2. Value Creation and Home Depot

Schlotzsky's Deli is a sandwich shop franchiser with franchises across the US. It saw much growth in the early '90's but has destroyed much of its value over the last five years. Net profit margins have fallen almost 7.5%. Long term debt is up from $3.1 million to $29.2 million and return on assets has fallen from 7.8% to 3.2%. Sales growth has been slowing in recent years, though the latest figure is still healthy at 13%.

Despite healthy though slowing sales, Schlotzsky's fall in value seems to be mainly a financial problem with the company, as non-financial measures are good. Income per employee is slightly above the industry average, while revenue per employee sits well above the average.

One problem area with Schlotzsky's value based management may be it's fairly recent expansion into corporate owned stores. The company opened three large stores in Texas, Schlotzsky's Deli Market Places, which test new sandwiches for the franchisees and sell homemade bread. This expansion may explain the large increase in long term debt over the last five years, and may be the key driver responsible for the company's value destruction.

Cavalier Homes makes manufactured homes throughout the South and in the Midwest. Its key market is low to middle-priced housing in these areas. This company too, has suffered a great deal of value destruction in the past few years.

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a statement on the customer service centered philosophy of Home Depot and that philosophy itself holds great value for the shareholder. Thus, Home Depot has been successful at value creation using both financial and non-financial measures. While the company is not likely to be able to sustain the current rate of value creation, there are no significant signs of a threat of value stagnation either. Therefore, it is likely that this company will continue to create value by implementing what appears to be a strong value based management philosophy. Example 2: Southwest Airlines Southwest Airlines is a relatively small discount regional airline. Aside from the obvious distinctions of size and industry, Southwest closely parallels Home Depot in many ways. Net profit margins have increased by nearly 3.5%, and return on assets is up from 5.6% to 8.4%. Finally, sales growth for Southwest has been close to 60% in five years. Long term debt for the Southwest Airlines has increased a bit more than that of Home Depot over the last five years, from $661 million to $871.1 million, with the majority of that increase happening over the last year. Like Home Depot, Southwest Airlines stresses customer service. As a result inco
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Approximate Word count = 1250
Approximate Pages = 5 (250 words per page)

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