Unnamed: 0 int64 | symbol string | quarter int64 | year int64 | date string | company_name string | company_id float64 | text string |
|---|---|---|---|---|---|---|---|
2,800 | GS | 1 | 2,025 | 2025-04-14 09:30:00 | The Goldman Sachs Group, Inc. | 398,625 | David Solomon: Okay. I'll start. Denis can jump in. I mean, I hate, Mike -- I appreciate the question. I hate to go back to Denis' message, but I think -- and you and I have spoken about this over the years. Our number one priority is to deploy capital in the business where we can get marginal returns. We've done that consistently over the last five years. We've grown our business. We've deployed capital, but we've also been very clear that if we don't see places to deploy that capital and we have excess capital, we're going to consistently return it, including sustained growth in the dividend, where we've made a lot of meaningful progress. We've grown the earnings of the firm materially, and that's generating a lot of capital. And as Denis highlighted earlier, if we don't have a place to go in the business immediately, we have to return it. We can't market time, and so we'll return it consistently. We are confident that we're going to continue to have a big, diverse, strong-earning business. We are confident that we will have capital available to deploy when there are opportunities, but if we don't, we will continue to actively return it to shareholders. There will be some quarters where the stock price is higher, some quarters where the stock price is lower, but we're going to stick to that capital return philosophy, and I think it serves us very, very well. I think we've proven over a long period of time, certainly over the 26 years that we've been public, that we are very good stewards of capital. If we can't deploy it in the business for incremental returns, we're going to return it, get it back.
Mike Mayo: Was Denis going to add to that?
David Solomon: You don't have to if you don't have anything to add, but you can.
Denis Coleman: Do you have any follow-up question, Mike?
Mike Mayo: Well, it's just a specific amount of capital that could be freed up if and when you dispose of your private investments and your credit cards? It seems like that could be a pretty big number. |
2,801 | GS | 1 | 2,025 | 2025-04-14 09:30:00 | The Goldman Sachs Group, Inc. | 398,625 | David Solomon: Yeah. Sorry, Mike. I didn't get to that. Yeah, I didn't get to that. Denis can certainly make a comment on that.
Denis Coleman: Sure. So if you look at the HPI portfolio, we have approximately $4 billion of attributed equity, maybe a tad underneath that, and a reasonably similar amount across hard portfolio. That gives you some context for the aggregate magnitude.
Operator: Thank you. We'll take our next question from Steven Chubak with Wolfe Research.
Steven Chubak: Hi, good morning, David. Thanks for taking my questions. I had a two-parter on alternatives, David. I was hoping you could speak to bigger picture, just the outlook for sponsor activity across the complex, given some of the headwinds to realization activity as well as the heightened macro uncertainty you cited. And then just drilling down to the third-party alts disclosure, what contributed to that fee rate contraction on the credit side, just given the step down was meaningful? And I know that's a high priority growth area for you and the management team. |
2,802 | GS | 1 | 2,025 | 2025-04-14 09:30:00 | The Goldman Sachs Group, Inc. | 398,625 | David Solomon: Well, first, I'll comment on the macro, Steven. The size of the sponsor community, the amount of capital that's deployed, the assets that they hold and they control, it's quite significant. We've been talking about this for the last few quarters. There's no question there's been a pickup in activity and monetization because there's enormous LP community to increase DPI and start to bring this capital back. A macro environment will further put more pressure. That will be balanced by the fact that in the macro environment, some of the valuation expectations and realizations have to come down. I can't time it on a quarter-to-quarter basis. But the way I describe it, this is an enormous backlog that will come through the pipe at some point in time. And there's no firm better positioned to capitalize on that than Goldman Sachs. How that unfolds in the coming quarters will be activity. But I think more certainty with respect to the policy landscape will be needed to really accelerate that.
Denis Coleman: And, Steven, as you talk about fee rates coming through on the alts side, a number of different ways of feeding into our alts business, and they bring with them different levels of fees. So let’s take two ends of the spectrum. As we've had some growing our OCIO activities, a lot of those portfolios will include some component of alts and the fees in connection with that are lower. We obviously have sort of our own flagship funds that we launched. We gave some color on the types of asset classes that we're expecting to execute on over the near-term. That was a much higher level of fees. So overall, you see a 61 basis point disclosure, which was a couple of basis points of recent periods. But with the flagship launches, I expect that would improve over time. |
2,803 | GS | 1 | 2,025 | 2025-04-14 09:30:00 | The Goldman Sachs Group, Inc. | 398,625 | Steven Chubak: That's really helpful color. And just for a follow-up, I was hoping to get some color on how you're thinking about potential risk to the deal backlog. Certainly encouraging to see sequential increase in the fee backlog. But as we think about some of the risks, whether it's international and cross-border or specific sectors that are particularly challenged, how you're framing or potentially handicapping the risk of some of these deals coming out of the backlog?
David Solomon: Yeah. So I mean there are a couple of things, Steven, that I'd say, first of all, this is a little bit counterintuitive. But when the landscape changes, companies have to rethink their strategic positioning. And interestingly, when you look at dialogues, dialogues are increasing. Now obviously, increased dialogues take a while to turn into deals and play through. But Denis was quite clear we had a notable increase in our backlog. Our backlog is up a lot during the quarter. Obviously, revenues lag the period of deal announcements. So the backlog and the deal announcements are reflective of the second half of last year, the early part of this year. In a period of uncertainty, things will slow down. But again, it's a big complex world. There's a lot of change going on. Dialogues are up. I do think for a period of time, there'll be some uncertainty around how certain things that were close proceed forward. But I would expect a significant amount of M&A activity through the rest of the year. But obviously, if the landscape got more constrained, there's a risk of it slowing. But we're continuing to be out with clients doing the things that we do. And I don't see anything at the moment that leads me to believe that it's a fundamental shift in that activity.
Operator: We'll take our next question from Devin Ryan with Citizens.
Devin Ryan: Great. Good morning, David. Good morning, Denis. I want to continue the conversation, I guess, on the sponsors.
David Solomon: Good morning. |
2,804 | GS | 1 | 2,025 | 2025-04-14 09:30:00 | The Goldman Sachs Group, Inc. | 398,625 | David Solomon: Good morning.
Devin Ryan: Good morning. On the sponsors, obviously, on the asset management side of the business, fundraising for alts has been terrific. And as you guys pointed out, LPs are waiting for capital, so there's a lot of, I think, pressure on sponsors to return capital, but the IRRs on -- maybe the prior vintage that are being realized probably going to be great. So I'm just curious kind of your conversations with sponsors and fundraising. Is this an opportunity? Does it further differentiate Goldman? Or just any other color given some of that tension between sponsors today and the market trying to return capital and what LPs are demanding? |
2,805 | GS | 1 | 2,025 | 2025-04-14 09:30:00 | The Goldman Sachs Group, Inc. | 398,625 | David Solomon: Yeah. First of all, it's not clear to me that the returns from that vintage, if it’s realized over time, are going to be better or worse. I think it's early to say. But the big thing that's changing or putting pressure on fundraising, as the pace of capital return to the big capital allocators, has been less than they expected. And so as a result, because they're getting less back, the new capital that they're deploying into new funds is slowing until they get more back. That is balanced by the fact that we are still in long-term secular growth with respect to private assets and private asset allocation overall. And I continue to think that secular growth over the next 5, 10, 15 years is going to be meaningful as more people continue to shift to gain exposure to private assets. And by the way, that's not just institutional capital, I think you're going to see meaningfully more participation from individual investors and all sorts of forms the capital formation and potentially, ultimately, in retirement accounts, et cetera. So I think we're in the early stages of continued secular growth. I think the track record matters a lot and investment performance matters a lot. We from an investment performance perspective, are very, very focused on performance. Performance matters. We have a good history over 30 years of performing in these strategies. I think that matters a lot. But I think these are short-term phenomenon against long-term strategic shifts. And while there can be bumps or slowdowns, et cetera, I think the long-term direction of travel is really quite clear.
Devin Ryan: Okay. That's excellent. Thanks, David. And then just a quick follow-up on debt underwriting. It's been a really good story for Goldman. So I just love to maybe just hear a little bit about some of the -- whether it's cyclicality in the business, some of the other puts and takes that are kind of driving results. And then just the outlook from here, just given that it does seem like you guys are taking some share there. |
2,806 | GS | 1 | 2,025 | 2025-04-14 09:30:00 | The Goldman Sachs Group, Inc. | 398,625 | Denis Coleman: Sure. Thank you. So, obviously, debt underwriting is a huge business for us. We’ve been focused on it for a very, very long period of time. We gave our sort of market share positions at number two, across the noninvestment-grade components and more like a four in certain of the investment-grade categories. It's a big business for us. It's an important business for us. And we have a track record, I think, importantly, of delivering, particularly when there are elevated times of uncertainty. We have a track record of being good risk takers in that business. And when clients see an opportunity that an environment like this presents and they need to turn to a trusted counterparty who has the capability and the risk appetite to step up and support them, I think we have a long-standing track record of doing that. The last several quarters have been more benign from a credit perspective. You've seen the balance of activity, more refinancing and orientation, where we've obviously had a very meaningful role to generate our market share positions. But should there be opportunities on the forward to do more transaction-based activity, I think the firm is well set up to do that as well.
Operator: Thank you. We'll take our next question from Matt O'Connor with Deutsche Bank.
Matt O’Connor: Good morning. A follow up on the capital discussion. You seem to have managed the balance sheet really well this quarter both on the RWA and the leverage assets. Anything to call out on that because, again, like the standardized RWAs fairly went up. Advance went down. And usually, you see kind of the opposite where it goes up in the first quarter. So any balance sheet optimization that you did this quarter to call out? |
2,807 | GS | 1 | 2,025 | 2025-04-14 09:30:00 | The Goldman Sachs Group, Inc. | 398,625 | Denis Coleman: Look, I appreciate the question and the observation. We're proud of how we've managed all of those metrics while delivering the type of performance and market shares that we have. I think the way I would phrase it is, we are accustomed to operating our financial resources in a very nimble fashion, given where we sit. And I think our team collectively performed really well with what we refer to as keen eyes on risk management. We also have a keen eye on financial resource deployment. And so it is, as you see, it's a strong on a financial resource adjusted basis.
Matt O’Connor: Okay. And then separately, within the historical principal investment book, you had about a $600 million drop in a somewhat tough quarter. What's your thought process on the pace from here? And just remind us of that target, I think it was by the end of next year, you're targeting around $2 billion. Just wondering if that's right and still stands? Thank you.
Denis Coleman: Sure. Appreciate that. Obviously, for the last several years, we have been reducing our historical principal investments, what we call HPI. Several years ago, the balance was around $30 billion. If you went to the beginning of just last year, we had $16 billion and change of HPIs. We now sit with $8 and change billion of HPI. So we continue to meaningfully reduce those exposures. And we expect by the end of 2026, we'll have sold down the vast majority of exposures versus where we began, and we're committed to continuing to chip away at this. We have different sub-asset classes priced the HPI. Some are easier than others, but we have a plan to sell down, and we're going to continue to execute on that.
Operator: Thank you. We'll take our next question from Erika Najarian with UBS. |
2,808 | GS | 1 | 2,025 | 2025-04-14 09:30:00 | The Goldman Sachs Group, Inc. | 398,625 | Operator: Thank you. We'll take our next question from Erika Najarian with UBS.
Erika Najarian: Good morning. So, my first question is a follow-up on capital. So, David, given what you've said about the landscape and sort of freeing capital from the industry, we have strong momentum in terms of the stress test, GSIB surcharge recalibration and then Betsy mentioned the SLR. And the question for you is, you are already one of the most optimized businesses and financial services. If we do redefine the definition of excess capital for the industry broadly and for Goldman specifically, how are you going to allocate that freed-up capital? How does your -- where do your priorities go? I appreciate the whole -- the stack in terms of clients first and buybacks. But within the first within the business, are there any places where you would reallocate even more capital if we do free-up or change the definition of excess capital? |
2,809 | GS | 1 | 2,025 | 2025-04-14 09:30:00 | The Goldman Sachs Group, Inc. | 398,625 | David Solomon: Appreciate the question, Erika, and welcome to the team by the way. Happy to have you. Look, I know you're asking for probably more granularity than we'll give. But we have a zealous focus on finding opportunities to serve our clients. And when we need capital to serve them, making sure we have adequate capital to allocate there. Obviously, a significant -- if you look at our business today, and let's put the consumer -- what’s left of the consumer platform aside for the moment, when you look at our business today, the additional capital that gets allocated into the business broadly gets allocated into the banking markets franchise. We are prepared if there's opportunity there to allocate meaningfully more. But if there's not opportunity there, it's probably going to come back. That helps obviously support the growth in our dividend, the sustainable growth in our dividend. And it really is kind of our capital waterfall in the business or if not return it. I will say over time, and this all proportionate as we scale our alternatives platform, we use capital to start up new funds, to start up new platforms. So you could see some capital deployed there, but it's all going to be in the context of margin on that business. That business is running as a much more capital-light business on a go-forward basis than it did historically. And so if we do see this capital reform from a regulatory perspective, and I -- as I said earlier, I think there's a good chance of that happening, it is going to allow us to do two things. One, probably return more capital, but two, also in the context of how we think about things, find some people where we can deploy a little bit more to support clients, but we're going to watch it very carefully. The marginal -- the excess capital that we're keeping, the cushion that we're keeping is high. I don't think that's a normalized thing. And it's not just us, you can look across the industry that everybody is going to run with these excess capital cushions. When we get more, I |
2,810 | GS | 1 | 2,025 | 2025-04-14 09:30:00 | The Goldman Sachs Group, Inc. | 398,625 | us, you can look across the industry that everybody is going to run with these excess capital cushions. When we get more, I think, across the industry, there will be a reset of what those cushions should be when people feel like they're in a position to be able to plan over multiple years of the capital cycle. |
2,811 | GS | 1 | 2,025 | 2025-04-14 09:30:00 | The Goldman Sachs Group, Inc. | 398,625 | Erika Najarian: Got it. And my follow-up question is this. So there's been increased questions from investors about how global investment banks like Goldman, how the standing is impacted by some of the policy volatility, if you will, in terms of your internationally sourced revenues. And we had sort of two different answers from your peers on Friday. Jamie was a little bit more pessimistic. Ted was a little bit more optimistic about the international revenue outlook going forward, given all of the global policy and David and Denis, I wanted to get your thoughts on that, on whether or not what the US is doing could impact some of that sourcing.
David Solomon: Well, what we're hearing from clients, Erika, and I mean this is important is to be talking to clients. What we're hearing from clients, particularly clients in Europe and other places around the world, is they don't like the level of uncertainty, and they don't like the fact that certain constructs for how they interact with the US economic system, the global economic system are potentially changing. I would just say it's early to call heads or tails or direction of travel on how this will play out. We're listening to it carefully. At the same point, we want a huge scale and global franchise all over the world. We have extraordinary expertise and leadership positions and activities all over the world. And I don't see any decline in any way, shape or form of clients' interest in dealing with Goldman Sachs in any part of the world, and I don't expect that to change on any significant basis. But certainly, as we engage with clients, we're hearing questions on these things. I think it's early to declare one way or another as to whether or not at the margin, there's any effect from that. At the moment, all over the world clients are extremely engaged with the firm.
Operator: Thank you. We'll go next to Gerard Cassidy with RBC. |
2,812 | GS | 1 | 2,025 | 2025-04-14 09:30:00 | The Goldman Sachs Group, Inc. | 398,625 | Operator: Thank you. We'll go next to Gerard Cassidy with RBC.
Gerard Cassidy: Hi, Denis. Hi, David. Denis, you mentioned in your -- in answering your question about the HPI portfolio that you guys had just over $4 billion of CET1 capital, I think it was that supports that portfolio. Can you remind us how will you bleed that capital back in -- releasing it back in -- or just releasing it, I should say? I know when the 8.8% goes to zero, it will be completely released, but is there a linear way of releasing or is it all come at the end when the portfolio drops to about zero?
Denis Coleman: So, I appreciate the question, Gerard. And look, as we have been selling down that portfolio over time, we do free up capital and we have been returning a lot of that to shareholders. So we don't need to wait till the end of the sell-down exercise to release that capital. In fact, you should expect that it will be part of our capital management plan over the following quarters. And as we have this broader discussion around quantums and capacity to continue to return capital to shareholders, that is one of the drivers that will have us continuing to look to do that.
