HD - Earnings call transcript Q3 2018

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good day and welcome to the Home Depot Q3 2018 Earnings Call. Today's conference is being recorded. [Operator Instructions] At this time, I'd like to turn the conference over to Isabel Janci. Please go ahead, ma'am.

Isabel Janci

Thank you and good morning everyone.

and call Decker, Craig Merchandising, Executive Tomé, Financial our and Chairman, and on Corporate Chief Ted President, President; Vice Officer us today Menear, are CEO Carol Services. Joining Vice Executive President of

the are Following your one for Questions please our at follow-up. question call, and and with will open please question reminder we analysts questions. as to one prepared a Investor call unable limited limit our be to Relations the investors XXX-XXX-XXXX. remarks, during to will get be yourself call If to department

Craig, release Before results release limited with I measures. Today's are subject are our turn also non-GAAP of to factors Reconciliation identified differ include let by statements the our uncertainties materially actual include me and provided presentations website. Private measures risks the to discussion projections. of the on but in you call in and our press Act from that over These Securities today's defined Exchange is to certain These Commission. include could Reform cause forward-looking the Securities risks to as and and XXXX. that statements made uncertainties executives remind expectations our and not will and the these in the filings Litigation

over Now Craig. let turn the to me call

Craig Menear

the U.S. regions last which billion. X.X%. positive of the Hurricane were exception third of our year XXX comps. in were posted XX.X Sales comps were the our one you, lapping quarter U.S. region, third Harvey. Hurricane Thank associated to sales per of with last almost but sales Diluted third pleased million perspective sales anniversary quarter from quarter. All Isabel, year. geographic Gulf year earnings share and X.X% good for we're from the related quarter. last the our that Recall strong of from compares The up We're was across results in tough with faced the were morning a positive From XX $X.XX our and everyone. were up X.X% Comp

and devastation inflict scope in are community than of this brought begin damage Nonetheless, more and did the and storms in what they Florence from Hurricanes While thoughts geographical quarter our with them compact Michael, perspective these we significant experienced prior a the efforts. year. was recovery as prayers

currently Our thoughts by are the and prayers Internationally, all fires comps currency. local Canada who being positive in deadly go to and Mexico those also out both posted California. in impacted

again ticket to DIY in DIY the will both transactions to outpaced Ted see home market. grew continue in demand the this the is across Pro and strength a overall a we detail, testament sales, healthy believe but store. shop as sales of they improvement Pro As both the balance customers in We and once quarter. from growth

business be customer growth. to approximately from digital Our was making interconnected frictionless to quarter traffic growth a respond quarter, investments we're continues to the healthy. Online of another In sales drive third of grew XX% source Customers to experience. enhancements continued XXXX. and ongoing third online

online buy store both in online for pickup quarter. faster sales For example, the third online sales, rate and than buy the ship to grew overall store growth

class Another delivery experience of enhanced and shopping best key fulfillment on interconnected the centers component options. in

we delivery a know, reach we there, told get enable to be to five different journey One order capability we're that next Supply In Today, One that year SKU of you or goods. availability. improvement. to Home breadth the in XXXX to plan greater an our fastest, must a that first end state with on can the enable same and in chain invest SKU Depot very of and for I'm to and year reach report facilities stages of includes parcel We of depth the of of the number The extended as XX% track population population the U.S. we're the day live learn test year. bulky you we facilities, two days shipping. with XX% offering us or pilots with will next with will open early offer in and the big our the network Home are Chain with rest new we supply few of approximately additional As early efficient to Depot anticipated centers. U.S. with year throughout in delivery and home less pilot day of fulfillment in this investment most pleased scheduled pilot

we're progress with initiatives, car long-term customers' enhancements We've offerings our store as now delivery our enables car immediate meeting on utilization delivery and delivery van work express goods. population needs. Since customers. we van our Pro also focused day on the we XX% delivery increased and and rolling great over to same As made of seen store from our DIY delivery our of U.S. out both have

that focus and our the laid of update exceptional wayfinding our sign implemented XXX customer in initial on for refresh We've goals continue simplifying delivering we investments towards operations. our driving on in me of we ahead plan. approximately work December all out service, let which to of As stores and you you of XXXX, store package XXXX some productivity

