Sep 14, 2026 · 3h 35m · acquired
Home Depot: The best-performing stock in the S&P 500 since IPO (Audio)
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In this exhaustive corporate history, Ben Gilbert and David Rosenthal explore how The Home Depot expanded from an improbable venture launched by fired retail executives into the best-performing S&P 500 stock since its 1981 IPO. The episode deconstructs how a customer-centric tradesperson workforce, specialized heavy-goods logistics, and disciplined capital allocation built an enduring $350 billion retail giant.
Statements from this episode (69)
Home Depot is the world's largest specialty retailer
“It is the world's largest specialty retailer.”
Home Depot is the 45th most valuable publicly traded company globally
“In fact, Home Depot is the 45th most valuable publicly traded company in the world, period.”
Home Depot IPO investment outperformed Apple's IPO return
“And astonishingly, if you put a thousand dollars into Home Depot and Apple and their IPOs and you held them all today, your investment in Home Depot would beat your investment in Apple.”
Home Depot compounded at nearly 25% annually with dividends for 45 years
“And if you reinvested the dividends that it paid out, it has compounded at nearly 25% per year for 45 years.”
Home Depot is the top-performing S&P 500 stock since its IPO
“That makes it the number one performing stock in the S&P. 500 in total investment return from the day that it went public to today.”
A $1,000 Home Depot IPO investment is worth about $17 million today
“So that thousand dollars invested in the IPO would be worth about 17 million dollars today.”
A $1,000 S&P 500 investment in 1981 grew to $170,000 today
“If you had bought the S&P 500 with that same thousand dollars instead of seventeen million dollars today, you would have 170,000.”
Home Depot has more employees than any bank globally or restaurant chain
“That's more than any big tech company in the US, except for Amazon, more than any bank in the world, more than almost every car company, hotel chain, more employees than any restaurant chain also.”
Rosenthal: 1970s conglomerates floated 19% stubs to keep financial consolidation
“There was this kind of crazy fad going on on Wall Street in the seventies here, which we're into now, where conglomerates would spin off these little 19% equity stubs of their various divisions and then float them publicly on the stock market. 19% being below …”
Rosenthal: Ken Langone is basically the greatest investment banker ever
“He is basically the GOAT investment banker.”
Rosenthal: Homeowners must spend 1% of home value yearly on maintenance
“The rule of thumb is that homeowners need to reinvest about one percent of the house's then market value into their home every year, just in maintenance, before you get into Improvement.”
Langone sold Handy Dan stock to Sigiloff for $25.50 after buying at $3
“He sells for 2550 a share that he started buying at three.”
Sigiloff manufactured union violations to fire Marcus, Blank, and Brill
“The reason that Ron gets fired too is the pretense that Sigloff trumps up is an accusation that the three of them had violated national labor relations rules in negotiating with unions. Sigloff starts a labor relations investigation against his own company to …”
Gilbert: Original Home Depot seed investors retained 91% of their ownership
“It ends up being that the original seed investors in Home Depot today, if they held all the way through Would have had about 91% of their original percentage of the company.”
Gilbert: Rejecting Home Depot deal cost Ross Perot $223 billion
“Ross Perot insisting on a Cadillac cost him 223 billion dollars. Assuming he held. Assuming he would have held.”
Gilbert: Home Depot's initial syndicate took 50% while founders retained 45%
“And the way the cap table breaks down now is the investors own 50%, Ken gets five percent in exchange for, you know, putting this deal together, finding the capital, and I think he put in something like a hundred K of his own. Yep, he put in a hundred K. And t…”
Gilbert: Half of Home Depot's inventory is financed by suppliers
“So this resulted in about half of the Home Depot's inventory at any given time actually being financed Buy the suppliers, which is still true today.”