Gerard Cassidy: Very good. And then coming back, David, you've mentioned it a few times in your prepared remarks, but also in answering questions. Goldman is in a very unique position having this global view of the world because of your size and your presence. Can you give us any color on, with the uncertainties going forward, is -- are they more elevated here in the United States than when you talk to clients in Europe or Asia? If you had to live the land, where is the greatest uncertainty or the greatest worry when you talk to CEOs around the world? |
2,813 | GS | 1 | 2,025 | 2025-04-14 09:30:00 | The Goldman Sachs Group, Inc. | 398,625 | David Solomon: Gerard, I mean it's a good question. And I would say the level of uncertainty is up significantly, and it's partially up because growth was slowing down before we got to the implementation of trade policy. And the implementation of trade policy reset the prospect of forward growth pretty significantly all over the world. I would say that when you get outside of US and I listen to CEOs, I hear a greater sense of short-term concern, but everyone would like less uncertainty and more clarity on forward policy, and that's what we're hearing from clients. They want to understand where the policy will settle out, so that they can make capital decisions, investment decisions, planning decisions when you're talking to CEOs. When you're talking to investors, investors invest by predicting the future. And they'd obviously like less uncertainty so they can have a better window into predicting the future. My guess is over time, this level of uncertainty will come down. And my general message to people is to go slow and take a pause here until we have more clarity around a lot of these issues.
Operator: Thank you. We'll take our next question from Jim Mitchell with Seaport Global Securities.
Jim Mitchell: Hey, good morning. We've seen very strong results in equities across the industry at or near record levels. But the industry performance in FICC has been a lot more muted. In your opinion, is that FICC-- is that the FICC is already operating at a high level? Or do you see opportunities for aspects of that business to improve from here? Just trying to frame the outlook on FICC. |
2,814 | GS | 1 | 2,025 | 2025-04-14 09:30:00 | The Goldman Sachs Group, Inc. | 398,625 | Denis Coleman: I think you've seen the most notable sort of period-on-period growth across the equity line, particularly equity intermediation type activities. FICC obviously is not a uniform asset class, has multiple subcomponents to it, and you can have different sort of behavioral patterns across the subcomponents of FICC. But the FICC business and the FICC markets are absolutely enormous. The clients that participate across the components of FICC are some of the largest clients in the world. We expect there continue to be good opportunities to drive activity with clients across both FICC and equities.
David Solomon: And I'd also just caution you, Jim, we had an extraordinary first quarter in 2024. When you look at year-over-year comparisons, and by the way, not a there's a lot of activity in the first quarter of 2024, year-over-year comparisons sometimes can cloud. When you look at the growth in assets and resources over the last five years against the FICC business, the growth has been pretty meaningful.
Jim Mitchell: Sure. Yeah. No, I appreciate that. But just maybe thinking through what areas might be underperforming right now, if any, that could improve in a better environment versus just maybe the different components, which are doing well and which are doing -- or underperforming, if possible?
David Solomon: Well, I mean, it wouldn't surprise you, yeah, it will surprise you, for example, that there's enormous activity in volumes in currencies at the moment, given this shift that people are thinking about and looking at the dollar and selectivity levels there are extraordinarily high, record activity levels. One of the things that, again, I just highlight about these businesses, these are big, broad, deep, diverse global businesses, and one level can be -- one lever can be up, one lever could be down. But when you look at the performance over a period of time, when you look at that market's performance over the last five or six years, it's relatively steady with a little bit of growth. |
2,815 | GS | 1 | 2,025 | 2025-04-14 09:30:00 | The Goldman Sachs Group, Inc. | 398,625 | Operator: Thank you. We'll take our next question from Saul Martinez with HSBC.
Saul Martinez: Hi, good morning. Thank you for taking my question. I hate to beat a dead horse here on capital, but I did want to follow up on Betsy and Matt's questions, and what they mean for RWA progression? RWA is up slightly this quarter. Your peers had much bigger increases. Markets RWA is down, VaR is down. If I look at RWA density on a standardized basis, it came down quite a bit. It's at its lowest level I think that I can see in recent history. So just is there anything unusual in terms of RWA progression or VaRs or exposures? And how do we just rethink about RWA density and RWA progression from here because obviously it does matter in terms of forecasting CET1 ratios and the level of excess capital over time?
Denis Coleman: Sure. So, again, you're not beating a dead horse, but I think what we would say is we look at that very, very carefully. When we set our own business planning, we use our own form of RWA projections, we think about our own capacity to step in and support client activities. And we are meaningfully focused on those exposures that have high density versus low density. You can see us sort of moving out of certain exposures that have high capital density. Best example would be some of the historical principal investments. And we are feeding other activities, I can stay in the same segment for the moment like private wealth lending, which have a lower capital density and have an attractive recurring revenue component to them and also brings forth other types of activities with those clients. So we look across the entirety of the firm. We look across each and every segment. And we look at which of our client base activities are more or less capital consumptive and we try and make sure that we're supporting the clients with the products that they demand from us and doing it as a capital-efficient fashion as we can. |
2,816 | GS | 1 | 2,025 | 2025-04-14 09:30:00 | The Goldman Sachs Group, Inc. | 398,625 | Saul Martinez: Okay. That's helpful. Maybe just a follow-up with a very ticky-tacky question on tax rate. I think you mentioned 21%. I think the previous guidance was 20%, if I'm not mistaken, despite this quarter being -- having it benefited from some discrete items. But I guess, going forward, tax rate should be roughly in the 23% range for the rest of the year, if my math is right? I mean just any color on how to think about your tax rate going forward for the rest of the year? And what it looks like on a more normalized basis?
Denis Coleman: Sure. Our guidance, you take into account everything that we know about the first quarter and our outlook for this year is that you should expect the tax rate around 21% for the full year.
Operator: Thank you. We'll take our next question from Dan Fannon with Jefferies.
Dan Fannon: Thanks. Good morning. Just a follow-up on the outlook for the fee rate within Asset and Wealth. You talked about the OCIO wins and obviously, you continue to grow in bulk. So as you think about it on a longer-term basis, should this mix shift to be higher? Or do you think those will offset each other? Then also in the quarter, were there any placement fees in the context of the management fee as you reported it?
Denis Coleman: Sure. A couple of things. We did comment that placement fees were down sequentially versus the fourth quarter. That was one of the components in the other fee line. To take a step back, you have an aggregation represented in the effective fee of the alts business, but we don't manage the business to the average effective fee. We actually have multiple different strategies, and we have demand from different client subcomponents for those strategies. And so we're focused on building our different fund strategies in response to client demand, but not necessarily trying to boil it all down to one effective fee.
Dan Fannon: Understood. Thank you. |
2,817 | GS | 1 | 2,025 | 2025-04-14 09:30:00 | The Goldman Sachs Group, Inc. | 398,625 | Dan Fannon: Understood. Thank you.
Operator: Thank you. At this time, that will close our Q&A portion. Ladies and gentlemen, this concludes The Goldman Sachs first quarter 2025 earnings conference call. Thank you for your participation. You may now disconnect. |
2,818 | HD | 4 | 2,024 | 2025-02-25 09:00:00 | The Home Depot, Inc. | 278,679 | Operator: Greetings and welcome to the Home Depot Fourth Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Isabel Janci. Please go ahead. Thank you, Christine, and good morning, everyone. Welcome to Home Depot's fourth quarter and fiscal year 2024 earnings Joining us on our call today are Ted Decker, Chair, President and CEO Anne Marie Campbell, senior executive vice president. Billy Bastek, executive vice president of merchandising, and Richard McPhail, Executive Vice President and Chief Financial Officer. Following our prepared remarks, the call will be open for questions. Questions will be limited to analysts and investors And as a reminder, please limit yourself to one question with one follow-up. If we are unable to get to your question during the call, please call Investor Relations at 770-384-2387. Before I turn the call over to Ted, let me remind you that today's press release and the presentations made by our executives include forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. These statements are subject to risks and uncertainties could cause actual results to differ materially from our expectations and projections. These risks and uncertainties include, but are not limited to the factors identified in the release and in our most recent annual report on Form 10-Ks and our other filings with the Securities and Exchange Commission. Today's presentation will also include certain non-GAAP measures, including but not limited to adjusted operating margin, adjusted diluted earnings per share and return on invested capital. Great reconciliation of these and other non-GAAP measures to the corresponding GAAP measures, please refer to our earnings press release and our website. Now let me turn the call over to Ted. |
2,819 | HD | 4 | 2,024 | 2025-02-25 09:00:00 | The Home Depot, Inc. | 278,679 | Ted Decker: Thank you, Isabelle and good morning everyone. Sales for fiscal 2024 were $159.5 billion an increase of 4.5% from the same period last year. Comp sales declined 1.8% from the same period last year. And our U.S. Stores had negative comps of 1.8%. Adjusted diluted earnings per share were $15.24 compared to $15.25 in the prior year. In the fourth quarter, comp sales increased 0.8% from last year. And comps in our U.S. Stores were up 1.3%. Adjusted diluted earnings per share were $3.13 compared to $2.86 in the prior year. The quarter, we saw broad-based engagement across our geographies. As fifteen of our nineteen U.S. Regions delivered positive comps. In addition, both Canada and Mexico reported positive comps in local currency. Our fourth quarter results exceeded our expectations as we saw greater engagement home improvement spend despite ongoing pressure on large remodeling projects. Throughout the year, we remained steadfast in our investments across our strategic initiatives. Despite uncertain macroeconomic conditions and a higher interest rate environment that impacted home improvement demand. Our strategic priorities remain creating the best interconnected shopping experience, growing our pro wallet share through a unique ecosystem of capabilities, and building new stores. We are always improving our interconnect shopping experience. We know that our customers want faster delivery than ever before. Recall that last quarter I shared the progress we made with our investment in our downstream supply chain. Including an expanded assortment in our DFCs to allow for faster delivery speeds across more products. We also began leveraging our stores to offer more delivery options. Our delivery speeds are now the fastest they've ever been and customers are increasing their spend. Billy will take you through these results in a moment. Growing our share of wallet with our pro customers is a key part of our growth strategy. We've continued investing in our store experience, fulfillment options and sales teams. |
2,820 | HD | 4 | 2,024 | 2025-02-25 09:00:00 | The Home Depot, Inc. | 278,679 | is a key part of our growth strategy. We've continued investing in our store experience, fulfillment options and sales teams. These investments are delivering incremental sales growth and Anne will discuss this in detail shortly. In June, we completed the acquisition of SRS, And while we've only owned them for seven months, could not be happier with the business. The capabilities that SRS brings are both additive and complementary to our strategic efforts. As expected for fiscal 2024, SRS contributed $6.4 billion in sales for the seven months we owned them. And since we acquired them in June, they have opened over twenty greenfield locations, and completed four tuck-in acquisitions. We're also focusing on many cross-sell opportunities with SRS. As an example, we've talked about the opportunity with QuoteCenter. Our platform that provides real-time quote pricing in different fulfillment options for larger job lot quantities. SRS was already in quote center but not in all markets. Today, they are in nearly every market with their roofing products. And since making this change, have seen SRS's sales and quote center more than triple Going forward, we will continue to support SRS' momentum. We expect their organic sales to grow mid-single digits in fiscal 2025. Our real estate footprint remains one of our distinct competitive advantages. We are expanding that footprint by investing in new stores in areas that have experienced population growth or where it makes sense to relieve pressure on existing high volume stores. In fiscal 2024, we opened twelve new stores. Ten in the US and two in Mexico. We are seeing great results from these stores which are outperforming our expectations. For fiscal 2025, we plan to open thirteen new stores. For fiscal 2025, we expect total sales growth of comparable sales growth of approximately one percent, and adjusted diluted earnings per share to decline approximately two percent. We remain excited about all our growth opportunities. We feel confident that the investments we are making |
2,821 | HD | 4 | 2,024 | 2025-02-25 09:00:00 | The Home Depot, Inc. | 278,679 | two percent. We remain excited about all our growth opportunities. We feel confident that the investments we are making will set us up for continued success. I wanna close by thanking our associates for their hard work and dedication to our customers in the fourth quarter and throughout the year. Our results reflect strong execution by our stores, merchants and supply chain teams. As well as our vendor partners as they remain focused on delivering value and service to our customers. With that, let me turn the call over to Anne. |
2,822 | HD | 4 | 2,024 | 2025-02-25 09:00:00 | The Home Depot, Inc. | 278,679 | Ann-Marie Campbell: Thanks, Ted, and good morning, everyone. Our thoughts continue to be with everyone impacted by hurricanes Helene and Milton as well as the devastating fires in Los Angeles. We are here as these communities rebuild with our associates and suppliers who consistently go above and beyond to serve our customers. And I wanna thank them for all that they do. As you heard from Ted, growing our share of wallet with the pro is a key part of our growth strategy, and I'd like to take a moment to talk more about the progress we've made. For the quarter, all OPRA cohorts positive count. And it is clear that our initiatives are working. Over the last few years, we've made investments in our stores, as well as through our pro ecosystem to improve the shopping experience for all of our pros. Regardless of their purchase occasion. Whether they are shopping in store, online, or getting delivery from stores, or or distribution centers. We know that nearly all pro shop for stores. Over the years, we have been investing across our stores to simplify and enhance the in-store shopping experience through investments in our preschool process and technology to increase on-shelf availability, investments in inventory to provide a deeper assortment and job lot quantities in core skews. Enhancements in our labor model and the introduction of CSMs or dedicated customer experience managers. And the development of selling tools to provide better insights for our associates of Serve the Pro. In addition to these in-store investments, our investments in the FTC network have improved the in-store experience by taking many deliveries out of the store, which reduced clutter in the aisles from staged orders. As a result, our in-stock have improved and our associate availability is higher. The FTC has also enabled faster delivery, expanded fulfillment options, and more consistent on-time and complete delivery of larger orders directly to the job site. We also continue to build out a more comprehensive set of capabilities in our Pro |
2,823 | HD | 4 | 2,024 | 2025-02-25 09:00:00 | The Home Depot, Inc. | 278,679 | of larger orders directly to the job site. We also continue to build out a more comprehensive set of capabilities in our Pro ecosystem. These capabilities include a broader and deep assortment of products in the FTC, dedicated sales teams that provide a higher level of service, enhanced selling tools with CRM capabilities, to better serve our customers, additional digital capabilities through a b to b website, loyalty, and preferred pricing programs. It is all of these capabilities as well as enhancement in store that have really allowed us to win a greater share of wallet with all or pros. Our initiatives are originating with pros and not only are we gaining traction with a larger pro that works on complex projects, we're also seeing meaningful lift in sales with all pros across all purchase occasions. In fact, these investments have driven over $1 billion in incremental sales on an annualized basis in seventeen markets. Even in these seventeen markets, we are in different stages of maturity, and there's still a lot to do to better serve all our pros. From improving our delivery experience to building new capabilities like Tric and order management to leveraging SRS and improving connectivity with our stores. We know that as we invest across all of our assets, it will allow us to more uniquely serve the pro. We have a lot to be proud of this year. We continue to focus on delivering the best customer experience in home improvement We've seen great associate engagement and historically high retention rates. Our safety performance was exceptional and we've made significant progress in shrink driven by our company specific initiatives. All of these efforts are positioning us well and will allow us to continue to grow with all of our customers. Thank you. And with that, let me turn turn the call over to Billy. |
2,824 | HD | 4 | 2,024 | 2025-02-25 09:00:00 | The Home Depot, Inc. | 278,679 | Billy Bastek: Thank you, Anne, and good morning, everyone. Wanna start by also thanking all of our associates and supplier partners for their ongoing commitment to serving our customers and communities. As you heard from Ted, our performance during the fourth quarter exceeded our expectations as we saw broader engagement across home improvement related projects. In addition, we also saw incremental sales as a result of the ongoing hurricane recovery effort, However, higher interest rate environment continues to pressure larger remodeling projects. Turning to our merchandising department. Comp performance for the fourth quarter, Ten of our sixteen departments posted positive comps including appliances, indoor garden, Lumber. Power. Building materials, Paint. Outdoor garden, storage, hardware, and plumbing. During the fourth quarter, our comp transactions increased 0.6% and comp average ticket increased 0.2%. Inflation from core commodity categories positively impacted our average ticket by approximately twenty basis points driven by inflation in lumber and copper wire. Additionally, during the quarter, we continue to see our customers trading up for new and innovative products. Big ticket comp transactions are those over a thousand dollars we're up. Point nine percent. Compared to the fourth quarter of last year. We were pleased with the performance we saw in categories such as appliances, building materials and lumber. However, we continue to see softer engagement in larger discretionary projects for customers typically use financing to fund the project such as kitchen and bath remodels. During the fourth quarter, both pro and DIY comp sales were positive. With pro outpacing the DIY customer. In the fourth quarter, we saw strength across many pro heavy categories like gypsum, decking. Concrete. In fencing. Turning to total company online sales, excluding the impact of the extra week compared to the fourth quarter of last year. Are a lot of drivers to our online success. From the focus on continuously improving |
