to seven years. Certain development costs not meeting the criteria for capitalization are expensed as incurred.

We evaluate our long-lived assets each quarter for indicators of potential impairment. Indicators of impairment include current period losses combined with a history of losses, our decision to relocate or close a store or other location before the end of its previously estimated useful life, or when changes in other circumstances indicate the carrying amount of an asset may not be recoverable. The evaluation for long-lived assets is performed at the lowest level of identifiable cash flows, which is generally the individual store level. The assets of a store with indicators of impairment are evaluated for recoverability by comparing their undiscounted future cash flows with their carrying value. If the carrying value is greater than the undiscounted future cash flows, we then measure the asset's fair value to determine whether an impairment loss should be recognized. If the resulting fair value is less than the carrying value, an impairment loss is recognized for the difference between the carrying value and the estimated fair value. Impairment losses on property and equipment are recorded as a component of SG&A. Impairment charges for long-lived assets were not material to our consolidated financial statements in fiscal 2021, fiscal 2020, or fiscal 2019.

Leases

We enter into contractual arrangements for the utilization of certain non-owned assets which are evaluated as finance or operating leases upon commencement, and are accounted for accordingly. Specifically, a contract is or contains a lease when (1) the contract contains an explicitly or implicitly identified asset and (2) we obtain substantially all of the economic benefits from the use of that underlying asset and direct how and for what purpose the asset is used during the term of the contract in exchange for consideration. We assess whether an arrangement is or contains a lease at inception of the contract.

We lease certain retail locations, warehouse and distribution space, office space, equipment, and vehicles. A substantial majority of our leases have remaining lease terms of one to 20 years, typically with the option to extend the leases for five-year terms. Some of our leases may include the option to terminate in less than five years. Thelease term used to calculate the right-of-use asset and lease liability at commencement includes the impacts of options to extend or terminate the lease when it is reasonably certain that we will exercise that option. When determining whether it is reasonably certain that we will exercise an option at commencement, we consider various existing economic factors, including market conditions, real estate strategies, the nature, length, and terms of the agreement, as well as the uncertainty of the condition of leased equipment at the end of the lease term. Based on these determinations, we generally conclude that the exercise of renewal options would not be reasonably certain in determining the lease term at commencement.

The discount rate used to calculate the present value of lease payments is the rate implicit in the lease, when readily determinable. As the rate implicit in the lease is rarely readily determinable, we use a secured incremental borrowing rate, which is updated on a quarterly basis, as the discount rate for the present value of lease payments.

Real estate taxes, insurance, maintenance, and operating expenses applicable to the leased property are generally our obligations under our lease agreements. In instances where these payments are fixed, they are included in the measurement of our lease liabilities, and when variable, are excluded and recognized in the period in which the obligation for those payments is incurred. Certain of our lease agreements also include rental payments based on an index or rate and others include rental payments based on a percent of sales. For variable payments dependent upon an index or rate, we apply the active index or rate as of the lease commencement date. Variable lease payments not based on an index or rate are not included in the measurement of our lease liabilities as they cannot be reasonably estimated, and are recognized in the period in which the obligation for those payments is incurred.

Leases that have a term of twelve months or less upon commencement are considered short-term in nature. Short-term leases are not included on the consolidated balance sheets and are expensed on a straight-line basis over the lease term. We have also elected to not separate lease and non-lease components for certain classes of assets including real estate and certain equipment.

Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.

Business Combinations

The assets and liabilities of acquired businesses are recorded at their fair values at the date of acquisition. The excess of the purchase price over the fair values of the identifiable assets acquired and liabilities assumed is recorded as goodwill. During the measurement period, which is up to one year from the acquisition date, we may record adjustments to the assets acquired and liabilities assumed with the corresponding offset togoodwill. Upon conclusion of the measurement period, any subsequent adjustments are recorded to earnings.