Gilbert: Pat Farah gifted Home Depot stock to make previous investors whole
“All those investors who lost money, Pat felt so bad that later on he would give them shares of his Home Depot stock equivalent to the value That they had lost in his first venture to make them whole”
Gilbert: Home Depot's 45-year playbook was saturating one city before expanding
“This is actually the playbook that they would run for the next. 45 years is open in one city, saturate that city, become number one, and then move to the next city. Don't like sprinkle some stores here and there. No, go into a city with force.”
Rosenthal: Home Depot generated $7M in sales during its first six months in 1979
“By the end of the year, that first year there in 1979, they open the third store in Atlanta, And they do seven million dollars in total sales for just that like six month operating period of the first year.”
Gilbert: Early Home Depot took 30% gross margins via direct pallet deliveries
“They're getting deliveries directly from the manufacturers On a pallet into the store. So they can take relatively low margins, not, not Costco low, but 30% gross margins on these products, and they can offer these screamin' deals.”
Gilbert: High interest rate periods are great times to invest cheaply
“Even though, in theory, valuations should actually be depressed when interest rates are high, so it's actually a great time to be investing because you can pick up equities and income generating assets for cheaper than in low interest rate times.”
Rosenthal: Early Home Depot seed investors would have made over 50,000x
“By not cashing out here at a two X return, those investors, if they held to today, would have gotten well north of a 50,000 X return on their capital.”
Rosenthal: Home Depot raised $4M at a $32M valuation in its IPO
“They raise four million dollars in total in the IPO. At a thirty two million dollar initial market capitalization post offering.”
Rosenthal: Home Depot surpassed Lowe's as largest home retailer in 1989
“In 1989, they pass Lowe's to become the largest home improvement retailer in America.”
Rosenthal: None of Home Depot's 1980s warehouse copycats survive today
“Builder's Square, Home Club, Home Quarters Warehouse, Mr. Howe Warehouse. These are all copycats spun up in the 19 eighties. None of them are around today.”
Rosenthal: Specialty retail requires category-specific service beyond price, selection, and convenience
“In specialty retailing, it's not enough Just to have the classic holy trinity of price selection and convenience that Walmart and Costco and Amazon are all built on. You also need to serve the customer in ways that are wholly unique and specific to each specia…”
Gilbert: Gross margin dollars, not gross margin percentages, sustain retail businesses
“Because it's not the gross margin percentages that put food on the table, it's the gross margin dollars that put food on the table.”
Rosenthal: Thousands of early Home Depot associates became multimillionaires
“There are thousands and thousands of early Home Depot associates who became multimillionaires because of this.”
Gilbert: Home Depot was first scaled retailer offering broad employee equity
“This is really the first time that a scaled company, sort of at mass employment, has retail employees who are participating in this, like, giant wealth generation machine, and because it was compounding at 25% per year, I mean, it's the best thing they could h…”
Rosenthal: Home Depot offered hourly staff a 15% discount and downside protection
“The way it worked was, if you were a salaried employee, which started at assistant store manager, you got stock options. If you were an hourly employee, You couldn't be granted stock options, but you got this stock purchasing program, which in the early days t…”
Gilbert: In 1980, Home Depot saw 4x transactions of Lowe's despite 2x size
“In 1980, Home Depots were twice as large as Lowe's, and they carried three times as many products, which if you know us and our Costco zealotry, that sounds like a lot of danger. These are all downsides, right? But What ended up happening is they had four time…”
Gilbert: Returns increase in home improvement retail past certain SKU thresholds
“That, that, that is the kind of key insight behind the whole thing is that actually there are returns to your investment that increase once you get out beyond a certain skew count and out beyond a certain square footage.”
Gilbert: Average Home Depot DIY customer spends $330 annually across five visits
“The average Home Depot DIY customer interacts with the company about five times a year, spends about 330 dollars.”
Rosenthal: Home Depot agreed to historic gender discrimination settlement in 1997
“So first, that same year in 1997, the company agreed to one of the largest corporate gender discrimination lawsuit settlements in history up to that point.”