2,825 | HD | 4 | 2,024 | 2025-02-25 09:00:00 | The Home Depot, Inc. | 278,679 | to the fourth quarter of last year. Are a lot of drivers to our online success. From the focus on continuously improving the shopping and browsing experience, to enhancing the delivery and post delivery experience experience leveraging AI to enhance our chat features, product descriptions, and creating rating summaries for our customers. This quarter, I'd like to talk more specifically about delivery. As you heard from Ted, we remain focused on continuing to improve our interconnected experience. And have made significant progress on the delivery experience for our customers. We have invested in a broader assortment across our nineteen DFCs established partnerships with third party last mile providers, and made technology improvements across our two thousand plus stores to better utilize all of our assets for the benefit of our customers. Today, we have the fastest delivery speeds across the greatest number of products in company history. Our customers also have more fulfillment options than ever before. They can choose what they want, when they want. Including same day and next day delivery. We know that driving a superior customer experience, including speed of delivery, drives greater customer satisfaction, higher engagement, higher conversion, Nope. Ultimately, more sales. We've seen these customers who are engaging in our delivery capabilities meaningfully increase their overall spend with us across all purchase occasions and channels. During the fourth quarter, we hosted our appliance gift center, decorative holiday and a Black Friday event. We saw strong engagement across all of these events with our appliance and gift center events posting record sales years. We're looking forward to the year ahead, particularly with the spring selling season right around the corner and we have a great lineup of new and innovative products from live goods to outdoor power equipment. We continue to see an industry wide shift from gas powered to battery powered tools and we have been leaning into this trend for some time. |
2,826 | HD | 4 | 2,024 | 2025-02-25 09:00:00 | The Home Depot, Inc. | 278,679 | to see an industry wide shift from gas powered to battery powered tools and we have been leaning into this trend for some time. We have the brands that matter most to our customers, including Ryobi, Milwaukee. DeWalt, and Nikita. In our spring gift center event, we will provide our largest assortment of battery powered products with longer run times and enhanced performance across a number of battery RIAVI one, Milwaukee, m eighteen forge, DEWALT XR PowerPack and Power Stack, and Makita LXT to name a few. We're also excited about our live goods program. Each year, our merchants partner with a wide network of regional and local growers to ensure that our customers have new and improved varieties in the right localized assortment to enhance the overall garden experience. Investing in our relationships with our growers will allow us to continue to drive innovation to meet our customers' needs and improve their shopping experience while building loyalty to the Home Depot. As we look forward to spring, we are excited about continuing to provide a broad assortment of best in class products that are in stock and available for our when and how they need it. With that, I'd like to turn the call over to Richard. |
2,827 | HD | 4 | 2,024 | 2025-02-25 09:00:00 | The Home Depot, Inc. | 278,679 | Richard McPhail: In the fourth quarter, total sales were $39.7 billion an increase of $4.9 billion or approximately fourteen percent from last year. Fiscal 2024 included a fifty-third week which added approximately $2.5 billion in sales for the quarter and the year. During the first during the fourth quarter, our total company comps were positive 0.8% with comps of negative 1.7% in November positive 6.6% in December, and negative 2% in January. Comps in the US were positive 1.3% for the quarter, with comps of negative 2% in November positive 8% in December, and negative 1.4% in January. It is important to note that holiday shifts positively impacted December while negatively impacting November and January. Our results for the fourth quarter include a net contribution of approximately $220 million in hurricane related sales, which paused positively impacted total company comps by approximately sixty-five basis points for the quarter. Additionally, foreign exchange rates negatively impacted total company comps by approximately seventy basis points for the quarter. For the year, our sales totaled $159.5 billion an increase of $6.8 billion or 4.5% versus fiscal 2023. For the year, total company comp sales decreased 1.8% and US comp sales decreased 1.8%. In the fourth quarter, our gross margin was approximately 32.8% a decrease of twenty-five basis points from the fourth quarter last year, Reflecting a change in mix as a result of the SRS acquisition, which was in line with our expectations. For the year, our gross margin was an increase of approximately five basis points from last year, which was in line with our expectations. During the fourth quarter, operating expense as a percent of sales increased approximately thirty basis points to 21.5% compared to the fourth quarter of 2023. Our operating expense performance was in line with our expectations. For the year, operating expenses were approximately nine representing an increase of seventy-five basis points from fiscal 2023. Our operating margin for the fourth |
2,828 | HD | 4 | 2,024 | 2025-02-25 09:00:00 | The Home Depot, Inc. | 278,679 | approximately nine representing an increase of seventy-five basis points from fiscal 2023. Our operating margin for the fourth quarter was 11.3% compared to 11.9% in the fourth quarter of 2023. Excluding intangible asset amortization in the quarter, our adjusted operating margin for the fourth quarter was 11.7% compared to 12.1% in the fourth quarter of 2023. Our operating margin for the year was 13.5% compared to 14.2% in 2023. Excluding intangible asset amortization, our adjusted operating margin for the year was 13.8% compared to 14.3% in 2023. Interest and other expense for the fourth quarter increased by $150 million to $608 million due primarily to higher debt balances than a year ago. In the fourth quarter, our effective tax rate was 22.9% and for the year was approximately 23.7%. Our diluted earnings per share for the fourth quarter were $3.02 an increase of approximately 7% compared to the fourth quarter of 2023. Diluted earnings per share for fiscal 2024 were $14.91 a decrease of 1.3% compared to fiscal 2023. Excluding intangible asset amortization, our adjusted diluted earnings per share for the fourth quarter were $3.13, an increase of approximately 9.4% compared to the fourth quarter of 2023. Adjusted diluted earnings per share for fiscal 2024 were $15.24 essentially flat compared to fiscal 2023. During the year, we opened twelve new stores bringing our store count to two thousand three hundred forty-seven at the end of fiscal 2024. Retail selling square footage was approximately two hundred forty-three million square feet and total sales per retail square foot approximately six hundred dollars in fiscal 2024. At the end of the quarter, merchandise inventories were $23.5 billion up approximately $2.5 billion versus last year and inventory turns were 4.7 times up from 4.3 times last year. Turning to capital allocation. During the fourth quarter, we invested approximately $1.1 billion back into our business in the form of capital expenditures. This brings total capital expenditures for fiscal 2024 to |
2,829 | HD | 4 | 2,024 | 2025-02-25 09:00:00 | The Home Depot, Inc. | 278,679 | billion back into our business in the form of capital expenditures. This brings total capital expenditures for fiscal 2024 to approximately $3.5 billion. And during the year, we paid approximately $8.9 billion in dividends to our shareholders. Today, we announced our board of directors increased our quarterly dividend by 2.2% to $2.30 per share which equates to an annual dividend of $9.20. Per share. And finally, during fiscal 2024, we returned approximately $600 million to our shareholders in the form of share repurchases. Computed on the average of beginning and ending long-term debt and equity for the trailing twelve months, Return on invested capital. Was approximately 31.3% down from 36.7% in the fourth quarter of fiscal 2023. Now I'll comment on our outlook for 2025. As you heard from Ted, we feel great about the investments we made in 2024 the progress we've made throughout the year, and the significant opportunities we have as we look ahead. And while there are signs that the home improvement market is on the way towards normalization, Uncertainties still remain. As we look ahead to fiscal 2025, We expect the underlying momentum in the business that we saw in the back half of 2024 to continue into 2025. However, we are not assuming any meaningful changes to the macroeconomic environment. We expect our consumer will remain healthy We are not assuming a change in the rate environment nor improvements in housing turnover. As a result, we would expect continued pressure on larger remodeling projects. Given these factors, our fiscal 2025 outlook is for total sales growth to outpace sales comp with sales growth of approximately positive 2.8% and comp sales growth of approximately positive 1%. Compared to fiscal 2024. Total sales growth will benefit from the SRS acquisition, The new stores we opened in fiscal 2024 and plan to open in fiscal 2025. And for the year, we expect SRS to deliver mid-single digit organic Growth. Our gross margin is expected to be approximately 33.4% essentially flat compared to fiscal |
2,830 | HD | 4 | 2,024 | 2025-02-25 09:00:00 | The Home Depot, Inc. | 278,679 | mid-single digit organic Growth. Our gross margin is expected to be approximately 33.4% essentially flat compared to fiscal 2024. Further, we expect operating margin of approximately 13% and adjusted operating margin of approximately 13.4%. This primarily reflects natural deleverage from sales and continued investments across the business as well as reflecting the mix impact from the SRS acquisition. Our effective tax rate is targeted approximately 24.5% We expect net interest expense of approximately $2.2 billion We expect our diluted earnings per share to decline approximately 3% compared to fiscal 2024 when comparing the fifty-two weeks in fiscal 2025 to the fifty-three weeks in fiscal 2024. We expect our adjusted diluted earnings per share to decline approximately 2% compared to fiscal 2024. On a fifty-two week basis, it would be essentially flat compared to fiscal 2024. We plan to continue investing in our business with capital expenditures of approximately 2.5% of sales for fiscal 2025. We believe that we will grow market share in any environment by strengthening our competitive position with our customers delivering the best customer experience and home improvement. Before opening the call for questions, we are pleased to announce that we will be holding an investor conference on December 9, 2025 in New York City. We will share more details in the future but for now, please hold the date. Thank you for your participation in today's call. And Christine we are now ready for questions. |
2,831 | HD | 4 | 2,024 | 2025-02-25 09:00:00 | The Home Depot, Inc. | 278,679 | Operator: Thank you. We will now be conducting a question and answer session. Our first question comes from the line of Laura Ng with Morgan Stanley. Please proceed with your question.
Simeon Gutman: Good morning. It's it's Simeon Gutman from Morgan Stanley. My first question is on the macro housing backdrop. And the ingredients to a one percent comp. So existing home sales look like they're set to grow mid singles. And if that's the case, home improvement demand could arguably be a little stronger than maybe a one comp or whatever assumption you're using. What's your take on that? I know Richard said we're not assuming any improvement in turnover. Is there anything changed about is any change about your forecast due to people staying in their homes longer and rates being stubborn? |
2,832 | HD | 4 | 2,024 | 2025-02-25 09:00:00 | The Home Depot, Inc. | 278,679 | Ted Decker: Hi, Simeon. Yes. At this point, while we've seen a little life in turnover in Q4, we're not expecting meaningful increase of that forty year low. We've we've likely reached the bottom of housing turnover at about three percent of units. But We're not expecting a big rebound nor significant increases in new housing starts. However, if you if you just step back, I mean, if you look at our customer, they they remain very healthy. We we look at our customer today. We think about a hundred and ten thousand dollars average income Those incomes have been growing. We've talked about the increase in home equity values up fifty percent since the end of twenty nineteen and then wealth effect through through stock market and other investments. So our our customer is very healthy. And as you say, if they're staying in their homes longer, they will take on larger remodeling projects as opposed to moving those that are locked into to lower interest rates or or just not wanting to to get mortgages with with the higher rates. But we're not anticipating a large decrease in mortgage rates. It will be more issue of of cost of of consumers getting used to these higher rates and to take on a larger project, it's usually finance. And that financing is through HELOCs. And we've started to see a little increase in in each of cash out refi's as well as draws on HELOCs. But there's literally trillions of dollars of equity Built up. In in US housing. And as homes continue to age and people are staying in those homes, and realize that, you know, we're highly unlikely to see the low interest rates we saw over the past two, three years. That they'll eventually tap that equity and do the larger remodeling projects. We're just not sure that turn comes in twenty twenty five at at a dramatically accelerated paste. And to follow-up on the one percent, just to to explain that, Simeon, Obviously, this is a triangulation We look at exit run rates of the business And and as we said, keep in mind that q four while certainly showing signs of |
2,833 | HD | 4 | 2,024 | 2025-02-25 09:00:00 | The Home Depot, Inc. | 278,679 | We look at exit run rates of the business And and as we said, keep in mind that q four while certainly showing signs of momentum, growing. From q three still had some benefits from hurricanes that don't fully repeat in twenty twenty five. So a slight dampening of the run rate and then the assumption of continued pressure on larger projects, With the shape of the year increasing slightly through the year, which also includes the inclusion of SRS in our comp. You'll you'll see them in our comp for the last seven months of the year. |
2,834 | HD | 4 | 2,024 | 2025-02-25 09:00:00 | The Home Depot, Inc. | 278,679 | Simeon Gutman: K. That's helpful. The follow-up, if comps do end up being a little stronger than one, does each point flow through at this ten points of leverage to the margin Is or is there a scenario Whether it's you know, better DIY, more pro, more complex project, or do you spend more? Is there a mix shift that could alter that relationship above one?
Richard McPhail: No. I I I think I think, look, the the ten basis points is a is a good rough estimate of leverage from that point.
Simeon Gutman: Great. Good luck to you. You're not gonna have meaningful shifts in in in mix. Even if mix shifts, you're not gonna have meaningful meaningful differences in that leverage number. Thank you.
Operator: Our next question comes from the line of Christopher Horvers with JPMorgan. Please proceed with your question.
Christopher Horvers: Good morning, everybody. I wanted to go at a similar kind of question maybe on a different angle. Appliances were paint was up. You know, was that was that volume driven? And and to what extent do you think the category was up versus Home Depot you know, continuing to gain share? Because as you look forward, the replacement cycle cycle dynamics should get better from four q levels. You'll be five years out, know, Ted, you've talked about in the past, every every well was painted in the US and and twenty twenty, but we're getting further from there. So it doesn't that replacement part of the business further accelerate And curious if you were gonna say, like, well, you know, x percent of the business is replacement versus y percent is, you know, more like big ticket remodel, which would, you know, we expect to continue to be an anchor. |
2,835 | HD | 4 | 2,024 | 2025-02-25 09:00:00 | The Home Depot, Inc. | 278,679 | Ted Decker: Sure, Chris. Let let me make a broad comment and then and Billy can can give some detail on particular categories. Look at if we just step back and look at this quarter We're we're happy with it. Right? Sales, exceeded our expectations. And we're we're happy with with positive comps, obviously, for the first time in two years, and particularly happy with positive transaction comps. Which is been negative for over three years. And as you say, the the business is strengthened across many categories and in many geographies. In fact, we haven't seen This broader base performance in over two years in and maybe even closer to three years. And if you go back Chris, to your to your comment on on COVID, I'd say that shift of of spending back to services post COVID, and the pull forward of demand during the pandemic. Those have largely played out. There may be a category here and there, but but I'd say that PC shift in home improvement pull forward have have largely played out. And engagement in repair in smaller updates and decor oriented updates is strengthening and Billy can give some detail on the categories. Yeah. You know, listen, as Ted mentioned, you know, the broader base performance I talked about, the ten Of the sixteen departments that posted positive comps, we had an outperform Chris, as you mentioned, in appliances in our gift center, business, which, you know, we had record sales candidly, you know, in that in those areas across the store. So we had a healthy balance of transactions and unit performance which Ted's point, we haven't seen I mean, a while. With that said, still the pressure we know in finance projects, we had great performance across many of our pro heavy categories. I mentioned gypsum and decking. Concrete, fencing, and while there was some hurricane, impact in there, you know, we're pretty pleased with the broad base of performance you know, not only across the merchandising department, but certainly across the country. But there's just no denying the you know, the deferral that |
2,836 | HD | 4 | 2,024 | 2025-02-25 09:00:00 | The Home Depot, Inc. | 278,679 | the merchandising department, but certainly across the country. But there's just no denying the you know, the deferral that we're still seeing. We we are pleased with the pull forward that we think is largely know, behind us at this point from a go forward standpoint. So So all those things bode well, but still the pressure and some of the you know, more finance projects, we're still continuing to see, you know, to see that exist. |
2,837 | HD | 4 | 2,024 | 2025-02-25 09:00:00 | The Home Depot, Inc. | 278,679 | Christopher Horvers: Got it. And then, Richard, can you talk about the monthly U. S. Comps adjusting for the for the holiday shift? There's been a lot of questions, I think, over the past five, six weeks on what's going on with the consumer. Saw F and D talk about a, you know, slowdown relative to what they saw in the fourth quarter, and they talk about weather. So can you talk about, do you think, you know, that the weather had any influence on the business in in January in in any comment on exit rate? Thanks very much.
Richard McPhail: I think that so, you know, the the monthly progression was absolutely Influenced by holiday shifts, Again, to the benefit of December to the detriment of November and January, but no doubt weather was horrible in January. We've had two years in a row of tough January, but this one was was particularly tough. And so that's why we don't read a tremendous amount into it when we think about exit run rate, but no doubt weather had an impact.
Christopher Horvers: Great. Thanks very much. Have a great spring.
Ted Decker: Thanks.
Operator: Our next question comes from the line of Michael Lasser with UBS. Please proceed with your question.