Goodwill

Goodwill represents the excess of purchase price over the fair value of net assets acquired. We do not amortize goodwill, but assess the recoverability of goodwill in the third quarter of each fiscal year, or more often if indicators warrant, by determining whether the fair value of each reporting unit supports its carrying value. Each fiscal year, we may assess qualitative factors to determine whether it is more likely than not that the fair value of each reporting unit is less than its carrying amount as a basis for determining whether it is necessary to complete quantitative impairment assessments, with a quantitative assessment completed periodically as facts and circumstances warrant. We completed our last quantitative assessment in fiscal 2019 and concluded that the fair value of our reporting units substantially exceeded their respective carrying values, including goodwill.

During the third quarter of fiscal 2021, we completed our annual assessment of the recoverability of goodwill for our U.S., Canada, and Mexico reporting units based on qualitative factors. We performed a qualitative assessment to determine if there were any indicators of impairment and concluded that while there have been events and circumstances in the macro-environment that have impacted us, we have not experienced any entity-specific indicators that would indicate that it is more likely than not that the fair value of any of our reporting units were less than their carrying amounts. There were no impairment charges related to goodwill for fiscal 2021, fiscal 2020, or fiscal 2019.

The following table presents the changes in the carrying amount of our goodwill:

in millions Fiscal 2021 Fiscal 2020 Goodwill, balance at beginning of year $ 7,126 $ 2,254 Acquisitions(1) 323 4,870 Other(2) 2 Goodwill, balance at end of year $ 7,449 $7,126 (1) Fiscal 2021 includes goodwill from a small acquisition completed during the second quarter. Fiscal 2020 includes goodwill related to the acquisition of HD Supply. See Note 12 for details regarding the HD Supply acquisition.

(2) Primarily reflects the net impact of foreign currency translation and immaterial acquisition-related measurement period adjustments.

Page A-9 Other Intangible Assets

Intangible assets other than goodwill are included in other assets on the consolidated balance sheets. We amortize the cost of definite-lived intangible assets over their estimated useful lives, which range up to 20 years. Intangible assets with indefinite lives are tested in the third quarter of each fiscal year for impairment, or more often if indicators warrant. During the third quarter of fiscal 2021, we completed our annual assessment of the recoverability of our indefinite-lived intangible assets based on quantitative factors and concluded no impairment losses should be recognized. There were no impairment losses related to intangible assets for fiscal 2021, fiscal 2020, and fiscal 2019.

The following table presents the gross carrying amount and accumulated amortization relating to intangible assets:

Table Summary: A table has 5 columns. Column 1 is titled In Millions and lists account names, while columns 2 and 3 are merged and titled January 30, 2022, with sub-columns labeled Gross Carrying Amount and Accumulated Amortization. Columns 4 and 5 are merged and titled January 31, 2021, with sub-columns labeled Gross Carrying Amount and Accumulated Amortization. Columns 2 to 5 list dollar amounts. January 30, 2022 January 31, 2021 in millions Gross Carrying Amount Accumulated Amortization Gross Carrying Amount Accumulated Amortization Definite-Lived Intangible Assets: Customer relationships $3,034 $(326) $2,965 $(157) Trade names 151 (8) 151 (1) Other 12 (9) 16 (11) Indefinite-Lived Intangible Assets: Trade names 649 649 Total Intangible Assets $3,846 $(343) $3,781 $(169) Our intangible asset amortization expense was immaterial for fiscal 2021, fiscal 2020, and fiscal 2019.

The following table presents the estimated future amortization expense related to definite-lived intangible assets as of January 30, 2022:

Table Summary: A table has 2 columns. The column headers are titled In Millions and Amortization Expense. Column 1 lists the fiscal years, while column 2 lists dollar amounts. in millions Amortization Expense Fiscal 2022 $180 Fiscal 2023 178 Fiscal 2024 178 Fiscal 2025 178 Fiscal 2026 178 Thereafter 1,962 Total $2,854

Debt

We record any premiums or discounts associated with an issuance of long-term debt as a direct addition or deduction to the carrying value of the related senior notes. We also record debt issuance costs associated with an issuance of long-term debt as a direct deduction to the carrying value of the related senior notes. Premium, discount, and debt issuance costs are amortized over the term of the respective notes using the effective interest rate method.

