The housing and real estate meltdown was so epochal, and so persistent, that it’s easy to miss one piece of good news: the comeback of Home Depot (HD). Profits have surged at the retailer, and its stock has been on a multiyear tear, leaving rival Lowe’s and the S&P 500 in the dust. Home Depot CEO Frank Blake deserves plenty of credit for exiting less profitable businesses, such as one that supplied professionals (rather than do-it-yourselfers). But the unsung hero is Home Depot’s CFO for the past 11 years, Carol Tomé. Tomé, 55, showed a willingness to cut against the grain before the financial crisis and is demonstrating that tendency again today. “She is more than just CFO in terms of the respect she engenders from Wall Street and the board,” says Greg Melich, an analyst at ISI Group.
Tomé’s insights helped shield Home Depot before the housing storm struck. She saw that big-box retail growth would be curtailed by store saturation and the rise of online competitors. Tomé (pronounced toe-may) helped wean the company from relying on new stores to build revenue. “By 2005 the market was clearly becoming crowded,” she says. “We could open new stores, but it didn’t seem they’d create value.” Tomé successfully argued for investment in existing stores instead. That freed up cash right before the housing crash.
Later, as other companies slashed outlays in response to the financial crisis, Tomé tacked in the opposite direction. During the dark days of early 2009, Home Depot embarked on an ambitious overhaul. It shed an inefficient process in which each store ordered products individually and spent $300 million to construct centralized distribution centers, which have saved time and money in ordering costs. “Home Depot readjusted the structure of the company, which allowed it to recover margin lost during the downturn and grow,” says Melich. The company’s operating profit margins, which fell from 11.5% in 2005 to 7.4% in 2008, have rebounded to 10.5% without a significant recovery in home-improvement demand or the housing market.
Today Tomé is once again bucking trends: She has eschewed issuing corporate debt at a time when many other companies, enticed by record-low interest rates, are loading up on what they regard as “free” money. Home Depot’s debt-to-earnings ratio has dropped from 2.5 to 1.7 over the past year, while Lowe’ (LOW)s has risen from 1.8 to 2.3. Tomé isn’t predicting another 2008. But online competitors continue to roil retail, and multiple factors –– the presidential election, the fiscal cliff, the euro crisis, and a weak U.S. economic recovery — are creating uncertainty. In her view, adding debt just isn’t worth the risk. “Rates are low, without a doubt, but they will stay low for a while,” says Tomé, who is also on the board of the Federal Reserve Bank of Atlanta. “Remember all the low rates and M&A furor before the crisis and all of the leverage inside of those transactions? When there was volatility, those companies were crying.” Tomé may stumble one of these days, but this much is likely: Whatever her mistake, it won’t be the same one everyone else makes.
This story is from the October 29, 2012 issue of Fortune.