Michael Lasser: Good morning. Thank you so much for taking my question. What market share assumption have you embedded into your twenty twenty five outlook? And why wouldn't it be reasonable for us to assume that Home Depot's market share gains do accelerate from here and be above where they've been historically in light of you now having SRS as well as many more capabilities given the investments that have been made over the last several years, is that a sign that you think your DIY market share is starting to peak and that could have an impact on the overall overall share gains for the Enterprise. |
2,838 | HD | 4 | 2,024 | 2025-02-25 09:00:00 | The Home Depot, Inc. | 278,679 | Ted Decker: Hi, Michael. Thanks for the question. As we look at the overall market for for twenty twenty five. We see it overall being flat you know, maybe up slightly, Those expectations have come down over the last several months. And r plus one, as Richard explained, is is a continuation of some of the underlying strength in the business and our initiatives that we absolutely are are gaining incremental sales for us. So that's why, you know, we we peg our comp growth at one percent. Now if you look at the the combination of of what's driving our share gain for both pro and consumer in the core, it is all the capabilities that that we're putting in the marketplace. We we talked a lot about interconnected and all the investments we've made on the interconnected journey. And then certainly all the investments on our pro ecosystem and and I'll have Jordan spend a few minutes more on what we're doing on Interconnected. And then you add what we're doing with SRS, you know, SRS will grow fast than the core, and we believe they're taking share in each of their three verticals. So we're very pleased with what SRS is doing. So all that with our our new stores, which are starting to add some some meaningful dollars to our growth, Gets us to the the one percent comp and 2.8% overall growth in a flat market. So we wouldn't say our our share has peaked by any means in DIY or pro. And then Jordan, if you chat about what we're doing to drive share in pro and consumer Yeah. With interconnections. Sure. So I mean, we Billy Billy shared the excitement we have had on dot com sales performance, and that's really across both the consumer and the pro, both of them up healthily. Online. And it's been a combination of investments that we made that have helped deliver that. From the site experience and really making that journey so much better from a from a browse and search perspective and finding the right product to the fulfillment. Billy mentioned that we've had the fastest delivery speeds in the history of our company, same day |
2,839 | HD | 4 | 2,024 | 2025-02-25 09:00:00 | The Home Depot, Inc. | 278,679 | product to the fulfillment. Billy mentioned that we've had the fastest delivery speeds in the history of our company, same day delivery, next day delivery, whether that's concrete and lumber or whether that's a light bulb or power tool. Been really fast and we and and all of those investments come together to really drive an improvement in conversion rate on the site. And then what we see is an increased engagement across channel with more purchases that come in store. So we're real excited about the momentum there. And see the investments that we've made really really paying off. |
2,840 | HD | 4 | 2,024 | 2025-02-25 09:00:00 | The Home Depot, Inc. | 278,679 | Michael Lasser: Thank you for that. My follow-up question is on what's been happening as of late. There's been a lot of focus on the impact that the government efficiency measures and or immigration policy implementation could have on the US consumer How did you factor that and those considerations into the guidance? And while you had just indicated that weather was really the underlying cause of some of the results in January. Are you seeing any evidence that these factors are having an impact on the business? There's been talk about housing inventory in the mid Atlantic starting to creep higher So anything you could provide that would be very helpful.
Ted Decker: Michael, I don't think we've we've seen anything specifically. If you tick through some of the things You mentioned in in some some I'd add, you know, tax policy would be know, one of the most important to Home Depot is a full taxpayer, so we'd be very pleased the corporate rate stays at twenty one percent Tariffs is obviously a lot of discussion on what rates what countries would be impacted and what categories of goods We've been through that before and I think we have the best team to manage through. Any tariff environment, which would impact the industry broadly, I'd say our diversification efforts out of certain concentrations in countries has been quite good over the last six or seven years. You mentioned immigration, You know, we've talked about having a shortage of skilled trades folks in the country, for some time. We we believe it's like, four hundred odd thousand trades folks short And not sure how that number would would change with any any meaningful change in in immigration And then specifically to the government efficiency in mid Atlantic, no, we've we've not seen anything there.
Michael Lasser: Thank you very much, and good luck.
Ted Decker: Thank you.
Operator: Our next question comes from the line of Scott Ciccarelli with Truist. Please proceed with your question. |
2,841 | HD | 4 | 2,024 | 2025-02-25 09:00:00 | The Home Depot, Inc. | 278,679 | Operator: Our next question comes from the line of Scott Ciccarelli with Truist. Please proceed with your question.
Scott Ciccarelli: Good morning, guys. Anne talked about a a billion dollars of incremental sales in the seventeen markets where you've started to build out complex pro capabilities. How do you actually measure that? And then what kind of ramp would you expect in those markets in twenty five as you continue to phase in order management, credit expansion, etcetera, some of the other capabilities that you've discussed. Thanks. |
2,842 | HD | 4 | 2,024 | 2025-02-25 09:00:00 | The Home Depot, Inc. | 278,679 | Ann-Marie Campbell: Yes. Thank you, Scott. Yeah. As we mentioned that we're incredibly pleased with what we've seen so far. We're generating a billion dollars and growing. So that's been fantastic. And as we mentioned this well, you know, it's geared across all of participation. The way we measure that is the incremental sales in the seventeen markets versus what we see in the top forty markets. So the billion dollars of annualized sales is that in those seventeen markets, we have been outperforming all the top top forty markets. And so you think about twenty twenty five, we we're focused on really maturing the capabilities in these seventy markets, which is really important. Not only maturing the existing capabilities, but really, really rolling out new capabilities as well. So whether it be delivery, expanding our sales force, those are key things that we'll continue to focus on. As well as new capabilities as we talk about trade credit, order management, account management. Those are opportunities that we have continue to grow in twenty twenty five. And Ted talked about SRS. And there's also an opportunity for us to really drive cross at an opportunity across SRS portfolio. Last but not least, we have more FPCs in the pipeline as well. We have three FPCs under construction We have more in the pipeline. So we're incredibly pleased with what we've seen. Twenty twenty four when you think about the seventeen markets. Across, four company and compared to the top forty markets But more importantly, what we've seen with the pro ecosystem across the country as well and making sure that we're doubling down on the, you know, opportunities that we see.
Scott Ciccarelli: Appreciate that. What what's the biggest sticking point as you roll this out? Is it building, especially, Salesforce? Is it the the recognition from your complex pros, etcetera? Like, what what what's the toughest piece that you Kinda learned that, you'd have to what what her what's your toughest hurdle you have to clear? |
2,843 | HD | 4 | 2,024 | 2025-02-25 09:00:00 | The Home Depot, Inc. | 278,679 | Ann-Marie Campbell: Yes, Scott. This is, you know, what we continue to find. This is an entire entire ecosystem. Right? So it's not just one component of the ecosystem. Right? When we talk about the outside sales or we talk about delivery, or we talk about order management and account management. It's all of those things working in concert. So what you know, is always kinda difficult is as you roll these capabilities out and they are different levels of maturity, our focus is to refine and really perfect what we're seeing. And that takes time in a market, especially when you're building relationships. We don't wanna create new relationships with our new capabilities with our pros. And then have big failure points. So the difficult part is making sure that we're doubling down and moving at a speed that drives outcomes, but the same time that we're focused on perfecting within the market. So it's incredibly complex. It is really important that we do this right. And in twenty twenty four, we saw some really, really great progress, and that's what makes us excited about what we will do in twenty twenty five and beyond. Thank you.
Operator: Our next question comes from the line of Karen Short with Melius Research Please proceed with your question.
Karen Short: Hi. Thanks very much and good to talk to you. So I had one question regarding guidance. And another totally unrelated. So actually intangibles in terms of operating margin guidance, So so should we look at that as the right way to think about the relationship between sales growth and operating margin growth. I. E. Excluding intangible impact from SRS, on your guidance.
Richard McPhail: Yes. Yes. Karen, We believe that removing the noncash amortization expense related to the amortization of intangible assets is the best way to look at our underlying operating margin. And so that's where we would we we have guided for last couple of quarters and will continue to guide on the basis of moving forward. |
2,844 | HD | 4 | 2,024 | 2025-02-25 09:00:00 | The Home Depot, Inc. | 278,679 | Karen Short: So how should we And and it includes Karen, by the way, it includes it include we we the operating margin is adjusted for all non cash amortization expense at the Home Depot. Not just that related to SRS.
Karen Short: Okay. Thank you. So how should we think about the relationship on total sales growth versus operating margin or operating profit growth on the way you define it.
Richard McPhail: Reverse de lever is essentially the same. When you're looking at adjusted operating margin versus versus GAAP operating margin. So there's no change needed in the way that we've talked about leverage or deleverage in the past.
Karen Short: Okay. And is two point five percent of sales the rate run rate to think about on capex?
Richard McPhail: So, you know, historically, we've said two percent is a is sort of a rough expectation. We we have increased That percentage really to to reflect two things. Number one, obviously, we're we're happy with the investments we've made. They are generating exceptional returns, and so we're leaning into those investments. But second, you know, a big part of that investment portfolio are our new stores. And it's it's worth calling our new SOAR program out. In twenty twenty three, we announced we would build eighty stores over five years. Including the year twenty twenty three. We are twenty five stores into that program. So far, the results have been fantastic. We're tracking ahead of expectations. So we are going to continue, and and we will complete That program this year will be the third year of the program. We'll complete it by year five, which is twenty twenty seven. So that two point five percent of sales is is reflective of that new store program as well as leaning into investments that are working.
Karen Short: Okay. Great. Thank you so much. You are?
Operator: Our next question comes from the line of Steven Seguin with Citi. Please proceed your question. |
2,845 | HD | 4 | 2,024 | 2025-02-25 09:00:00 | The Home Depot, Inc. | 278,679 | Operator: Our next question comes from the line of Steven Seguin with Citi. Please proceed your question.
Steven Seguin: Hey. Good morning. Thanks very much for taking my question. I actually want to follow-up on Karen's question there and maybe dig into the SRS contribution a bit more. Can you The bottom line tracking versus expectations. Dollars to our top line from seven months of ownership. They hit that on the button, and we feel great about their p and l top to bottom. And and so it from a you know, as we discussed during the deal, we expected this to be cash accretive within the first year of of of of ownership, we'll be, you know, coming up on that first year anniversary soon. They're already contributing top and bottom line. And so we feel really happy about that. Just to to be clear, to make sure that everyone understands this, obviously, we report our results on a consolidated basis. If you think about the pro form a impact of SRS, the reflection of SRS and and its mix impact on the Home Depot there's about a forty basis point full year mix impact to the Home Depot. And so think about Home Depot you know, in in total, being being impacted by about forty basis points, but that's a mix effect. And we'll take that all day long. You know, they are they are leaders in their spaces. They're performing exceptionally well, and and we're happy with that.
Steven Seguin: Okay. Thanks. The follow-up question I have was just on maybe the pricing environment. In the past, I think you've talked about prices kinda settling. Do you feel like we're at a point now where we should see sort of a a natural you know, return to a normal environment for pricing. And then how does you know, the potential for tariffs kind of fit into that view? |
2,846 | HD | 4 | 2,024 | 2025-02-25 09:00:00 | The Home Depot, Inc. | 278,679 | Billy Bastek: Well, thanks, Steven. It's Billy. Listen. As it relates to the just the general pricing environment, and then I'll talk for a minute about tariffs. Mean, we are in a very rational Market just by definition. And, you know, prices, as we've mentioned on the last couple of calls really have settled to your point. And the promotional activity is is the same as it's been, you know, kind of pre COVID as well. So no differences in that. And and as I mentioned, again, the last couple quarters pricing is is settled into the market accordingly. As it relates to to tariffs, and we've spoken a little bit about it this morning. I mean, listen. We've been through this before. We'll continue to assess, you know, just you know, how these impact our business from a go forward standpoint. We've been focused on diversifying sourcing for several years. So we'll continue to assess that going forward. But our number one job in merchandising is to be the customer's advocate for value. We have great, great vendor relationships. And with our scale, we feel that we're as well or better positioned to than anyone in the market place to navigate the environment going forward. And, actually, I wanna go back one question and just follow-up on Steven's question. So Steven, just to to put a a year over year comparison together for you and and talk about how SRS impacts year over year from an operating margin perspective. So as you can as you've seen our guidance, we're guiding to a thirteen point four percent adjusted operating margin from a thirteen point eight that's a forty basis point decrease. Here's how that forty basis points breaks down. Coincidental to the pro form a impact, but the year over year is different. So that forty reflects twenty basis points of natural deleverage. And recall, we think this business leverages about a three percent comp. At a one percent comp, we're getting about two comp points of deleverage. So two times about ten basis points per is twenty basis points. Then the inclusion of twelve months of |
2,847 | HD | 4 | 2,024 | 2025-02-25 09:00:00 | The Home Depot, Inc. | 278,679 | points of deleverage. So two times about ten basis points per is twenty basis points. Then the inclusion of twelve months of ownership of SRS compared to seven months of ownership, is reflected in fifteen basis points of mix shift. So you've got about a fifteen basis point impact of that year over year comparison of twelve months versus seven months. And then finally, the comparison versus a fifty-three week year also shifts margin by five basis points. So you've got twenty bps from naturally leverage, You've got fifteen from SRS, impact, and you've got five from the fifty-third week comparison. Within that, I think it's worth saying, but we are leaning into investments We're paying for those investments through productivity. And so that's also within that operating margin guidance. There's there's productivity inside it as well as as leaning into investment. And I hope that makes it a little bit more clear. |
2,848 | HD | 4 | 2,024 | 2025-02-25 09:00:00 | The Home Depot, Inc. | 278,679 | Steven Seguin: Yeah. That answers our question. Thank you so much for that follow-up.
Operator: Our next question comes from the line of Seth Sigman with Barclays.
Seth Sigman: Thanks. Good morning, everyone. I do want to follow-up on that last point around the flow through you step back and look at your sales over the last several years, I think since twenty nineteen, sales are up maybe forty five percent, s g and a is actually up a similar percent. Along the way, there have been investments and plenty of cost pressures I guess the real question is to the extent that comps start to improve here, they progress throughout twenty twenty five. Are we at that point where sales should grow faster than expenses you can really start to see that flow through come through. Seth, you know what? I would point you back to our investor conference back in twenty twenty three, right, Once this market normalizes, we would expect a base case of three to four percent top line growth We would expect and and and within that, we expect flat gross margin is kind of a base expectation. And then we do expect operating expense leverage. And so that Takes you to the the the earnings per share expectation of mid to high single digit growth once our market is normalized and once we are back to that level of sales growth. And that view hasn't changed since twenty twenty three. |
2,849 | HD | 4 | 2,024 | 2025-02-25 09:00:00 | The Home Depot, Inc. | 278,679 | Seth Sigman: Okay. Great. Thank you for that. And then just on that point around the gross margin, you are guiding flat in twenty five. You still have some SRS dilution wrapping into this year. Can you talk about some of the underlying assumptions for core Home Depot and and speak to the offsets that would be helping mitigate that SRS dilution. Thanks so much. Sure. I'd I'd I'd I'd point it to you. You're right about that. We still have a little bit of a lapse And so there's pressure from SRS mix. Just two great callouts. Number one, our outstanding supply chain and merchandising teams finding productivity and and, you know, I I could I could go on and on about it, but The the the benefits we've seen in supply chain productivity alone Our are are really encouraging. And we would call out our fantastic store operations team who have now driven improvements in shrink, for about a year and a half. Year over year, quarter by quarter, We expect that to continue into twenty twenty five. And so it's really a story of SRS mix being offset by supply chain productivity, some other great things the merchants are doing. And our fantastic store ops team.
Seth Sigman: Thanks. Appreciate it.
Operator: Christine, we have time for one more question. Thank you. Our final question will come from the line of Zihan Ma with Bernstein.
Zihan Ma: Hi. Thank you so much for taking my question. Just a a final quick one. How does your Complex Pro initiatives impact your long term ROI expectations, taking into account that you are extending more trade credit and potentially holding more inventory with a broader assortment from here. Thank you. |
2,850 | HD | 4 | 2,024 | 2025-02-25 09:00:00 | The Home Depot, Inc. | 278,679 | Ted Decker: I I wouldn't expect a meaningful impact on ROIC through capital investment. Driving incremental sales and profit dollar growth That business has a different margin profile, but certainly incremental sales and and profit growth But it it's really a reasonably asset light investment. We leased the DCs, We lease trucks. We bring on sales teams that are commissioned sales forces that sort of earn their keep as they build their portfolios. Trade credit, as we scale that, we're tiny, tiny exposure at the moment, but as we build that, it it's just not going to be a meaningful balance sheet item given given the scale of our overall balance sheet.
Zihan Ma: Great. Thank you.
Operator: Miss Janci, I would now like turn the floor back over to you for closing comments.
Isabel Janci: Thank you, Christine, and thank you everybody for joining us today. We look forward to speaking with you on our first quarter earnings call in May.