Derivative Instruments and Hedging Activities

We use derivative instruments in the management of our interest rate exposure on long-term debt and our exposure to foreign currency fluctuations. We enter into derivative instruments for risk management purposes only; we do not enter into derivative instruments for trading or speculative purposes. All derivative instruments are recognized at their fair values in either assets or liabilities at the balance sheet date and are classified as either current or noncurrent based on each contract's respective maturity. While we enter into master netting arrangements, our policy is to present the fair value of derivative instruments gross in our consolidated balance sheets.

Changes in the fair values for derivative instruments designated as cash flow or net investment hedges are recognized in accumulated other comprehensive income (loss) until the hedged item is recognized in earnings, which for net investment hedges is upon sale or substantial liquidation of the underlying net investment. Changes in fair value of outstanding fair value hedges and the offsetting changes in fair values of the hedged item are recognized in earnings. We record realized gains and losses from derivative instruments in the same financial statement line item as the hedged item.

Derivative instruments that are not designated as hedges, if any, are recorded at fair value with unrealized gains or losses reported in earnings each period in the same financial statement line item as the hedged item. Cash flows from the settlement of derivative instruments appear in the consolidated statements of cash flows in the same categories as the cash flows of the hedged item.

Insurance

We are self-insured for certain losses related to general liability (including product liability), workers' compensation, employee group medical, and automobile claims. We recognize the expected ultimate cost for claims incurred (undiscounted) at the balance sheet date as a liability. The expected ultimate cost for claims incurred is estimated based upon analysis of historical data and actuarial estimates.

Our self-insurance liabilities, which are included in accrued salaries and related expenses, other accrued expenses and other long-term liabilities in the consolidated balance sheets, were $1.3 billion at January 30, 2022 and January 31, 2021.

We also maintain network security and privacy liability insurance coverage to limit our exposure to losses such as those that may be caused by a significant compromise or breach of our data security. Insurance-related expenses are included in SG&A.

Treasury Stock

Treasury stock is reflected as a reduction of stockholders' equity at cost. We use the weighted-average purchase cost to determine the cost of treasury stock that is reissued, if any.

Net Sales

We recognize revenue, net of expected returns and sales tax, at the time the customer takes possession of merchandise or when a service is performed. Our liability for sales returns is estimated based on historical return levels and our expectation of future returns. We also recognize a return asset, and corresponding adjustment to cost of sales, for our right to recover the goods returned by the customer, measured at the former carrying amount of the goods, less any expected recovery cost. At each financial reporting date, we assess our estimates of expected returns, refund liabilities, and return assets. Adjustments related to changes in return estimates were immaterial in fiscal 2021, fiscal 2020, and fiscal 2019.

Net sales include services revenue generated through a variety of installation, home maintenance, and professional service programs. In these programs, the customer selects and purchases material for a project, and we provide or arrange for professional installation. These programs are offered through our stores, online, and in-home sales programs. Under certain programs, when we provide or arrange for the installation of a project and the subcontractor provides material as part of the installation, both the material and labor are included in services revenue. We recognize this revenue when the service for the customer is complete, which is not materially different from recognizing the revenue over the service period as the substantial majority of our services are completed within one week.

For products and services sold in stores or online, payment is typically due at the point of sale. When we receive payment from customers before the customer has taken possession of the merchandise or the service has been performed, the amount received is recorded as deferred revenue until the sale or service is complete. Such performance obligations are part of contracts with expected original durations of typically three months or less. As ofJanuary 30, 2022 and January 31, 2021, deferred revenue for products and services was $2.6 billion and $1.9 billion, respectively.

We further record deferred revenue for the sale of gift cards and recognize the associated revenue upon the redemption of those gift cards, which generally occurs within six months of gift card issuance. As of January 30, 2022 and January 31, 2021, our performance obligations for unredeemed gift cards were $1.0 billion and $839 million, respectively. Gift card breakage income, which is our estimate of the portion of our gift card balance not expected to be redeemed, is recognized in net sales and was immaterial in fiscal 2021, fiscal 2020, and fiscal 2019.

We also have agreements with third-party service providers who directly extend credit to customers, manage our PLCC program, and own the related receivables. We have evaluated the third-party entities holding the receivables under the program and concluded that they should not be consolidated. The agreement with the primary third-party service provider for our PLCC program expires in 2028, with us having the option, but no obligation, to purchase the existing receivables at the end of the agreement. Deferred interest charges incurred for our deferred financing programs offered to these customers, interchange fees charged to us for their use of the cards, and any profit sharing with the third-party service providers are included in net sales.