Gilbert: 75% of Home Depot store managers lack college degrees
“75% of store managers at Home Depot don't have a college degree.”
Gilbert: Extreme operational excellence can destroy entrepreneurial culture
“You can Operationally excellence yourself out of being entrepreneurial. If you take away all of people's ability to take ideas and act on them and have fun and all that stuff like you, that could kill the company.”
Rosenthal: Home Depot customer satisfaction fell to lowest among major US retailers
“So a couple of years into Nardelli's tenure, customer satisfaction among Home Depot shoppers falls to the lowest level of any major US retailer.”
Gilbert: Home Depot doubled revenue and expanded to 2,000 stores under Nardelli
“But David, they doubled their revenue and their profits, and they grew from 1100 stores to 2000 stores in five years.”
Rosenthal: Home Depot paid Bob Nardelli roughly $200 million over six years
“Nardelli also gets paid roughly two hundred million dollars by the board over the six years of his tenure running Home Depot.”
Rosenthal: Home Depot authorized $20B in buybacks and dividends without stock gains
“During Nardelli's tenure, he authorizes twenty billion dollars in share buybacks and dividends. That doesn't even move the stock price.”
Rosenthal: Lowe's stock rose 200% during Nardelli's tenure at Home Depot
“And meanwhile, during this same period, again, this is as the U.S. Housing bubble is reaching, you know, its peak inflation. Lowe's stock price is up 200%.”
Gilbert: Home Depot raised gross margins from ~29% to ~33% under Nardelli
“They took gross margin up, which results, of course, in more profits, but prices that aren't blow away. They're closer to market competitive. And actually, if you look at their gross margin profile, it's remained elevated ever since. So it's not a huge differe…”
Gilbert: Stock-based executive compensation encourages long-term value over short-term numbers
“If you're comped on the stock price, you don't care about the business's current performance. You just want investors to believe the story that you are storing up long-term value inside the company. So you Keep prices really low. You keep volume really high. Y…”
Rosenthal: Home Depot fired Nardelli with an $18M severance and $210M package
“Finally, on January second, 2007, Ken Langone calls a special board meeting in Dallas and the board fires Nardelli at this meeting. He gets an eighteen million dollar cash severance payable immediately and gets a quote unquote retirement package valued at two …”
Gilbert: Home Depot revenue and net income took seven years to recover
“For Home Depot, their revenue Would fall starting in 2007. It bottomed in 2010, and it actually did not get back to 2007 levels until 2014. So that's a seven year span, and it's the same story with net income where they were below their previous high watermark…”
Gilbert: Home Depot doubled store productivity over 11 flat-footprint years
“So remarkably, while they weren't opening new stores, they grew revenue from seventy billion to one hundred and thirty billion and net income from four billion to eleven billion, all by focusing on the return they could get from their existing stores. So sales…”
Gilbert: Opening new stores creates a crutch that undermines existing store productivity
“They'd always grown ever since founding by growing stores. It was this, like, safety net that we can, we will always show growth because we are always growing stores, which means, A, you don't really optimize the stores you have. You don't try to wring the ver…”
Gilbert: Frank Blake repurchased 30% of Home Depot's shares during his tenure
“So what they do with the 8.3 billion dollars, and this is ballsy, they put it all into buybacks. They just bet on themselves. They said, I think the best ROI thing we can do is buy Home Depot stock. With this eight billion dollars. So right away, they bought b…”
Rosenthal: YouTube unbundled Home Depot's core value of in-store DIY knowledge
“The internet actually represented a pretty big disruptive threat for Home Depot. Not from Amazon. We'll get to Amazon in a minute, but actually from YouTube, like you're unbundling the core value prop of the knowledge in the stores has gone, you know, first to…”
Rosenthal: Amazon's delivery network cannot handle heavy home-improvement bulk goods
“Amazon is not equipped to do this. I mean, can you imagine putting 200 cubic feet of lumber that weighs 6000 pounds on an Amazon delivery van? No, that is the amount of lumber you would need for a deck job. So Home Depot is actually pretty uniquely positioned …”
Gilbert: A major share of Home Depot e-commerce is in-store pickup
“At Home Depot, a giant chunk of the e-commerce is actually store pickup.”