Operator: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day. |
2,851 | HD | 3 | 2,024 | 2024-11-12 09:00:00 | The Home Depot, Inc. | 278,679 | Operator: Greetings, and welcome to The Home Depot Third Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Isabel Janci. Please go ahead.
Isabel Janci: Thank you, Christine, and good morning, everyone. Welcome to Home Depot’s third quarter 2024 earnings call. Joining us on our call today are Ted Decker, Chair, President and CEO; Ann-Marie Campbell, Senior Executive Vice President; Billy Bastek, Executive Vice President of Merchandising; and Richard McPhail, Executive Vice President and Chief Financial Officer. Following our prepared remarks, the call will be open for questions. Questions will be limited to analysts and investors. And as a reminder, please limit yourself to one question with one follow-up. If we are unable to get to your question during the call, please call our Investor Relations department at 770-384-2387. Before I turn the call over to Ted, let me remind you that today’s press release and the presentations made by our executives include forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. These statements are subject to risks and uncertainties that could cause actual results to differ materially from our expectations and projections. These risks and uncertainties include, but are not limited to the factors identified in the release and in our filings with the Securities and Exchange Commission. Today’s presentation will also include certain non-GAAP measures, including, but not limited to adjusted operating margin and adjusted diluted earnings per share. For a reconciliation of these and other non-GAAP measures to the corresponding GAAP measures, please refer to our earnings press release and our website. Now, let me turn the call over to, Ted. |
2,852 | HD | 3 | 2,024 | 2024-11-12 09:00:00 | The Home Depot, Inc. | 278,679 | Ted Decker: Thank you, Isabel, and good morning, everyone. Sales for the third quarter were $40.2 billion an increase of 6.6% from the same period last year. Comp sales declined 1.3% from the same period last year and our U.S. stores had negative comps of 1.2%. Adjusted diluted earnings per share were $3.78 in the third quarter compared to $3.85 in the third quarter last year. From a geographical perspective, storms and more favorable weather throughout the quarter drove a higher degree of variability in the performance across our divisions and four of our 19 U.S. regions delivered positive comps. In local currency, Mexico and Canada posted comps above the company average, with Mexico posting positive comps in the quarter. In the third quarter, our associates and communities were impacted by two hurricanes. As you’ll hear from Ann, our associates and supplier partners worked tirelessly under difficult circumstances to serve our customers and communities. Our thoughts continue to be with those impacted by hurricanes Helene and Milton. Excluding the impacts from the hurricanes, our third quarter performance exceeded our expectations. As weather normalized, we saw better engagement across seasonal goods in certain outdoor projects. But as Billy will detail, we continue to see pressure on larger remodeling projects driven by the higher interest rate environment and continued macroeconomic uncertainty. Today, we updated our guidance primarily as a result of the better performance in the third quarter as well as expected hurricane related demand in the fourth quarter. For fiscal 2024, we now expect our sales to grow approximately 4%, comps to decline approximately 2.5% and adjusted diluted earnings per share to decline approximately 1%. Richard will take you through the details in a moment. Despite the continued uncertainty in the macroeconomic environment, our focus remains on creating the best interconnected experience, growing Pro wallet share through a differentiated set of capabilities in building new stores. |
2,853 | HD | 3 | 2,024 | 2024-11-12 09:00:00 | The Home Depot, Inc. | 278,679 | best interconnected experience, growing Pro wallet share through a differentiated set of capabilities in building new stores. Today, I would like to highlight where we are improving the interconnected experience. Recall that over the last several years, we built a network of downstream supply chain facilities, including 19 direct fulfillment centers, allowing us to reach 90% of the U.S. population with same or next day delivery. Recently, we expanded our assortment in these facilities to allow for faster delivery speeds across more products. We made significant website enhancements to better communicate faster delivery options. Many customers were not aware of our robust delivery options. In the third quarter, we launched a marketing campaign that builds awareness of our faster delivery speeds. While this is just launched, we are seeing the intended results, greater customer engagement, higher conversion and incremental sales. This is also the first quarter that reflects a full period of SRS in our financials. SRS gives us the right to win with the specialty trade Pro customer who need specialized capabilities to complete their project. The SRS team did an exceptional job in the quarter and is on track to deliver $6.4 billion in sales for the approximately seven months we’ll owe them in fiscal 2024. As you would expect, the immediate focus with SRS is supporting their growth both organically and through acquisitions. However, we are also seeing incremental cross-sale opportunities from our distinct product catalogs and competitive advantages. As you can tell, we remain excited about the growth opportunities in front of us. We are committed to investing in our capabilities to continue growing share in any environment. Our merchants, store and MET teams, supplier partners and supply chain teams did an outstanding job executing throughout the quarter. I’d like to thank them for their dedication and hard work. Before I turn the call over to, Ann, I’d like to take a moment to reflect on the legacy of our Co-Founder, |
2,854 | HD | 3 | 2,024 | 2024-11-12 09:00:00 | The Home Depot, Inc. | 278,679 | and hard work. Before I turn the call over to, Ann, I’d like to take a moment to reflect on the legacy of our Co-Founder, Bernie Marcus. We owe an immeasurable debt of gratitude to Bernie. He was a master merchant and a retail visionary. But even more importantly, he valued our associates, customers and communities above all. He’s left us with an invaluable legacy in the backbone of our company, our values and culture. The entire Home Depot family is deeply saddened by his passing. He will be missed. With that, let me turn the call over to, Ann. |
2,855 | HD | 3 | 2,024 | 2024-11-12 09:00:00 | The Home Depot, Inc. | 278,679 | Ann-Marie Campbell: Thanks, Ted, and good morning, everyone. First, I want to extend my deepest sympathy and support to all the residents and communities that have been impacted by hurricanes Helene and Milton. One of the hallmarks of The Home Depot has always been to support our communities through natural disasters and we are incredibly proud of the tireless efforts of our teams, pre and post the storms to stage and deliver the needed products while ensuring the safety of our associates. In the aftermath of the storms, the efforts of both our field and Store Support Center teams have been extraordinary and demonstrate the culture and exceptionalism of our amazing associates who are committed to providing the necessary support and resources to help rebuild and restore their communities. Our thoughts and prayers continue to be with all of our effective associates and communities as they navigate this challenging time. Over the last year, I’ve provided some key insights on the progress we’re making with our Pro Ecosystem capabilities that serve Pro working on larger complex projects. We are pleased with the performance of this Pro Ecosystem which is now in 17 U.S. markets. Today, I would like to take a moment to highlight some of the investments we’re making in our stores to deliver the best experience for every pro buying occasion. You’ve heard us talk about our focus on improving on shelf availability through multiple initiatives, but we are also enhancing leadership oversight, processes and systems to drive the overall in-store pro customer experience. We recently introduced a Pro Customer Experience Manager to help drive a higher level of connectivity with our in-store pro and outside sales team in order to deliver a more seamless experience and exceptional service. This new leadership role with our existing teams enables us to focus more on the needs of the [passion] (ph) pro with a focus on building relationships with our most important pros, ensuring we have job lot quantities available for sale on |
2,856 | HD | 3 | 2,024 | 2024-11-12 09:00:00 | The Home Depot, Inc. | 278,679 | with a focus on building relationships with our most important pros, ensuring we have job lot quantities available for sale on critical SKUs and allocated more labor hours to the pro desk during peak shopping times. We also continue to improve my view with more robust insights to drive a deeper level of engagement and more actionable outcomes for pro customers. These tools combined with the process improvements, leadership engagement and increased emphasis on service are driving more customer engagement and improving the in-store shopping experience for pro customers. I would also like to take a minute to share with you a bit more around the progress we have seen over the last few quarters as it relates to shrink. For us, our focus on mitigating shrink has been a continual and evolving process, leveraging our cross functional teams and investing in technology to test and learn the most effective methods of reducing shrink. While the external environment continues to be challenging, we’re incredibly pleased with the positive momentum we are seeing and improve results through our shrink mitigating initiatives. I could not be more excited about the progress we are making across the business to drive a best-in-class experience for customers. Our stores are ready and our associates stay engaged and I would like to thank them for all that they do. Lastly, as one of the 100 of 1000 of Home Depot associates inspired by Bernie’s passion for giving back to our associates and communities, I want to extend my deepest condolences to the entire Marcus family. With that, let me turn the call over to Billy. |
2,857 | HD | 3 | 2,024 | 2024-11-12 09:00:00 | The Home Depot, Inc. | 278,679 | Billy Bastek: Thank you, Ann, and good morning, everyone. I want to start by also thanking all of our associates and supplier partners for their ongoing commitment to serving our customers and communities. As you heard from Ted, our performance during the third quarter exceeded our expectations as we saw better engagement in some seasonal leasing categories as a result of more favorable weather throughout the quarter. In addition, we also saw incremental sales as a result of the hurricanes. However, the higher interest rate environment and greater macroeconomic uncertainty continues to pressure overall project demand. Turning to our merchandising department comp performance for the third quarter, our power, outdoor garden, building materials, indoor garden and paint departments posted positive comps, while lumber, plumbing and hardware were all above the company average. During the third quarter, our comp transactions decreased 0.6% and comp average ticket decreased 0.8%. However, we continue to see our customers trading up for new and innovative products. Big ticket comp transactions or those over a $1,000 were down 6.8% compared to the third quarter of last year. We continue to see softer engagement in larger discretionary projects where customers typically use financing to fund the project, such as kitchen and bath remodels. During the third quarter, pro sales were positive and outpaced the DIY customer. And, those pros engaging with elements of our Pro Ecosystem, who also have a dedicated salesperson, were our strongest performing pros in the quarter. Turning to total company online sales. Sales leveraging our digital platforms increased 4% compared to the third quarter of last year. And, for those customers that chose to transact with us online during the third quarter, nearly half of our online orders were fulfilled through our stores. In addition, as you heard from Ted, we are focused on continuing to improve our interconnected retail experience, whether it is our faster delivery speeds, our more relevant |
2,858 | HD | 3 | 2,024 | 2024-11-12 09:00:00 | The Home Depot, Inc. | 278,679 | on continuing to improve our interconnected retail experience, whether it is our faster delivery speeds, our more relevant and personalized search results or our enhanced product review summaries powered by AI, all of which are leading to greater purchasing confidence for our customers. During the third quarter, we hosted our Annual Supplier Partnership Meeting, where we focused on how we will continue to work together to bring the best products to market, deliver innovative solutions that simplify the project and offer great value with best-in-class features and benefits. At the event, we recognized a number of vendors across categories who continue to transform the industry with the innovation they bring to our customers on a daily basis, this included Starlink, Milwaukee, RYOBI, WAGO, Glacier Bay, Henry Roofing and many more. We are proud of the innovation and partnership that our suppliers bring to The Home Depot and the value that we’re able to offer both our Pro and DIY customers. We also hosted our Annual Labor Day and Halloween events and we’re pleased with the results. During our Labor Day event, we were encouraged with the customers’ engagement across a number of categories, including grills, which had positive comps for the quarter led by Traeger. And, 2024 was another record sales year for our Halloween program, both in-store and online as our customers continue to add to their collection with our unique and exclusive product assortment. As we turn our attention to the fourth quarter, we plan to maintain our momentum with our annual holiday, Black Friday and Gift Center events. In our Gift Center event, we continue to lean into brands that matter most for our customers with our assortment of Milwaukee, RYOBI, Makita, DEWALT, RIDGID, Husky and more. We’ll have something for everyone, whether it’s our wide assortment of cordless RYOBI tools, Milwaukee M18 FUEL Toolkits and our new Husky BITE Tools. We are bringing more innovation in batteries with RYOBI Edge, DEWALT XR and the expansion of the |
2,859 | HD | 3 | 2,024 | 2024-11-12 09:00:00 | The Home Depot, Inc. | 278,679 | and our new Husky BITE Tools. We are bringing more innovation in batteries with RYOBI Edge, DEWALT XR and the expansion of the Milwaukee Forge lineup with new 8 and 12 amp hour batteries, all designed to bring more power to our customers. And, the innovative Husky BITE tool technology offers increased grip on new and rounded fasteners, better access, more torque and more leverage, making them a great addition to any toolbox at a great value. And, they are exclusive to The Home Depot. Our merchandising organization remains focused on being our customers’ advocate for value. This means continuing to provide a broad assortment of best-in-class products that are in-stock and available for our customers when they need it. We will also continue to provide innovative product solutions that simplify the project, saving our customers time and money. That’s why I’m so excited about the innovation we continue to bring to the market. And with that, I’d like to turn the call over to, Richard. |
2,860 | HD | 3 | 2,024 | 2024-11-12 09:00:00 | The Home Depot, Inc. | 278,679 | Richard McPhail: Thank you, Billy, and good morning, everyone. In the third quarter, total sales were $40.2 billion, an increase of approximately 6.6% from last year. During the third quarter, our total company comps were negative 1.3% with comps of negative 3.3% in August, negative 2.3% in September and positive 1% in October. Comps in the U.S. were negative 1.2% for the quarter, with comps of negative 3.5% in August, negative 2.2% in September, and positive 1.4% in October. The progression of our monthly comps reflects in large part hurricane related sales. Our results for the third quarter include a net contribution of approximately $200 million in hurricane related sales, which positively impacted total company comps by approximately 55 basis points for the quarter and approximately 120 basis points for October. In the third quarter, our gross margin was approximately 33.4%, a decrease of approximately 40 basis points from the third quarter last year, primarily driven by mix as a result of the SRS acquisition, partially offset by benefits from lower shrink. During the third quarter, operating expense as a percent of sales increased approximately 45 basis points to 19.9% compared to the third quarter of 2023. Our operating expense performance was in-line with our expectations. Our operating margin for the third quarter was 13.5% compared to 14.3% in the third quarter of 2023. In the quarter, pre-tax intangible asset amortization was $138 million including $86 million related to SRS. Excluding the intangible asset amortization in the quarter, our adjusted operating margin for the third quarter was 13.8% compared to 14.5% in the third quarter of 2023. Interest and other expense for the third quarter increased by $157 million to $595 million due primarily to higher debt balances than a year ago. In the third quarter, our effective tax rate was 24.4% compared to 23.3% in the third quarter of fiscal 2023. Our diluted earnings per share for the third quarter were $3.67, a decrease of approximately 4% compared to |
2,861 | HD | 3 | 2,024 | 2024-11-12 09:00:00 | The Home Depot, Inc. | 278,679 | of fiscal 2023. Our diluted earnings per share for the third quarter were $3.67, a decrease of approximately 4% compared to the third quarter of 2023. Excluding intangible asset amortization, our adjusted diluted earnings per share for the third quarter were $3.78, a decrease of approximately 2% compared to the third quarter of 2023. During the third quarter, we opened five new stores, bringing our total store count to 2, 345. Retail selling square footage was approximately 243 million square feet. At the end of the quarter, merchandise inventories were $23.9 billion up approximately $1.1 billion compared to the third quarter of 2023, and inventory turns were 4.8 times, up from 4.3 times last year. Turning to capital allocation. During the third quarter, we invested approximately $820 million back into our business in the form of capital expenditures. And during the quarter, we paid approximately $2.2 billion in dividends to our shareholders. Compute on the average of beginning and ending long-term debt and equity for the trailing 12-months, return on invested capital was approximately 31.5%, down from 38.7% in the third quarter of fiscal 2023. Now, I will comment on our updated outlook for fiscal 2024. As you heard from Ted, while macro uncertainty remains and continues to pressure home improvement demand, our performance in the third quarter was better than expected. Our performance reflects hurricane related sales in the third quarter, and we expect some hurricane related sales in the fourth quarter. Given the better than expected performance in the third quarter and incremental hurricane related sales, we have updated our fiscal 2024 guidance. We now expect total sales growth of approximately 4%, including SRS in the 53rd week. The 53rd week is projected to add approximately $2.3 billion to total sales and SRS is expected to contribute approximately $6.4 billion in incremental sales. Comparable sales are expected to decline approximately 2.5% for the 52 week period. We expect to open approximately 12 new |
2,862 | HD | 3 | 2,024 | 2024-11-12 09:00:00 | The Home Depot, Inc. | 278,679 | Comparable sales are expected to decline approximately 2.5% for the 52 week period. We expect to open approximately 12 new stores. Our gross margin is expected to be approximately 33.5%. We expect operating margin to be approximately 13.5% and adjusted operating margin to be approximately 13.8%. Our effective tax rate is targeted at approximately 24%. We expect net interest expense of approximately $2.1 billion. We expect our diluted earnings per share to decline approximately 2% compared to fiscal 2023 with the extra week contributing approximately $0.30 per share. And, we expect our adjusted diluted earnings per share to decline approximately 1% compared to fiscal 2023 with the extra week contributing approximately $0.30 per share. We believe that we will grow market share in any environment. We are continuing to invest to strengthen our competitive position with our customers and leverage our scale and low cost position to drive growth faster than the market and deliver shareholder value. Thank you for your participation in today’s call. And Christine, we are now ready for questions. |
2,863 | HD | 3 | 2,024 | 2024-11-12 09:00:00 | The Home Depot, Inc. | 278,679 | Operator: Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] Thank you. Our first question comes from the line of Scot Ciccarelli with Truist. Please proceed with your question.