Cost of Sales

Cost of sales includes the actual cost of merchandise sold and services performed; the cost of transportation of merchandise from vendors to our distribution network, stores, or customers; shipping and handling costs from our stores or distribution network to customers; and the operating cost and depreciation of our sourcing and distribution network. Vendor allowances that are not reimbursement of specific, incremental, and identifiable costs are also included within cost of sales.

Page A-11

Vendor Allowances

Vendor allowances primarily consist of volume rebates that are earned as a result of attaining certain purchase levels and co-op advertising allowances for the promotion of vendors' products that are typically based on guaranteed minimum amounts with additional amounts being earned for attaining certain purchase levels. These vendor allowances are accrued as earned, with those allowances received as a result of attaining certain purchase levels accrued over the incentive period based on estimates of purchases. Volume rebates and certain co-op advertising allowances reduce the carrying cost of inventory and are recognized in cost of sales when the related inventory is sold.

Selling, General and Administrative

Selling, general and administrative expenses include compensation and benefits for retail and store support center associates, occupancy and operating costs of retail locations and store support centers, insurance-related expenses, advertising costs, credit and debit card processing fees, and other administrative costs.

Advertising Expense

Advertising costs, including digital, television, radio and print, are expensed when the advertisement first appears. Certain co-op advertising allowances that are reimbursements of specific, incremental, and identifiable costs incurred to promote vendors' products are recorded as an offset against advertising expense. The following table presents net advertising expense included in SG&A:

Table Summary: A table has 4 columns. The column headers are titled In Millions, Fiscal 2021, Fiscal 2020, and Fiscal 2019. Column 1 lists account names, while columns 2 to 4 list dollar amounts. in millions Fiscal 2021 Fiscal 2020 Fiscal 2019 Net advertising expense $ 1,044 $ 909 $ 904 Stock-Based Compensation

We are currently authorized to issue incentive and nonqualified stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, performance units, and deferred shares to certain of our associates and non-employee directors under certain stock incentive plans. We measure and recognize compensation expense for all stock-based payment awards made to associates and non-employee directors based on estimated fair values. The value of the portion of the award that is ultimately expected to vest is recognized as stock-based compensation expense, on a straight-line basis, over the requisite service period or as restrictions lapse. We include estimated forfeitures expected to occur when calculating stock-based compensation expense. Additional information on our stock-based payment awards is included in Note 8.

Income Taxes

Income taxes are accounted for under the asset and liability method. We provide for federal, state, and foreign income taxes currently payable, as well as for those deferred due to timing differences between reporting income and expenses for financial statement purposes versus tax purposes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted income tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of a change in income tax rates is recognized as income or expense in the period that includes the enactment date. We routinely evaluate the likelihood of realizing the benefit of our deferred tax assets and may record a valuation allowance if, based on all available evidence, we determine that it is more likely than not that some portion of the tax benefit will not be realized.

We recognize the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs.

We file a consolidated U.S. federal income tax return which includes certain eligible subsidiaries. Non-U.S. subsidiaries and certain U.S. subsidiaries, which are consolidated for financial reporting purposes, are not eligible to be included in our consolidated U.S. federal income tax return. Separate provisions for income taxes have been determined for these entities. For unremitted earnings of our non-U.S. subsidiaries, we are required to make an assertion regarding reinvestment or repatriation for tax purposes. For any earnings that we do not make a permanent reinvestment assertion, we recognize a provision for deferred income taxes. For earnings where we have made a permanent reinvestment assertion, no provision is recognized. See Note 5 for further discussion.

We recognize interest and penalties related to income tax matters in interest expense and SG&A, respectively, on our consolidated statements of earnings. Accrued interest and penalties related to income tax matters are recognized in other accrued expenses and other long-term liabilities on our consolidated balance sheets.

We are subject to global intangible low-taxed income ("GILTI") tax, an incremental tax on foreign income. We have made an accounting election to record this tax in the period the tax arises.