while new to our lockers also deployment our working application. progress the front-end We An among of areas this productive for our example more our on to redesigned pickup the management friction rollout other with remove make customers of be helping investments. time. of their overhead associates is continue We're and to

say inventory manually the better for in management management. associates enabling stored shelf way stock, As only improving heard to and application experience time, overheads the to in of rollout has stones overheads starts overhead service for the product our the you've on application, in in product associate could quickly be customers to accurately purchase, on an saving the This customer it. just first new helps locate having locate was look Prior the overhead. not them in and our to with being an beyond it customer before, stock, product but

as the but improvement of dedication thanking work associated drivers business. customer their in I supportive and fiscal of year. we we're headwinds quarter, we fourth expect diluted spend from close XXXX our our improvement. to guidance of Turning X.X% making share more that for to deliver growth and some the storm outlook, ensure home are about detail, believe by investments our want hard discuss now earnings customers. to last year's We home the for updating excited experience sales the of in earnings $X.XX. remain related faced We sales our and the we're continued best will Carol sales per the approximately our to We

not and the efforts aisles, we to communities customers our record only but associates serve which Our their in our extend operate. to

our in campaign in This eighth annual quarter XXX,XXX support marked housing needs. veteran hours associates of a over Celebration volunteered our of Service which

Veterans over in veteran In Day let our hands that served opportunity with to proud homes this XXX. since that and over this given take earlier the every those to fact, our me associates have of XX,XXX to have partners week, facilities Ted. me our turn call We're thank was live And associates And on that let transforming been day. and country. non-profit very values our

Ted Decker

core our Pro and were both We pleased The well good with we customers. to perform quarter. saw growth, continues our DIY the store our Thanks, Craig morning and and of results third in everyone. with

the average. plumbing, electrical, departments, in Looking tools, company appliances, were comps and décor our flooring at above

other approximately the quarter, XX and while the were The essentially increased in average All In impacted volatile lighting departments transactions were building prices and below X.X%. average. of quarter, inflation the Today XXXX ticket comp the points prices basis levels. X.X% materials in company positively comp copper positive Commodity growth in ticket our quarter. by lighting lumber lumber, are was average comp but but flat. in third below increased

addition growth by rates ticket negatively impacted exchange In XX points. basis approximately foreign average

as over Big in continue heaters. than see Pro plumbing had above water and electrical heavy like or pro appliances the again X.X% in projects increase many We power quarter. Pro the US the average $X,XXX, drivers during big and were faster A categories average. sales grew the all quarter. company's performance of flooring, sales up the categories XX% ticket concrete big which comps sales sales vinyl strong several in approximately windows, saw tools, few company comp. were ticket heavy to plank we ticket categories third behind and in represent transactions strength Once

helped DIY we exterior with which also a growing healthy Day us We pleased were Harvest third in quarter recorded events engage store. create Categories customer and the strong annual they stores. our the hosted in several and drive vanity, events, as the traffic interior year-over-year. growth to Labor and excitement and safety Halloween, lawnmowers, ceiling that quarter. and growth our solid We In security, continue paint showed across with see like fans and

initiatives the work highlight associates. focus efficiency analytics data partners attention to activity first MET This recent on to integrity stores, three managers store like been sets customers, season I'd and Team. continue set we As Execution in for on MET we've leverages enhancing experience the to advanced best class MET speed execute with in working team to market. our categories see to partnering the who our We We bringing time throughout and technology require phones understand productivity supplier our Depot. proprietary Merchandising power to the the of direct real with and drive stores. of our to our in thank Home to wanted what and use our continue leverage some

in launches associates of our part us to the recent Power Troy-Bilt Wiss, exclusive destination our Toro, Equipment. Our our of and makes every Stanley including lineup Crescent, many of blooded large Two BESSEY lineup Cub plus day. DEWALT, the our and ECHO, complements Tools Husky, to Cadet, EGO, Hand hand Ryobi, Stanley, us Outdoor brands product aisles one because they Outdoor Honda, And for leading brands our tools. innovative Klein DEWALT Milwaukee. portfolio brands, and exclusive Adding Power of suppliers and Equipment with Milwaukee, are number exclusive enthusiasm Troy-Bilt, and Empire, XXX,XXX bring to trust exclusives additions