Scot Ciccarelli: Good morning, everyone.
Isabel Janci: Scott, you’re breaking up. Can you repeat your question, please?
Scot Ciccarelli: Sorry about that. Sales were better than we would have expected. I know you guys outlined hurricane specific, but do you have any comment on the open market because obviously it was quite favorable --
Isabel Janci: Scott, sorry to cut you off. We can’t really hear you. So, we’re going to go to the next question and we’ll come back to you.
Operator: Our next question comes from the line of Zach Fadem with Wells Fargo. Please proceed with your question.
Zach Fadem: Hey, good morning. So, starting with the hurricane impact, Richard, you called out about 55 basis points in Q3. Any color on category impacts and if those sales skewed more DIY versus pro? And, then as you think about Q4, how would you characterize the implied down 2.5% comp guide between hurricane driven and the underlying business?
Ted Decker: I’ll let Billy.
Billy Bastek: Yes. Hey, Zach, it’s Billy. And, then I’ll turn it over to Richard to answer the back half of that question. Just in terms of the hurricane piece, obviously, pretty similar to all events. Think about generators, think about cleanup. You think about obviously lumber as it relates to what we do to help our communities get ready for those events. So, pretty similar from a product assortment standpoint. And obviously, all that’s consumer-driven as customers ready themselves for that event. And I’ll flip it to Richard to answer the back half of that. |
2,864 | HD | 3 | 2,024 | 2024-11-12 09:00:00 | The Home Depot, Inc. | 278,679 | Richard McPhail: Yes. So, Zach just talking about the guide of 2.5% for the year, our guidance really principally reflects the outperformance that we saw in Q3 driven by hurricane related sales as well as reflecting the fact that we just saw exceptional weather across the entire country for most of the quarter. So, the full-year view is basically the flow through of that Q3 performance with some Q4 impact of hurricane related sales.
Zach Fadem: Got it. Appreciate the color. And, just taking a step back, how much of your business would you categorize as needs based versus discretionary today? And, is it still fair to say that the larger and bigger ticket projects are being deferred while needs based break fix type projects are getting done? And, also any color on how those two buckets have been trending through the year?
Ted Decker: Yes. Zach, that’s always difficult to parse out needs based versus discretionary project. We would say your needs based projects are getting done. We’ve talked about there being strong engagement in home improvement and certainly with our pros, but the larger more discretionary projects are the ones that are being deferred and that balance has been consistent throughout this year.
Zach Fadem: Got it. Thanks so much for the time.
Ted Decker: Thank you.
Zach Fadem: Yes.
Operator: Our next question comes from the line of Chuck Grom with Gordon Haskett. Please proceed with your question.
Chuck Grom: Hey, good morning. Thanks very much. Can you discuss SRS and the progress you’ve made in cross-selling products and services across the two businesses? And, then can you also touch on the volume contribution specifically in the third quarter? |
2,865 | HD | 3 | 2,024 | 2024-11-12 09:00:00 | The Home Depot, Inc. | 278,679 | Ted Decker: Sure. So, we’re very pleased with our progress with SRS. As I said in my prepared remarks, job one is to support them executing their play of growing their business which they do with what we would call comp growth through their existing branches, opening up new branches and then doing tuck in M&A. They’ve continued to do that through the third quarter. They opened a number of branches. They grew the business and they even made a couple small tuck-in acquisitions. So, the strategic game plan for SRS is proceeding as expected. On the cross-sell opportunity, the initial things we’re working on is to make their catalog available to our customers largely through the Pro Desk and through our outside sales resources and we’re seeing terrific take up on that. The comp sales of SRS product through The Home Depot ecosystem, while obviously a very small base is accelerating incredible sort of triple-digit comp growth with those specific sales. And then, we’re also beginning to quote our product into their customer base. Now, remember they’re specialty trade and they’re focused on roofers, landscapers, folks putting down hardscapes in backyards and then working on repairing and maintaining pools and irrigation. However, those customers do engage in some broader home improvement activity and we’ve already begun to actively quote our broader catalog into their customer base. Very, very early days, but the sales teams are working together incredibly well getting to know each other, going on some joint customer calls together. So, early days on that, but again the strategic thesis is playing out exactly how we had hoped.
Richard McPhail: And Chuck, you asked for specifics. They contributed $2.9 billion in the third quarter. They’re on track to deliver the expected $6.4 billion in sales contribution for the roughly seven months that we’ll end them. |
2,866 | HD | 3 | 2,024 | 2024-11-12 09:00:00 | The Home Depot, Inc. | 278,679 | Chuck Grom: Okay, great. Thanks very much. And then one for you, Richard, on gross margins, down 40 basis points. It sounds like SRS was the lion share. Is there any way to double click on that and just unpack? I think it was about 35 basis points of pressure last quarter. And then just looking out, can we think about broader puts and takes for gross margins? I mean relative to where you were pre-COVID which was north of 34%. How do we think about the gross margin trajectory over the next few years? Thanks. |
2,867 | HD | 3 | 2,024 | 2024-11-12 09:00:00 | The Home Depot, Inc. | 278,679 | Richard McPhail: Sure. Well, so specifically, look when you look year-over-year, the major impact in gross margin versus last year was simply the mix impact from SRS. And so, that was actually an 80 basis point impact for the quarter. So, let’s talk about gross margin. It was in-line with our expectations. In fact, our guidance for gross margin for the full-year has not changed. So again, in Q3, the impact was around 80 basis points from SRS. So, you can do the math and see that the remainder of the business was up significantly and was in-line with our expectations, and that also reflected benefits from shrink that Ann had mentioned. And, just to remind you, SRS will be for the year 2024, it will have about a 45 basis point impact on the year because remember, we will have only owned them for about seven months. But, an annualized number for SRS impact to gross margin is about 70 basis points. So, if you just allow me a second to make sure everyone got that, that’s 70 basis points of expected shift in our gross margin profile from adding them to our business. Our gross margin again was right where we expected it to be. Transportation expense or rather benefits from decreasing transportation expense were dynamic in the first half of the year, but that’s largely sort of gone away as year-over-year comparisons flatten out. And so, we were very pleased with our margin performance. And as I said, we have not changed our guidance for the full-year gross margin. Look, as far as long-term goes, in June of 2023, at our Investor Conference, we laid out a base case that in essence said, look, we anticipate flat gross margin as part of our operating model. There’s a ton of productivity that our amazing supply chain team drives every single year that we reinvest in that gross margin, but that’s reflective of our position as the sharpest value in the market for our customers and that’s our intention. But again, the acquisition of SRS does present a shift in our margin base for the business. |
2,868 | HD | 3 | 2,024 | 2024-11-12 09:00:00 | The Home Depot, Inc. | 278,679 | Chuck Grom: Makes sense. Thank you.
Operator: Our next question comes from the line of Seth Sigman with Barclays. Please proceed with your question.
Seth Sigman: Hey, good morning, everyone. Nice progress in the quarter. My main question is around market share. Obviously, macro and housing matters a lot here, but you’re also doing a lot to better serve your customer and all the different types of customers. I guess, in that context, it does seem like Home Depot’s performance improved relative to the industry this quarter. Can you speak to that? And, any specific categories you would call out where you do think you’re gaining more share? Thanks.
Ted Decker: I’ll hit on the broader topic and pass over to Billy. We’ve always said it is tough to parse out market share. But if you look at PC expenditures in home, in furnishings those were deeper negative as reported in government statistics in our results. So, if you look at that broader macro, we would the highest-level macro, we would say we took share and then we obviously look at reported results from competitors who are functioning in certain product categories that we operate in. And again in most of those, we see our businesses outperforming those of publicly traded companies results. And Billy, if you want to hit on some categories? |
2,869 | HD | 3 | 2,024 | 2024-11-12 09:00:00 | The Home Depot, Inc. | 278,679 | Billy Bastek: Yes. As we said in our prepared remarks, certainly our seasonal performance, we saw increased great engagement across our seasonally related categories and that includes Halloween. Paint continues to be a great story for us. And, while we did see some exterior business just related on the weather that we called out, we’re certainly making great progress with the pro that paints, our partnerships with BEHR, PPG, our in-store service model enhancements, our job site delivery expansion has really helped us grow share in that segment and really pleased with the performance of the team there. And then, you talk about building materials, continue to see really strong performance in our building materials. That’s multiple quarters on top of multiple quarters. So, as Ted mentioned, pretty hard to kind of parse that out. We look at a lot of different data sets, but feel very confident that in any market we’re going to continue to take share. But, that’s a few of the areas that we’ve seen great continued acceleration and as I mentioned in building materials specifically ongoing terrific improvement there.
Seth Sigman: Okay. That’s helpful. I guess a follow-up question would be around big ticket more specifically. It does seem like it took a step down this quarter even in light of hurricane, certain categories you mentioned like generators. How do you categorize that? I mean you mentioned interest rates. Do you think there was some election noise? I mean I guess ultimately we’re trying to think about what needs to change in your view to really get those categories inflecting? |
2,870 | HD | 3 | 2,024 | 2024-11-12 09:00:00 | The Home Depot, Inc. | 278,679 | Ted Decker: Well, if maybe I’ll just step back on how we look at this overall environment and what we’re seeing. I mean clearly our sales during the quarter as we said were more favorable than we expected a lot with weather and hurricane related demand. And, don’t forget on weather, it’s not just that you’re doing garden because the weather is nice. Think of limited days loss from a pro because they can be out of the job site through virtually every day in October it was dry throughout the country. Now, the issue we continue to watch are the macroeconomic uncertainties in the higher rate environment that continues to pressure larger remodeling projects. So, we look at the reversion of personal consumption from goods to services that’s largely worked its way out and we’ve largely navigated our way through the pull-forward of demand that we saw during the pandemic. So, again today this higher rate environment is pressuring the larger normally debt financed remodeling projects as well as existing home sales. So, we all know that the Fed’s cut interest rates two cycles here. But, from the cut in September, mortgage rates have actually increased about 60 basis points. So, two rate cuts combined 75 basis points, yet the 10 year and then therefore the mortgage rates are up about 60 basis points. That continues to impact housing turnover, which were just about 3% of homes turning over, which is a 40 year low at this point. And, you might say that the worst is behind us, how much lower are we going to go, usually we’re at about 4.5%, 5% turnover. I think we actually touched on sort of 2.99%. So, one could argue we’re near the low there. But, then the larger projects often require financing whether it’s cash out financing or home equity lines of credit. Those are down. So, our HELOCs those track more directly the drop in short-term rates. So, those are down 75 basis points, but still historically high at over 8%. So with that, we’re encouraged with certain green shoots if you will in the business with the pull-forward |
2,871 | HD | 3 | 2,024 | 2024-11-12 09:00:00 | The Home Depot, Inc. | 278,679 | high at over 8%. So with that, we’re encouraged with certain green shoots if you will in the business with the pull-forward working its way through the categories that Billy just went through. But, what we’re looking for is just one is the timing of homeowners starting those larger remodeling projects. So, we remain super bullish on the outlook for home improvement. We’ll have to work our way through this current macro uncertainty and the interest rates pressuring home improvement demand, but this is a market after all and markets return to equilibrium and remodeling will as well. We just don’t think we’re quite there yet. |
2,872 | HD | 3 | 2,024 | 2024-11-12 09:00:00 | The Home Depot, Inc. | 278,679 | Seth Sigman: I got it. Thank you so much.
Operator: Our next question comes from the line of Steven Zaccone with Citi. Please proceed with your question.
Steven Zaccone: Great. Good morning. Thanks very much for taking my question. I wanted to follow-up on gross margin briefly. So in the quarter, was there any mix pressure on gross margin from the higher hurricane related sales? And then, just to follow-up on the longer-term, there’s a good amount of discussion around shrink. You’ve made a lot of progress there. Can you help us understand how much of an opportunity that is over the medium-term? Is this something that’s in the 10 basis points to 20 basis points, or could it be something more meaningful over time?
Richard McPhail: Right. Yes. So, as far as gross margin goes for the quarter, there was a slight amount of mix pressure to margin. And, just think about how Billy characterizes at the beginning of hurricane prep and then through cleanup, you’re just selling higher volumes of lower gross margin goods. And so, there was some slight pressure there. And, as far as shrink goes, look, we are frankly just head down and the teams are working so hard every single day. They have made major investments, not just financially, but also in the amazing number of initiatives they’ve brought forward to combat, in essence, the results of organized retail theft and other crime. This is a problem for all of retail. It’s hard to quantify. What we can tell you is that our investments are paying off. They’ve led now to multiple quarters of benefits year-over-year, tangible results from investments we’ve made. That does not mean that the operating environment is getting any easier. In fact, it’s getting harder and harder. So, our hats are off to our teams, and it’s an everyday initiative that our teams are fighting every single day. |
2,873 | HD | 3 | 2,024 | 2024-11-12 09:00:00 | The Home Depot, Inc. | 278,679 | Steven Zaccone: Yes, understood. My follow-up question, I know there’s no 2025 guidance today, but I think as we I’m curious like as you look at the backdrop, right, the view for 2024 was like housing was going to be net neutral. As you sit here today, it’s tough to kind of call rates. But as you think about ’25 would you think the housing backdrop turns a little bit more favorable for you, or is it still like think about housing as net neutral as kind of the base case scenario?
Ted Decker: Well, Steven, I’d repeat the comments I just made. One could argue that the rate environment is settling down in turnover certainly even under 3% last reported period would be at a low, but just don’t know and not obviously ready to talk about ‘25 and they’re not ready as we sit here today to call that this is a turn on larger remodeling projects.
Steven Zaccone: Okay, fair enough. Thank you.
Operator: Our next question comes from the line of Scot Ciccarelli with Truist. Please proceed with your question.
Scot Ciccarelli: Thanks, guys. I apologize for the tech issues. Richard, I know you outlined the impact of hurricane related sales, but is there a broader estimate for the weather impact in the quarter? And then second, can you guys give us an idea of the magnitude of difference in performance in the 17 markets where you rolled out incremental pro capabilities versus the rest of the base just so we can better understand the impact that those capabilities are having? Thanks. |
2,874 | HD | 3 | 2,024 | 2024-11-12 09:00:00 | The Home Depot, Inc. | 278,679 | Ted Decker: So, the first part of your question, Scot, look, we had outstanding weather across the country. So, it becomes harder to parse out what the weather impact is when you literally don’t have a control group. However, we know when the sun was shining, our customers were engaged and that’s huge testament to our merchants and our operators for inspiring them to do outdoor projects and the like. So, it’s hard to parse out weather, and therefore, we’re cautious with respect to extrapolating Q3, just given how favorable the weather truly was across the country. And Ann, Chip, maybe you can talk about pro markets.
Ann-Marie Campbell: Yes, I’ll jump in and I’ll turn it over a little to Chip and Hector. But as we’ve mentioned, just tremendous opportunity as we think about greater share of wallet with the complex pro, and we invest in across the end-to-end, experience. We have talked about previously of what we’re doing with capabilities on the complex side of the business. And today, I highlighted a lot of great work that Hector and his team is doing with the in-store pro. And, when we think about it across the entire ecosystem, we want to have a great experience outside the stores, and we want to have a great experience inside the store. So, we have to be working on these initiatives simultaneously. To your point, the more they engage with our capabilities, we are seeing tremendous upside. And, it’s important for us as we think about these 17 markets to ensure that we’re delivering an excellent experience where we build the level of confidence. So Chip, I know you continue to work on some key capabilities and if you’re going to turn it over to Hector on some of the things he’s doing in-store. |
2,875 | HD | 3 | 2,024 | 2024-11-12 09:00:00 | The Home Depot, Inc. | 278,679 | Chip Devine: Yes. Thanks Ann. And Scot, we’re very encouraged in what’s going on in the 17 investment markets where we’ve been building out the ecosystem that Ann referenced. The investment in our foundational capabilities, breadth and depth of inventory, supply chain, delivery and importantly our sales force has led to share gains and outperformance in all those markets, low-single-digits in those markets. So very, very pleased. As Billy mentioned, these customers that are interacting with our ecosystem are some of our very best performing customers. Just as an example, we’ve launched our trade credit offering where it’s early days, but it is really resonating with our customers and we’ve been able to take share in some of their projects that we normally cannot participate in. So, very pleased with what’s happening. Hector?