Page A-12Comprehensive Income

Comprehensive income includes net earnings adjusted for certain gains and losses that are excluded from net earnings and recognized within accumulated other comprehensive loss as a component of equity, which consist primarily of foreign currency translation adjustments. Accumulated other comprehensive loss also includes net losses on cash flow hedges that were immaterial as of January 30, 2022 and January 31, 2021. Reclassifications from accumulated other comprehensive loss into earnings were immaterial in fiscal 2021, fiscal 2020, and fiscal 2019.

Foreign Currency Translation

Assets and liabilities denominated in a foreign currency are translated into U.S. dollars at the current rate of exchange on the last day of the reporting period. Revenues and expenses are translated using average exchange rates for the period and equity transactions are translated using the actual rate on the day of the transaction. Cumulative foreign currency translation adjustments recorded in accumulated other comprehensive loss as of January 30, 2022 and January 31, 2021 were losses of $575 million and $498 million, respectively.

Recently Adopted Accounting Pronouncements

ASU No. 2019-12. In December 2019, the FASB issued ASU No. 2019-12, "Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes," as part of its overall simplification initiative to reduce costs and complexity of applying accounting standards while maintaining or improving the usefulness of the information provided to users of financial statements. Amendments include removal of certain exceptions to the general principles of Topic 740, "Income Taxes," and simplification in several other areas. On February 1, 2021, we adopted ASU No. 2019-12 with no material impact to our consolidated financial condition, results of operations or cash flows.

Recently Issued Accounting Pronouncements

ASU 2021-10. In November 2021, the FASB issued ASU No. 2021-10, "Government Assistance (Topic 832)," to improve the transparency of government assistance received by business entities that are accounted for by applying either the International Accounting Standards 20 grant model or Accounting Standards Codification 958-605 contribution model by analogy. Topic 832 requires disclosure of the nature of the transactions and the related accounting policy used, the line items on the balance sheet and income statement that are affected and the amounts applicable to each financial statement line item, and significant terms of the transactions. This standard is effective for fiscal years beginning after December 15, 2021 and should be applied either prospectively or retrospectively. Early adoption is permitted. We are currently evaluating the impact of ASU 2021-10 on our consolidated financial statements and related disclosures.

ASU 2020-04. In March 2020, the FASB issued ASU No. 2020-04, "Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting," which provides practical expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The expedients and exceptions provided by the amendments in this update apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued as a result of reference rate reform. These amendments are not applicable to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022. ASU No. 2020-04 is effective as of March 12, 2020 through December 31, 2022 and may be applied to contract modifications and hedging relationships from the beginning of an interim period that includes or is subsequent to March 12, 2020. While the discontinuance of LIBOR will impact our interest rate swap agreements and certain of our credit arrangements, we do not anticipate the transition to a new reference rate and adoption of this standard will have a material impact on our consolidated financial condition, results of operations, or cash flows.

Recent accounting pronouncements adopted or pending adoption not discussed above are either not applicable or are not expected to have a material impact on our consolidated financial condition, results of operations, or cash flows.

2. NET SALES AND SEGMENT REPORTING

We currently conduct our retail operations in the U.S., Canada, and Mexico, each of which represents one of our three operating segments. Our operating segments reflect the way in which internally-reported financial information is used to make decisions and allocate resources. For disclosure purposes, we aggregate these three operating segments into one reportable segment due to their similar operating and financial characteristics.

The following table presents net property and equipment, classified by geography:

Table Summary: A table has 4 columns. The column headers are titled In Millions, January 30, 2022, January 31, 2021, and February 2, 2020. Column 1 lists account names, while columns 2 to 4 list dollar amounts. in millions January 30, 2022 January 31, 2021 February 2, 2020 Net property and equipment - in the U.S. $ 22,696 $ 22,205 $ 20,302 Net property and equipment - outside the U.S. 2,503 2,500 2,468 Net property and equipment $ 25,199 $ 24,705 $ 22,770 No sales to an individual customer accounted for more than 10% of revenue during any of the last three fiscal years.