XX top to In fact, self-propelled lawnmowers rated Depot. of market the Home are XX the fox exclusives in the big gas

about Looking quarter, upcoming the we're to holiday season. fourth the excited

power RIDGID, to and Husky. tool and With Diablo This also Ryobi, features Milwaukee, Depot XXXX accessory to is holiday from center the number a over are our I'd leading to exclusive Makita, that of Carol. call our yet including Home to addition with gift we're thrilled special tool gift best In turn our and comprehensive the décor that brands buys offerings, our center. like

Carol Tomé

Thank an of dollar operating the In were X.X% positively impacted negatively at that new recognition. quarter, year. you, accounting of everyone. impacted The during we on third last in million growth revenue XXXX, by the standard standard US changes the fiscal of adopted beginning morning X.X%. new no but to Recall the $XXX accounting income million. quarter certain total change the from $XX.X sales has pertaining profit. Ted, or items sales sales geography and impact our good increase In approximately billion, Further, total on statement a third growth by quarter, third the stronger a $XX

Hurricane basis sales for for The total comps our basis the the negatively we with monthly year, August, the the XX.X%, impacted points occurred basis impacted positively of the third September in cadence sales but October. Comps $XXX of related Hurricane majority August, related this X.X% August, sales October. in and the These XX spread year. September in that US experienced XXXX increase of estimate to third comps September quarter the In quarter. comps approximately of following were related the points XX.X% sales. with gross comps quarter In our October. quarter, and Our positive related more third last in quarter across gross September, of by margin year-over-year were the of in points XXXX X.X% an margin of in comps positive positive X.X% X.X% sales both change equally and The million reflects those US of US the XX to XXXX, we approximately $XXX Hurricane due in and large and company from In factors. Hurricanes. in XXX fiscal our X.X% were and X.X% October. part We of in in basis in X.X% had points was XX in in quarter in positive sales by comps million

million $XXX of about or drove basis XX margin expansion. points standard accounting new profit the gross of gross First,

of of XX margin impact drivers of costs X chain higher resulted And caused the contraction. Second, points net and of approximately basis margin transportation finally point gross basis in gross all other supply contraction.

following For factors. to quarter, basis gross of to the In the expect points to by as XX basis points. our XX by expand we now due XX.X% approximately operating the sales year, increased rate margin a expense third percent

First, XX points in As experienced we Usual basis of or BAU, Business expense. leverage expense

our control, good was due benefit driven leverage also by of certain did expense expenses to not some Our related business year-over-year that but Hurricane reflects repeat year. core strong in this the

operating standard in resulted accounting And strategic caused new plan investment million points increase $XXX finally, million the our basis $XXX of resulted expenses operating basis Second, expense operating of expenses points XX related of to and XX deleverage. our deleverage. approximately in expense to roughly

expect year to our sales grow at fiscal operating approximately of XXX% rate. we now For expenses the growth XXXX our

were margin quarter. operating $XX tax rate effective in was Our flat the year. and guidance. including the of million the to million, other the we XX.X% that and largely Interest recorded was by quarter, year reform the and the last charge for fourth in provisional other for in expense last was $XXX that year. tax occurred the reconcilement a third XX.X%, The reflects year-to-date lower few the with last rate to tax items third our than tax of and quarter recorded due essentially discreet quarter, quarter third settlements a quarter lower for XX.X%, our In decreased