Rosenthal: Home Depot can reach 90% of US homes within 24 hours
“90% of all homes in America can get anything they need for any project, so over a million SKUs delivered to their home or job site or a nearby store within two to 24 hours.”
Rosenthal: Specialized logistics insulated Home Depot from Amazon's retail dominance
“Amazon's eating everybody's lunch except Home Depot's because this is a highly Specialized, again, specialty retail, logistics and fulfillment chain, and Home Depot's built it out.”
Rosenthal: Home Depot revenue surged from $110B to $160B during COVID
“So during COVID, Home Depot's revenue growth goes nuts. It goes from one hundred and ten billion in revenue to about one hundred and sixty billion of revenue.”
Gilbert: Home Depot bought SRS for $18.25B in company's largest acquisition
“The next thing they do is they buy SRS in 2024. This is a giant deal, an 18 and a quarter billion dollar acquisition, the largest deal in the company's history.”
Gilbert: Owning prime retail real estate long-term protects against costly lease renegotiations
“Once capital stopped being an issue for them, and they started being free cash flow generative, they realized that actually a competitive advantage for us is lock up the best real estate and hold it forever, and don't get held hostage in a real estate negotiat…”
Gilbert: Home Depot failed in China because DIY culture lacks prestige
“They have moved to Canada, Mexico, you know, they're branching out in North America, but completely failed in China. They totally miscalibrated. Home improvement is not really a thing. A DIYer is not virtuous in China. Sort of like, why can't you have someone …”
Gilbert: Home Depot turns inventory 4.5 times annually versus 3.3 for Lowe's
“They turn their inventory about four and a half times per year compared to Lowe's turning 3.3.”
Gilbert: Power tool battery platforms create strong brand loyalty and switching costs
“I will, I think house brands are getting more interesting too, especially with electric tools. If you look at Ryobi, batteries create brand loyalty.”
Rosenthal: Lowe's CEO was groomed at Home Depot under Frank Blake
“And my favorite fact to sum up the state of the company and the business today is the CEO of Lowe's is a former Home Depot executive groomed under Frank Blake.”
Rosenthal: Falcons valuation makes Arthur Blank the wealthiest Home Depot co-founder
“So I think the Falcons are worth a minimum of ten billion and arguably more than that, which I think combined with his other assets and his remaining Home Depot stake makes Arthur the wealthiest of all of the co-founders of the Home Depot.”
Rosenthal: Frank Blake runs Bernie Marcus's $4B spend-down foundation
“Today, Runs Bernie Marcus's foundation. Which is about a four billion dollar spend down foundation.”
Rosenthal: Ken Langone has never sold a share of Home Depot
“And Ken Langone, the GOAT, is about to turn 91 years old, has never sold a share of Home Depot. His stake in the company is worth about six billion dollars today.”
Gilbert: Founding values matter at scale, but founding tactics do not
“The founding values are important, but the founding tactics are probably not.”
Gilbert: Home Depot is the only specialty retailer at Costco and Walmart scale
“Home Depot is the only specialty retailer in the world that is in the same universe as Costco and Walmart and Amazon retail.”
Gilbert: Home Depot holds 51% of U.S. home improvement market
“Used to be super fragmented, but today, Home Depot is 51% of the market. Lowe's is 29% of the market. The next highest is Menards with less than five percent of the market.”
Gilbert: U.S. home repair spending surged from $28B to $600B
“In 1975, US consumers spent twenty eight billion dollars on residential improvements and repairs. That was right before the company was founded, twenty eight billion. Five years later, that twenty eight billion grew to forty seven billion. Today, that number i…”