The following table presents net sales, classified by geography:

Table Summary: A table has 4 columns. The column headers are titled In Millions, Fiscal 2021, Fiscal 2020, and Fiscal 2019. Column 1 lists account names, while columns 2 to 4 list dollar amounts. in millions Fiscal 2021 Fiscal 2020 Fiscal 2019 Net sales - in the U.S. $138,920 $122,158 $101,333 Net sales - outside the U.S. 12,237 9,952 8,892 Net sales $151,157 $132,110 $ 110,225 The following table presents net sales by products and services:

Table Summary: A table has 4 columns. The column headers are titled In Millions, Fiscal 2021, Fiscal 2020, and Fiscal 2019. Column 1 lists account names, while columns 2 to 4 list dollar amounts. in millions Fiscal 2021 Fiscal 2020 Fiscal 2019 Net sales - products $145,745 $127,671 $105,194 Net sales - services 5,412 4,439 5,031 Net sales $151,157 $132,110 $110,225 The following table presents major product lines and the related merchandising departments (and related services):

Table Summary: A table has 2 columns. The column headers are titled Major Product Line and Merchandising Departments. Column 1 lists the particulars, while column 2 lists statements. Major Product Line Merchandising Departments Building Materials Building Materials, Electrical/Lighting, Lumber, Millwork, and Plumbing Dcor Appliances, Dcor/Storage, Flooring, Kitchen and Bath, and Paint Hardlines Hardware, Indoor Garden, Outdoor Garden, and Tools The following table presents net sales by major product lines (and related services):

Table Summary: A table has 4 columns. The column headers are titled In Millions, Fiscal 2021, Fiscal 2020, and Fiscal 2019. Column 1 lists account names, while columns 2 to 4 list dollar amounts. in millions Fiscal 2021 Fiscal 2020 Fiscal 2019 Building Materials $54,990 $46,521 $39,337 Dcor 50,437 43,415 37,386 Hardlines 45,730 42,174 33,502 Net sales $151,157 $132,110 $110,225 Note: Net sales for certain merchandising departments were reclassified in fiscal 2021. As a result, prior year amounts have been reclassified to conform with the current year presentation.

The following table presents net sales by merchandising department (and related services):

Table Summary: A table has 7 columns. Column 1 is titled Dollars in Millions and lists the particulars, while columns 2 and 3 are merged and titled Fiscal 2021, with sub-columns labeled Net Sales and % of Net Sales. Columns 4 and 5 are merged and titled Fiscal 2020, with sub-columns labeled Net Sales and % of Net Sales. Columns 6 and 7 are merged and titled Fiscal 2019, with sub-columns labeled Net Sales and % of Net Sales. Columns 2, 4, and 6 list dollar amounts, while columns 3, 5, and 7 list percentages. Fiscal 2021 Fiscal 2020 Fiscal 2019 dollars in millions Net Sales % of Net Sales Net Sales % of Net Sales Net Sales % of Net Sales Appliances $14,232 9.4 % $11,865 9.0 % $9,850 8.9 % Building Materials 9,823 6.5 8,656 6.6 7,712 7.0 Dcor/Storage 6,095 4.0 4,959 3.8 3,845 3.5 Electrical/Lighting 13,473 8.9 11,178 8.5 9,843 8.9 Flooring 9,225 6.1 8,156 6.2 7,443 6.8 Hardware 7,873 5.2 7,312 5.5 6,083 5.5 Indoor Garden 15,546 10.3 14,649 11.1 11,261 10.2 Kitchen and Bath 10,432 6.9 8,383 6.3 7,633 6.9 Lumber 13,344 8.8 11,309 8.6 7,894 7.2 Millwork 7,412 4.9 6,460 4.9 5,757 5.2 Outdoor Garden 10,317 6.8 9,602 7.3 7,595 6.9 Paint 10,453 6.9 10,052 7.6 8,615 7.8 Plumbing 10,938 7.2 8,918 6.8 8,131 7.4 Tools 11,994 7.9 10,611 8.0 8,563 7.8 Total $151,157 100.0 % $132,110 100.0 % $ 110,225 100.0 % Note: Certain percentages may not sum to totals due to rounding. Net sales for certain merchandising departments were reclassified in fiscal 2021. As a result, prior year net sales have been reclassified to conform with the current year presentation. Prior year percent of net sales data also reflects the new classifications.