XXXX, be XX%. will rate approximately fiscal we effective expect tax For our now

for Our the in to third were last $XXX, grew of at from versus levels XX.X% third inventory to $XX.X foot X.X% the turns Compared shares merchandising of million ago diluted $X.XX, increase repurchased billion the last to the stock. than times. last had year, reflects earnings billion investments stock growth last accelerate sales from per by higher of or year. we approximately in and an The forward purchases. we outstanding pull per year. inventory billion our were year for inventory $X.X Total some [ph], In up third making planned expense one and approximately quarter we're dollars remained X.X quarter share inventory XX.X year $X.X square quarter,

quarter $X.X program We X our incremental of approximately with outstanding the we related approximately us we long-term to EBITDA our our repurchased year. now X to $X.XX we million billion replace raise and came debt September repurchase shares, the We fourth fourth our plan the Computed which $X will basis of hand billion closer an XX adjusted due and shares notes billion was to to to average senior initiated Year-to-date, of proceeds received with have the intend on the may also indebtedness, points higher approximately that targeted months, XXXX. of quarter. and for the ASR additional times. in we second cash to beginning expect ending invested from equity repurchases debts. for quarter return outstanding trailing in and shares quarter In debt long-term share on and fund of take fiscal capital we third on XXX ratio approximately of XX.X%, than

XXXX we off to guide our fourth to see will updating recall we against important XXXX fiscal and of we and which in tax Turning the prices sales. We're sentiment model remains is metrics GDP moderating, fiscal earnings near $XXX lifting years. drivers of it remainder margin, is of gross growth, guidance and lowest of healthy rate. spend to demand, it we XXXX for per year-to-date of the outperformance. related are to XX share up XXrd the imperfect guidance that approximately reflect over. we're all-time year, in stock with sales fourth strong, home that fiscal while is appreciate, Today, has Hurricane to the our also XXXX supportive nearly continue expense, that consist the our growth. our being operating outlook. outlook It GAAP formed quarter highs include that is housing are are the note weeks. improvement ageing, sales but for Housing improvement the related correct households million and will our share Remember so repurchases expectations week, And but turn to home continues Home housing a our reflect remember been unemployment fiscal a that of use to forecast directionally quarter we XX starts have consumer are

we by of X.X% to a XXXX, sales comps X.X%. approximately basis on fiscal expect with XX-week as calculated positive increase For approximately

expect approximately Porsha, per would grow share call. earnings questions. in For we like to With you XX.X% participation to share, we fiscal are thank that, And per to your for diluted I earnings today's $X.XX. now for ready XXXX

Operator

Thank you. [Operator will today Morgan. Horvers instructions] with And question from our first come Christopher J.P.

Christopher Horvers

good Thanks, morning.

housing. So home the the on environment lot and if yeah, there's questions you in of - a consumer

you quarter in of If comparing front, guiding to about that fourth have quarter so going seems harder a - still the better the X.X at than some quarter flat, is maybe maybe a that after FX. also guidance, the fourth your a you're be to like you it US look headwind, had assuming the third for Hurricane inflation benefit

in So give of you a what to gives business, are guide? you what the seeing the confidence that level

Craig Menear

let the really the about Chris, on We're improvement environment level see I'll be factors, comps we're years improvement we lined up against high you not in that's excited Again, year but the what of two about. and the we where the back the would strength basically great talked events gift back for second half for only walk up that overall Ted but look merchandise give the we've forward year through the see the of for solid. home numbers, and in the see half you half. clearly that as of we center terms it Hurricane details. significant in going stat and based We're and is comparable a home we first as the half Carol and

Carol Tomé

in we're has guidance the - with from not in our what only our how quarter seeing sales macro we That's begun. and pleased right, Chris. we're from from seeing but we're in And environment, comfort the get what

Christopher Horvers

forward gross you fast investment say think how share risk, can experience of a in broad marginally the little about to categories those you more maintain that Some drive potential profit increases, look you flooring as margin balancing pass up maybe think but you that how go gross appliances dollars. on bit sort versus about risk potential in would the year, next talk rate about a to and they - let's how of would your certain commented wanted also so gross size rate, you try you in after about tariff just through like you share? have margin would to Excellent, had price companies to and trying think tariff

Craig Menear

to start you much the represent prices. here. and ability. Ted to to in in you purchases a can have to us Chris, But we'll and happen. to the the saw I'll basis represent costs in some will we project as in But would XX% impact gets we knows what's laundry happen part the second of comment mitigate business. approach, do So one it to laundry pressure see in business applied, come The through relates will tariffs jump make date it's mitigate of where and X% portfolio of but to think retail as the don't necessarily as that's customer everything on about place in of were US that's taking let we're X.X% go of question and see on purchases. area a in our portfolio best January who as in a I The as to mentioned you And run is, we possible, we've we Yeah, that going US impact that of your this seen for that going tariffs example. more clearly if work and