Hector Padilla: Yes. And Scot, I would just add that we are super pleased with the engagement of our team in-store to drive just a great experience for that in-store pro. Had mentioned some of the strategic adjustments that we made going into the second half of the year to drive that engagement from our leaders. We’re laser focused on driving speed and ease for checkout for our pros, making sure that we are driving in-stock on large quantities of the products that the customers need and integrating the tools and resources and features that Chip and team are developing for the outside pro that are also, adding value to the in-store pro experience. So, we just like how the ecosystem is coming together in those markets and beyond.
Operator: Does that complete your question? Our next question comes from the line of Michael Lasser with UBS. Please proceed with your question. |
2,876 | HD | 3 | 2,024 | 2024-11-12 09:00:00 | The Home Depot, Inc. | 278,679 | Michael Lasser: Good morning. Thank you so much for taking my question. Ted, are you looking at the multi-year home improvement outlook as the longer that rates remain elevated, the more that homeowners are deferring projects and as soon as rates come down, that will lead to a more robust recovery. So, there’s a relationship between what’s happening right now and the magnitude of the recovery. And I guess as part of that, if rates don’t come down next year, can the home improvement industry grow in 2025? |
2,877 | HD | 3 | 2,024 | 2024-11-12 09:00:00 | The Home Depot, Inc. | 278,679 | Ted Decker: Yes. Michael, we think about that quite a bit as you can imagine. I mean certainly rates have been high. They pressured turnover most specifically, but even HELOC extraction. HELOC extraction is something like 25% right now of more recent period extraction. So, clearly rates are impacting. But, I’m not sure that we’ve talked about when rates came down towards the 6% we immediately saw activity in housing. And, we were seeing that just a matter of weeks, months ago before this latest change when rates actually went up. I think there’s a little bit of so much discussion about where rates are going and that the certainty of that they were going down has caused people to wait for that lower rate. But, if you get stability at sort of any rate might be more important at this point. So, once rates settle and there’s probably a gradual easing of rates, but I don’t think we need a dramatic drop. We just need the talk of the big drops are coming and market equilibrium will set in. Either that or people simply get used to the higher rates, which historically are still pretty decent rates. And, life cycles will continue, new household formation, increasing size of home, decreasing size of homes, second homes that normal equilibrium of housing activity will be reestablished. We’ve just had such a dramatic increase in value, increase in rates followed by this expectation of a meaningful short-term drop in rates over a very short period of time that has changed that stable turnover rate that we’ve seen for years-and-years to be what now you would argue could be a low. So, I don’t think again to answer your question that they have to drop quickly and meaningfully. They just need to stabilize and all the talk of what the Fed is going to do sort of gets out of the national conversation. |
2,878 | HD | 3 | 2,024 | 2024-11-12 09:00:00 | The Home Depot, Inc. | 278,679 | Michael Lasser: Got you. It’s very helpful. My follow-up question is, I want to get the team’s perspective on tariffs. So as part of that, what percentage of sales for the Home Depot could be subject to tariffs in China, and, what about from other countries? And, is the bigger risk from tariffs related to the sheer increase in merchandise costs or the indirect impact of potentially reaccelerating inflation and that impact on consumer spending? Thank you.
Ted Decker: Sure. And I’ll let Billy and John Deaton who runs our supply chain comment on tariffs. I would say, first and foremost, whatever happens in tariffs will be an industry-wide impact, it won’t discriminate against different retailers and distributors who are importing goods. The type of product as an industry is generally sourced from the same countries. There has been some diversification of those sources, but clearly a bit of concentration in Southeast Asia and China in particular. We source well more than half of our goods domestically and in North America, but there certainly will be an impact. But again given our scale, our experience going through the previous tariffs on at 25% on I guess was a couple of $100 billion of industry import goods going back a number of years ago, I’d bet on this team’s ability to work with the type of suppliers we have to work through this in a differentiated manner than others in the industry. But Billy and John, why don’t you give some input?
Billy Bastek: Yes, Michael, it’s Billy. Thanks. As Ted mentioned, I mean, our teams have been through this before. We anticipate we’ll manage through any new tariffs similarly to how we’ve done this in the past. As Ted mentioned, the majority of our goods are sourced in North America. And listen, we’ve been focused on diversifying, sourcing for several years and we’ll continue to assess that going forward. And I’ll hand it to John. I mean, we’re focused on that, but frankly there’s some other things that John and the team are also focused on. |
2,879 | HD | 3 | 2,024 | 2024-11-12 09:00:00 | The Home Depot, Inc. | 278,679 | John Deaton: Yes. More near-term, we’re focused on the resolution of the East Coast port situation and any implications that might have on our ability to move product through our supply chain. As Billy and Ted said, we have a lot of experience in this area in terms of being able to manage through these types of disruptions and these types of changes in terms of trade policy and we feel very confident with our ability to manage through whatever is to come in the future.
Michael Lasser: Thank you very much.
Ted Decker: Thank you.
Operator: Our next question comes from the line of Simeon Gutman with Morgan Stanley. Please proceed with your question.
Simeon Gutman: Hi, good morning everyone. First, a short-term question on Q3 to Q4. You mentioned Q3 exceeded expectations ex-the hurricanes. There was weather and you mentioned that weather helped as well. And, thinking about the movement to Q4, it looks like it’s a decel on stacks and obviously the absolute number. So, is the assumption that weather is less helpful? Is there some conservatism or any other things that change into the fourth quarter?
Richard McPhail: Thanks, Simeon. It’s Richard. Look, bottom line, we don’t expect the fundamentals of our business to decelerate. We’re just being cautious about extrapolating Q3 results that saw significant benefit from weather. And also just as a reminder, the guide is for approximately negative 2.5% comp sales.
Simeon Gutman: Okay, fair enough. Then second on the macro, this is trying to get a sense of how you’re thinking and I know a lot of it this call was helpful in that regard. The weight that you’re thinking about in terms of tappable equity, which we’ve talked about recently versus something like housing turnover, both are impacted by rates. But could this tappable equity idea become like a lock-in effect at some point? When does that kick in? Can it kick in even with rates being higher? |
2,880 | HD | 3 | 2,024 | 2024-11-12 09:00:00 | The Home Depot, Inc. | 278,679 | Richard McPhail: Yes. The question is often posed to us, hey with housing turnover there’s obviously more spend and if you don’t move then you remove the place. And, while we haven’t, we’ve seen the decrease in moving one does the repair or the remodel in place take effect. Clearly that has been delayed and we would point to the higher rates. But even more importantly, our surveys over the prior several months more than cost of project and higher rates, the number one issue that people were citing in our surveys were general macroeconomic and even political uncertainty. So as those dissipate, I think you’ll see people again with the lower rates HELOCs are variable. So, those are down 75 basis points since the cuts and assuming, we’re going to get another cut here in December, huge amount of tappable equity that’s nearly doubled since the end of ‘19. It went from just under $6 trillion to $11.5 trillion I mean a T, trillion with a T. So, tremendous amount of tappable equity. Recall back in the housing boom, I think folks were taking out as much as $120 billion a quarter. That was more recently $60 billion, $80 billion a quarter and now we’re down to $20 billion a quarter. So, don’t think it goes much lower. When people get some confidence back in macro and political dynamic, it’s a big project. And, for someone to make that decision to pull the trigger on $25,000, $50,000, $75,000 project, there’s a certain amount of confidence that goes into that. And, one would hope that we’re headed toward a change in overall confidence levels.
Simeon Gutman: Thank you.
Isabel Janci: And Christine, we have time for one more question.
Operator: Thank you. Our final question comes from the line of Steven Forbes with Guggenheim. Please proceed with your question. |
2,881 | HD | 3 | 2,024 | 2024-11-12 09:00:00 | The Home Depot, Inc. | 278,679 | Steven Forbes: Good morning. Ted, appreciate the color around cross-selling opportunities at SRS. But, I wanted to explore maybe some of the learnings you’re gaining from monitoring the sales force over there. So, can you remind us on how large the sales force is today at SRS and what you’re tracking to maybe inform your decision on how you’re thinking about scaling the sales force at HD?
Ted Decker: Right. So, their outside sales force is about 2,500 people. They also have inside sales force capabilities and account managers. It’s observing what they do and how they do it has given us confidence in what our approach is in terms of variable compensation, in terms of management structure, and how we go to market. So clearly, we’re in the 100 of outside sales folks. There are multiples of that and the way they’re compensated, managed, the tools they use to go to market, all that is reinforcing what we’re doing. Chip mentioned the credit. Credit is a huge unlock for these larger projects and almost all their sales are on open account, house account. And, as we’ve introduced and again it’s just hundreds of customers at this time. We’re seeing much, much larger purchases, the type of purchase that you just wouldn’t get from putting it on a credit card at a Pro Desk at a Home Depot store. So, yes, great learnings. Chip and his team are in contact regularly with the SRS sales team and just going really, really well.
Steven Forbes: And then, maybe just a quick follow-up on that. Can you maybe just update us on the current timeline or thinking behind the full rollout of bill upon delivery capabilities within the order management system? |
2,882 | HD | 3 | 2,024 | 2024-11-12 09:00:00 | The Home Depot, Inc. | 278,679 | Chip Devine: Yes. Hi, Steve, it’s Chip. We plan to rollout order management by the end of 2025. There’s elements of order management that are being turned on as we speak including inventory reservation, which is a key win for us as pros manage larger projects to be able to reserve that inventory for future delivery is a big win. So, we’ll light that up through the course of 2025 with completion at the end of the year.
Steven Forbes: Thank you.
Operator: Thank you. Ms. Janci, I’d like to turn the floor back over to you for closing comments.
Isabel Janci: Thanks, Christine. Thank you all for joining us today. We look forward to speaking with you on our fourth quarter earnings call in February.
Operator: Ladies and gentlemen, this does conclude today’s teleconference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day. |
2,883 | HD | 2 | 2,024 | 2024-08-13 09:00:00 | The Home Depot, Inc. | 278,679 | Operator: Greetings, and welcome to The Home Depot Second Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Isabel Janci. Please go ahead.
Isabel Janci: Thank you, Christine, and good morning, everyone. Welcome to Home Depot's second quarter 2024 earnings call. Joining us on our call today are Ted Decker, Chair, President and CEO; Ann-Marie Campbell, Senior Executive Vice President; Billy Bastek, Executive Vice President of Merchandising; and Richard McPhail, Executive Vice President and Chief Financial Officer. Following our prepared remarks, the call will be open for questions. Questions will be limited to analysts and investors. And as a reminder, please limit yourself to one question with one follow-up. If we are unable to get your question during the call, please call our Investor Relations department at (770) 384-2387. Before I turn the call over to Ted, let me remind you that today's press release and the presentations made by our executives include forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. These statements are subject to risks and uncertainties that could cause actual results to differ materially from our expectations and projections. These risks and uncertainties include, but are not limited to factors identified in the release and in our filings with the Securities and Exchange Commission. Today's presentation will also include certain non-GAAP measures including, but not limited to adjusted income, adjusted operating margin and adjusted diluted earnings per share. For a reconciliation of these and other non-GAAP measures to our corresponding GAAP measures, please refer to our earnings press release and our website. Now, let me turn the call over to Ted. |
2,884 | HD | 2 | 2,024 | 2024-08-13 09:00:00 | The Home Depot, Inc. | 278,679 | Ted Decker: Thank you, Isabel, and good morning, everyone. Sales for the second quarter were $43.2 billion, an increase of 0.6% from the same period last year. Our sales in the quarter include $1.3 billion from SRS. Recall that we closed on the SRS acquisition on June 18, and we've included approximately six weeks of their performance in our consolidated results. Comp sales declined 3.3% from the same period last year, and our U.S. stores had negative comps of 3.6%. Adjusted diluted earnings per share were $4.67 in the second quarter, compared to $4.68 in the second quarter of last year. The team continues to navigate this unique environment while executing at a high level. During the quarter, higher interest rates and greater macroeconomic uncertainty pressured consumer demand more broadly, resulting in weaker spend across home improvement projects. Additionally, we saw continued softness in spring projects, which were also impacted by the extreme weather changes throughout the quarter. When we look at the performance in the first six months of the year, as well as continued uncertainty around underlying consumer demand, we believe a more cautious sales outlook is warranted for the year. Richard will take you through the details in a moment, but we are now guiding to a comp sales decline of approximately 3% to 4% for fiscal 2024. Regardless of the current pressure in the environment, our team remains focused on serving our customers and ensuring we have the right products at the right values. And we remain focused on long-term share growth in the highly fragmented approximately $1 trillion home improvement market. Remember, we operate in one of the largest asset classes which is estimated at approximately $45 trillion, representing the installed base of homes in the United States. Today, we have roughly 17% market share with tremendous growth potential. That is why we have been investing and executing on our strategy to create the best interconnected experience for a Pro wallet share through a differentiated |
2,885 | HD | 2 | 2,024 | 2024-08-13 09:00:00 | The Home Depot, Inc. | 278,679 | and executing on our strategy to create the best interconnected experience for a Pro wallet share through a differentiated set of capabilities and build new stores. Now I'll take a few moments to comment on our acquisition of SRS Distribution. SRS has an exceptional team with a proven growth track record, and we are thrilled to welcome them into The Home Depot family. While our financials only reflect a portion of their first half performance for the first six-month period matching our first half, they generated high single-digit top line growth while growing operating income largely in line with sales compared to the previous year. We are incredibly excited about what we can achieve together by leveraging our combined assets, capabilities and competitive advantages. We plan to drive incremental growth through several sales and cross synergy opportunities. We'll make their more comprehensive product offering in roofing, pool and landscape available to all our customers through our Pro desk, and we will offer SRS customers a form of credit tied to their account, which will make purchases at Home Depot stores much more convenient. The fundamentals of the home improvement market remain strong, and we have significant growth opportunities in front of us. We are gaining share of wallet with our customers whether they are shopping in our stores, on our digital assets or through our Pro ecosystem. Our merchants, store and MET teams, supplier partners and supply chain teams are always ready to serve in any environment. They did an outstanding job delivering value and service to our customers throughout the quarter, and I'd like to close by thanking them for their dedication and hard work. With that, let me turn the call over to Ann. |
2,886 | HD | 2 | 2,024 | 2024-08-13 09:00:00 | The Home Depot, Inc. | 278,679 | Ann-Marie Campbell: Thanks, Ted, and good morning, everyone. As you heard from Ted, despite the environment, our associates continue to be engaged and ready to serve our customers. We know that delivering the best shopping experience for any purchase occasion is critical to our success. That is why we continue to invest in our associates, our in-store capabilities, our fulfillment channels and the customer experience. Over the past year, we have talked about the tool that help us create this differentiated experience. Specifically, our focus on in-stock and on-shelf availability or OSA with our Sidekick and Computer Vision applications. Today, our in-stock and OSA are at best-in-class levels and provides the foundation for a fast in-and-out convenient experience that many of our customers' desires, especially our Pro customers. We have also enhanced the tools our associates use for our in-store Pros and specialty selling. Within the MyView tool, which has many in-store applications, we have given our associates better visibility to our customers' activity with The Home Depot. For example, for our in-store Pros, we can see sales trends, specific buying patterns and expiring perks, equipping our associates with insights to better partner with share wallet and deliver value for our customers. To drive conversion for specialty customers, we launched a new platform known as Pipeline Management that enables interconnected product selling for kitchen designs. With this tool, associates and store leaders, will now be able to have a consolidated digital view of their pipeline and all activities related to our customer's journey. This allows associates to more easily manage multiple complex projects, while more effectively communicating with our customers throughout their journey. Additionally, we continue to make progress on our organic efforts around our different assets and capabilities to grow share of wallet with a complex project purchase occasion. We are pleased to announce that we now have key full capabilities in |
2,887 | HD | 2 | 2,024 | 2024-08-13 09:00:00 | The Home Depot, Inc. | 278,679 | share of wallet with a complex project purchase occasion. We are pleased to announce that we now have key full capabilities in 17 markets, including a broader product assortment, digital assets, a sales force and broader fulfillment options. Our trade credit pilot program is also underway, and while it's still early days, we have seen the program resonate with our customers and the benefits of extending credit for larger scale products that are stayed for a longer period of time. We are also making progress on our order management system as we continue to roll out enhancements to the end-to-end selling system. We are very excited about our continued success serving the complex product certification and are focused on delivering the best customer service to all our customers. Our store readiness and execution is strong and our associates are engaged. I look forward to the many opportunities ahead of us, and I want to thank all our associates for all they do to take care of our customers. With that, let me turn the call over to Billy. |