SELECTED SECTION OF MANAGEMENT DISCUSSION AND ANALYSIS

Results of Operations

The tables and discussion below should be read in conjunction with our consolidated financial statements and related notes included in this report. The following table presents the percent relationship between net sales and major categories in our consolidated statements of earnings:

Table Summary: A table has 7 columns. Column 1 is titled Dollars in Millions and lists account names, while columns 2 and 3 are merged and titled Fiscal 2021, with sub-columns labeled Net Sales and % of Net Sales. Columns 4 and 5 are merged and titled Fiscal 2020, with sub-columns labeled Net Sales and % of Net Sales. Columns 6 and 7 are merged and titled Fiscal 2019, with sub-columns labeled Net Sales and % of Net Sales. Columns 2, 4, and 6 list dollar amounts, while columns 3, 5, and 7 list percentages. Fiscal 2021 Fiscal 2020 Fiscal 2019 dollars in millions $ % of Net Sales $ % of Net Sales $ % of Net Sales Net sales $151,157 $ 132,110 $110,225 Gross profit 50,832 33.6 % 44,853 34.0 % 37,572 34.1 % Operating expenses: Selling, general and administrative 25,406 16.8 24,447 18.5 19,740 17.9 Depreciation and amortization 2,386 1.6 2,128 1.6 1,989 1.8 Total operating expenses 27,792 18.4 26,575 20.1 21,729 19.7 Operating income 23,040 15.2 18,278 13.8 15,843 14.4 Interest and other (income) expense: Interest and investment income (44) (47) (73) (0.1) Interest expense 1,347 0.9 1,347 1.0 1,201 1.1 Interest and other, net 1,303 0.9 1,300 1.0 1,128 1.0 Earnings before provision for income taxes 21,737 14.4 16,978 12.9 14,715 13.3 Provision for income taxes 5,304 3.5 4,112 3.1 3,473 3.2 Net earnings $ 16,433 10.9 % $12,866 9.7 % $11,242 10.2 % Note: Certain percentages may not sum to totals due to rounding.

Table Summary: A table has 6 columns. Column 1 is titled Selected financial and sales data and lists account names, while columns 2 to 4 are titled Fiscal 2021, Fiscal 2020, and Fiscal 2019. Columns 5 and 6 are merged and titled % change, with sub-columns labeled Fiscal 2021 versus 2020 and Fiscal 2020 versus 2019. Columns 2 to 6 list percentages. % Change Selected financial and sales data: Fiscal 2021 Fiscal 2020 Fiscal 2019 Fiscal 2021 vs. 2020 Fiscal 2020 vs. 2019 Comparable sales (% change) 11.4 % 19.7 % 3.5 % N/A N/A Comparable customer transactions (% change) (1) (0.1)% 8.6 % 1.1 % N/A N/A Comparable average ticket (% change) (1) 11.7 % 10.5 % 2.5 % N/A N/A Customer transactions (in millions) (1) 1,759.7 1,756.3 1,616.0 0.2 % 8.7 % Average ticket (1) (2) $83.04 $74.32 $67.30 11.7 % 10.4 % Sales per retail square foot (1) (3) $604.74 $543.74 $454.82 11.2 % 19.6 % Diluted earnings per share $15.53 $11.94 $10.25 30.1 % 16.5 % (1) Does not include results for HD Supply, including the legacy Interline Brands business, which was integrated into HD Supply during the fourth quarter of fiscal 2021.

(2) Average ticket represents the average price paid per transaction and is used by management to monitor the performance of the Company, as it represents a primary driver in measuring sales performance.

(3) Sales per retail square foot represents sales divided by retail store square footage. Sales per retail square foot is a measure of the efficiency of sales based on the total square footage of our stores and is used by management to monitor the performance of the Company's retail operations as an indicator of the productivity of owned and leased square footage for these retail operations.

The material in this appendix includes the primary financial statements and selected other information that is referred to at various points in this textbook. The entire 2021 (year ending January 30, 2022) The Home Depot, Inc. annual report can be accessed at www.homedepot.com. (Access Investor Relations, Key Financial Reports, 2021 Annual Report.) Annual reports for subsequent years become available in the spring of each calendar year.