2,888 | HD | 2 | 2,024 | 2024-08-13 09:00:00 | The Home Depot, Inc. | 278,679 | Billy Bastek: Thank you, Ann, and good morning, everyone. I want to start by also thanking all of our associates and supplier partners for their ongoing commitment to serving our customers and communities. As you heard from Ted, during the second quarter, the higher interest rate environment and greater macroeconomic uncertainty pressured overall project demand. In addition, our sales reflect a softer spring selling season, which was also impacted by extreme changes in the weather throughout the quarter. Turning to our merchandising department comp performance for the second quarter. Our plumbing department posted a positive comp, while power, building materials, appliances and paint were all above the Company average. During the second quarter, our comp transactions decreased 2.2% and comp average ticket decreased to 1.3%. However, during the quarter, we continued to see our customers trading up for new and innovative products. Big ticket comp transactions or those over $1,000 were down 5.8%, compared to the second quarter of last year. We continue to see softer engagement in larger discretionary projects where customers typically use financing to fund the project such as kitchen and bath remodels. Pro's outperformed the DIY customer, but both were negative for the quarter. We saw positive growth with Pro's who engage in Pro Extra program, deliveries to the job site and our B2B website. Turning to total company online sales. Sales leveraging our digital platforms increased approximately 4%, compared to the second quarter of last year. And for those customers that chose to transact with us online during the second quarter, nearly half of our online orders were fulfilled through our stores. In addition, during the second quarter, we expanded our partnership with Instacart to improve the interconnected shopping experience nationwide. While we are still in the early days of our expanded partnership, we are encouraged with the results we are seeing. During the second quarter, we leaned into products and projects |
2,889 | HD | 2 | 2,024 | 2024-08-13 09:00:00 | The Home Depot, Inc. | 278,679 | partnership, we are encouraged with the results we are seeing. During the second quarter, we leaned into products and projects that are resonating with our customers. We updated some line structures focused on innovation and continue to deliver a compelling value proposition while focusing on the customer experience. For example, we upgraded the durability of all Lifeproof Vinyl Plank, while also introducing on-trend colors, patterns and length. This helped drive positive comps in the category for the quarter. In water heaters, we recently modified our line structure to better serve the Pro customer needs. We simplified our value proposition, adding new and better features, which drove increased engagement in the category. And in paint, we continue to see the benefits of the investments we are making around our products and our fulfillment options, including our in-store service and job site delivery capabilities with the Pro who paints driving continued share gains in the quarter. And finally, we continue to see tremendous success in our outdoor power equipment categories, driving both positive unit and dollar comps in the quarter. As we've mentioned before, we have built a strong competitive advantage with our extensive lineup of battery-powered platforms that allows us to continue to grow share in these categories. As we look ahead to the third quarter, our merchandising organization remains focused on being our customers' advocate for value. This means continuing to provide a broad assortment of best-in-class products that are in-stock and available for our customers when they need it. We will also continue to lean into products that simplify the project, saving our customers time and money. That's why I'm so excited about the innovation we continue to bring to the market. This quarter, we are launching the first-to-market smart glass door with Feather River. Feather River is a leader in the fiberglass door market and continues to bring innovation to our customers. This new door technology allows customers |
2,890 | HD | 2 | 2,024 | 2024-08-13 09:00:00 | The Home Depot, Inc. | 278,679 | in the fiberglass door market and continues to bring innovation to our customers. This new door technology allows customers to easily change the glass from privacy or frosted to clear with a push of a button and is compatible with our hub space ecosystem. This will be exclusive to The Home Depot in the big box retail channel. Additionally, we continue to lean in with our exclusive partner in Milwaukee across the business and have seen great adoption of electrical hand tools. Our partnership is expanding with a broader assortment of Made in the USA tools. These tools provide a high degree of precision with lasting results for our Pro customers and will continue to strengthen our position as the number one destination for the electrical trade in the big box retail channel. With that, I'd like to turn the call over to Richard. |
2,891 | HD | 2 | 2,024 | 2024-08-13 09:00:00 | The Home Depot, Inc. | 278,679 | Richard McPhail: Thank you, Billy, and good morning, everyone. In the second quarter, Total sales were $43.2 billion, an increase of approximately 0.6% from last year. Total sales include $1.3 billion from the recent acquisition of SRS, which represents approximately six weeks of sales in the quarter. During the second quarter, our total company comps were negative 3.3%, with comps of negative 3.7% in May, negative 0.9% in June and negative 4.9% in July. Comps in the U.S. were negative 3.6% for the quarter, with comps of negative 4.1% in May, negative 1.4% in June and negative 5% in July. In the second quarter, our gross margin was approximately 33.4%, an increase of 40 basis points from the second quarter last year, primarily driven by benefits from lower transportation costs and shrink, partially offset by mix as a result of the SRS acquisition. During the second quarter, operating expense as a percent of sales increased approximately 65 basis points to 18.3% compared to the second quarter of 2023. Our operating expense performance was in line with our expectations. Beginning this quarter, in addition to our GAAP measures, we are providing the following non-GAAP measures: adjusted operating income, adjusted operating margin and adjusted diluted earnings per share, which excludes noncash amortization of acquired intangible assets. We believe these supplemental measures will help investors better understand and analyze our performance. Our operating margin for the second quarter was 15.1% compared to 15.4% in the second quarter of 2023. In the quarter, pretax intangible asset amortization was $90 million, including $39 million related to SRS. Excluding the intangible asset amortization in the quarter, our adjusted operating margin for the second quarter was 15.3% and compared to 15.5% in the second quarter of 2023. Interest and other expense for the second quarter increased by $61 million to $489 million due primarily to higher debt balances than a year ago. In the second quarter, our effective tax rate was |
2,892 | HD | 2 | 2,024 | 2024-08-13 09:00:00 | The Home Depot, Inc. | 278,679 | to $489 million due primarily to higher debt balances than a year ago. In the second quarter, our effective tax rate was 24.5%, compared to 24.4% in the second quarter of fiscal 2023. Our diluted earnings per share for the second quarter were $4.60, a decrease of approximately 1% compared to the second quarter of 2023. Excluding intangible asset amortization, our adjusted diluted earnings per share for the second quarter were $4.67, essentially flat compared to the second quarter of 2023. During the second quarter, we opened three new stores, bringing our total store count to 2,340. Retail selling square footage was approximately 243 million square feet. At the end of the quarter, merchandise inventories or $23.1 billion, down approximately $200 million compared to the second quarter of 2023, and inventory turns were 4.9x, up from 4.4x last year. Turning to capital allocation. During the second quarter, we invested approximately $720 million back into our business in the form of capital expenditures. And during the quarter, we paid approximately $2.2 billion in dividends to our shareholders. Our disciplined approach to capital allocation remains unchanged. First and foremost, we will invest in the business and expect capital expenditures of approximately 2% of sales on an annual basis. After investing in the business, we plan to pay the dividend and it is our intent to return any excess cash to shareholders in the form of share repurchases. Computed on the average of beginning and ending long-term debt and equity for the trailing 12 months, return on invested capital was approximately 31.9%, down from 41.5% in the second quarter of fiscal 2023. Now, I will comment on our updated outlook for fiscal 2024. As you heard from Ted, given the softer-than-expected performance in the first half of the year, and reflecting continued uncertainty around underlying consumer demand, we believe a more cautious outlook for the year is warranted. With the recent closing of the SRS acquisition, we are now including their results |
2,893 | HD | 2 | 2,024 | 2024-08-13 09:00:00 | The Home Depot, Inc. | 278,679 | cautious outlook for the year is warranted. With the recent closing of the SRS acquisition, we are now including their results in our consolidated outlook for the year. For the period matching our first half, which includes periods prior to the acquisition and not fully reflected in our financial statements, SRS generated high single-digit percentage sales growth with operating income growing largely in line with sales. We believe that over the next several years, SRS on its own, and through our combined Pro efforts, will help accelerate sales and earnings growth for our company. Updating our fiscal 2024 guidance for the factors we just discussed. We now expect total sales growth between 2.5% and 3.5%, including the SRS acquisition and the 53rd week. The 53rd week is projected to add approximately $2.3 billion to total sales. SRS is expected to contribute approximately $6.4 billion in incremental sales. Comparable sales are expected to decline between negative 3% and negative 4% for the 52-week period. The high end of our range implies a consumer demand environment consistent with the first half of fiscal 2024. While comparable sales for the Company are not currently on the trajectory for the low end of the range, a negative 4% comp implies incremental pressure on consumer demand beyond what we are seeing today. We expect to open approximately 12 new stores. Our gross margin is expected to be approximately 33.5%. We expect operating margin to be between 13.5% and 13.6%, and adjusted operating margin to be between 13.8% and 13.9%. Our effective tax rate is targeted at approximately 24%. We expect net interest expense of approximately $2.2 billion. Our diluted earnings per share percent will decline between negative 2% and negative 4% compared to fiscal 2023, with the extra week contributing approximately $0.30. We expect our adjusted diluted earnings per share percent to decline between negative 1% and negative 3%, compared to fiscal 2023, with the extra week contributing approximately $0.30. We believe that we |
2,894 | HD | 2 | 2,024 | 2024-08-13 09:00:00 | The Home Depot, Inc. | 278,679 | negative 1% and negative 3%, compared to fiscal 2023, with the extra week contributing approximately $0.30. We believe that we have positioned ourselves to meet the needs of our customers in any environment. The investments we've made in our business have enabled agility in our operating model. As we look forward, we will continue to invest to strengthen our position with our customers, leverage our scale and low-cost position to drive growth faster than the market and deliver shareholder value. Thank you for your participation in today's call. And Christine, we are now ready for questions. |
2,895 | HD | 2 | 2,024 | 2024-08-13 09:00:00 | The Home Depot, Inc. | 278,679 | Operator: Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] Our first question comes from the line of Scot Ciccarelli with Truist. Please proceed with your question.
Scot Ciccarelli: So, it sounds like you guys are seeing a bit more of a shift towards, let's call it, broader consumer weakness from what previously seemed to be hesitancy around finance projects. Can you provide a couple of examples just so we can better understand kind of the incremental hesitancy on consumer spending patterns?
Ted Decker: Well, I think it's just in broader projects, Scott. As we said in the prior couple of few quarters, the consumer remains engaged. Our consumer, in particular, remains quite healthy. Again, these are consumers who have seen their home values go up 50% in the last four years, their home equity has increased almost 70% since the -- right before the pandemic. So that translates to over $13 trillion. Equity values have been strong, jobs are strong, earnings are strong. But we saw engagement the last several quarters in smaller projects. What we saw this most recent quarter is further pressure in larger projects. And we see that in building materials in lumber categories that are very specifically tied to construction in a larger project. And that was really the change that we saw as the quarter progressed.
Scot Ciccarelli: So, in other words, like it's not necessarily broadening out, but it's increased pressure on, let's call it, project-oriented purchases? |
2,896 | HD | 2 | 2,024 | 2024-08-13 09:00:00 | The Home Depot, Inc. | 278,679 | Ted Decker: Yes. And you said it. I mean the change that we believe happened over the course of the quarter. And so, if you go back a bit to the environment that we've been working through this period of moderation, the first thing we saw was a shift in spending -- PCE spending from goods back into services. And we're effectively through that transition, the relative share spend is more or less equal to where it was before the pandemic. And then we had, some certainly some pull forward in our segment. I'd say we're not completely through the pull forward, but largely. I mean we're now going on four years from the first spring of the pandemic when people were buying lots of grills and patio furniture et cetera. We're largely working our way through that. And then, the higher interest rate started to impact the housing market in housing turnover in particular, which is down some 40%. And I think last quarter, last month, we saw numbers that on an annualized basis, we're approaching 40-year lows. That's also impacting customers' interest in financing larger projects. Everyone's expecting rates are going to fall. So, we're deferring those projects. But again, what more recently has happened is a broader concern with the macro economy. There's just a lot of noise with political and geopolitical environment, unemployment ticked up, inflation keeps eating away at disposable income. And I think people just took a pause as we progress through the quarter or more of a pause because of these macro uncertainties.
Operator: Our next question comes from the line of Seth Sigman with Barclays. Please proceed with your question. |
2,897 | HD | 2 | 2,024 | 2024-08-13 09:00:00 | The Home Depot, Inc. | 278,679 | Operator: Our next question comes from the line of Seth Sigman with Barclays. Please proceed with your question.
Seth Sigman: I wanted to ask about just performance across different channels. So, core Home Depot retail, I think that's pretty clear. But Home Depot or HD Supply, it seems like it's outperformed, but kind of hard to tell from our side. And then on SRS, if you can maybe just elaborate more on the trends you're seeing there. As you step back and think about, hopefully, an eventual recovery, you've built up this very diverse business over the last few years. I mean how do you think about the timing of these different segments and how they come out of this?
Richard McPhail: Sure, Seth. Well, we're -- I'll tell you, we're very proud of all components of our business. We are executing at an exceptionally high level across the core and across the businesses that you call out. While we don't split out HD Supply is part of our core, we are proud to say that we have had -- and HD Supply has had an exceptional track record as of late even penetrating through to generate positive sales growth in the second quarter. And so that's a real bright spot for The Home Depot. Now SRS, as we told you when we acquired SRS, this is a growth company acquiring a growth company. SRS has a track record of growing faster than their competition in all of their verticals and has done so for the last 15 years. If you look at what SRS accomplished in the first six months of the year, again, we only own them for six weeks, so we only book six weeks of results. But they grew in the high single-digit percentages in the first half. They had healthy growth in the second quarter and we expect them to, again, book single-digit growth in the entirety of the year 2024, even though we'll only own them for seven months. So, these two business models, HD Supply and SRS are great examples of market leaders who are accustomed to growing share and delivering the bottom line as well. |
2,898 | HD | 2 | 2,024 | 2024-08-13 09:00:00 | The Home Depot, Inc. | 278,679 | Ted Decker: Yes. And I'd add to that, Seth, we're not going to break out operating segments. But in HD Supplies case, there's some appropriate comparatives in SRS, there's very much publicly traded comparatives. And we feel really good about the MRO business, the roofing, the pool and the landscape business against those comparables.
Seth Sigman: Okay. That's super helpful. And then if we just zoom back in on core Home Depot, maybe just speak about your relative performance. If there are categories that you may be seeing some widening gap. You called out a number of categories that seem to be under a lot of cyclical pressure, but were cited as bright spots, outdoor power equipment, you mentioned appliances above average. Obviously, that's been a tough category. I think you even mentioned vinyl plank having positive comps. So maybe just speak to some of those categories and where you may be seeing that widening gap?
Billy Bastek: Thanks, Seth. So, it's Billy. Listen, as I did mention in our prepared remarks that we continue to talk about the finance projects, we continue to see ongoing pressure. I don't think that's new news. Having said that, we called out a number of businesses that you just mentioned it, vinyl plank, we saw great performance in both sales and unit comps. Water heaters, as I mentioned, certainly, paint. We're thrilled with the efforts we've had in paint with the Pro that paints and our paint business in total. And again, power across our platforms as well. So non-finance projects, while we did see some softness in some of the seasonal pieces that we alluded to in our prepared remarks, the continued ongoing pressure of just the uncertainty as it relates to interest rates, it's going to continue to put some pressure on those finance projects. But we're pleased with some of the other pieces I mentioned, larger ticket, onetime purchase categories like riders as an example, we continue to see good engagement in businesses like that as well. |
2,899 | HD | 2 | 2,024 | 2024-08-13 09:00:00 | The Home Depot, Inc. | 278,679 | Operator: Our next question comes from the line of Michael Lasser with UBS. Please proceed with your question.
Michael Lasser: What do you think the key level for the 30-year fixed rate mortgage needs to fall to in order to drive Home Depot business higher? And does that rate change, or that level change, is the decrease in rates is due to an erosion in the labor market rather than just a moderation in inflation?
Ted Decker: Michael, full question there. Hard to pinpoint what that magical rate number is historically and then as you say, with some added pressure. All I can do is reference towards the end of last year when rates came off, the high is over 7%, and moderated down, I think even hit below 6.5% there for a bit. You saw an immediate increase in housing activity, mortgage applications, mortgage refi applications. And then unfortunately, the rates spike back up think almost to 7% again. So, we're trending down again. I think you're approaching 6.5% for qualified mortgage. And based on what we saw towards the end of last year, we would think you're approaching a level that people are going to engage. Caveat to that would be, again, this broader economic, geopolitical even concerns that people still might pause a little bit until some of this gets sorted out, which would be understandable, but as rates head down towards 6%, we would expect to see activity. The other thought or piece of this whole puzzle is the amount of folks, as you know, who are in mortgages as low as 3%. And plenty of mortgages under 5%. There's definitely a little bit of a golden handcuff dynamic going on with those rates. But again, as time goes on, family dynamic changes. And for one or two years, you might stay in those golden handcuffs and enjoy the low rate, but family size increases, household formation, moves for employment, retirement, et cetera. So, we would see a gradual unlocking of that even if that adds to a little bit of a delay response to housing for -- from a traditional rate cut environment. |
Subsets and Splits
No community queries yet
The top public SQL queries from the community will appear here once available.