Ted Decker

we've mad today I'm an what of add in business. its that than portfolio with than is take while tariff. good at particularly did cost what laundry term that several Craig tariffs, of months the average slightly as Chris. But sales manageable unit that we've the would news, approach right straight that look our comments, in of more industry Yeah, there to initial was productivity better manageable seen is par reaction had price is priced of largely stilt if is industry, now described. I Certainly also cycled that's just not and laundry the it's appliance so light attributable our to couple using overall we the Craig, that generally to the if And a and through well, a that you productivity happened unit laundry on

in that So able well. the through we the other as again were demand would and cycle expect same to see given to strength categories of

Christopher Horvers

Thanks, everybody.

Carol Tome

Thank you.

Operator

to move And Michael UBS. next Lasser with we'll on

Michael Lasser

Good for a question. Thanks lot taking morning. my

been would home what like will How So long can your be view? decoupled do turnover improvement prices level view that it and you demand home is think rethink housing and from that has and of housing. sounds persist you that make

Carol Tome

phrase Michael, I that and bit think a differently. I'd - would we

have model We forecast to directionally we this imperfect ourselves that outlook. use correct but

drivers, we a I we of look get but GDP, so sales. do hurricane quarter related we for while outlook. different quarter, be sales, that than million million outlook, suggest would it that's expect lower all those our of if price And turnover. home we well of third to related outlook starts housing of metrics the are number comps fourth almost we and mentioned, quarter, the don't we worth with fourth get sales the the add they housing And reported to now related to expect against the factor our up we our we will As hurricane appreciation, our into stock and because at formation, bode in from $XXX hurricane that think household benefits $XXX what age in including housing that

housing turnover, correct model. is when our together there's In we would lot thought gotten metric imperfect one the it but attention beginning the than of a housing turnover turnover. of of at be and we look recently at that's if decoupling, that's And directionally you put lower terms housing year

number with you, we believe has we approach, is least, model, been beginning lag basis. points. on turnover model look to based way on at with do what not smoothing has So one what and we at perfect, than but correlation which share our what had of the world, data outlook, the the actual our at projected based been and and year, turnover housing impact look a XX back our we we one-month calculated the impact impact went the of transactions don't that the the housing do then on we at other basis the And we to a correlated a through lower

you If correlation at now, was XXXX X.XX. historical look from correlation the to coefficient

XXXX run Okay. But go you if it now, X.X, to now, to it's XXXX if and again and it's from you run from it X.XX.

So the point it's that of to a bit The in turn in what means decoupled housing because band. turn think large home until we a housing Cube, part a it Rubik's of form the we're view for improvements bit, it on you it turn a and way about just it you US. metrics, and got shortage like talking it's

Michael Lasser

that's guided that X%-ish the Carol, years helpful, comps And, and range. grow - for will because next you've in few the

decline headlines about would from to rate type that range by outlook? to similar turnover point think that would port implied in know, XX or at as this housing the continues that moderate, start we a home significant should prices to be be those basis if from and - as what risk would forecast be you not So the

Carol Tome

at so cube our we're when taking that we've to turning not view ourselves the this real well has view, Again in driver of for targets February, wealth in up increase specific number appreciation a with price around. in at down you're created. we Home because out Cube, our have XXXX, feel now so but you the prices not increase big targets that look sure. sales the XXXX, we're a of growth turnover their equity, We've point ago, year, refresh refreshing rate you We been it's as need XXX% will of to our XXXX. a projected had since $XXX,XXX been seen just on seen very albeit would homeowners because are a give Rubik's can't the per comfortable point for that's home from we laid unit, we to year

Michael Lasser

there's seeing of the well you. on is for about for in an question and increase those price of vendors your requests to vocal in have sell pressure you follow-up my lot And a improvement that been home many been increases products documented the

related their the from sales are an going you aside putting to increase products that's you to to commodity XX% So your in inflation expect here? product with price increase are that continue inflation, starting of and to see associated that

Craig Menear

We're But certainly are for cost seems are what Carol to net cost we mean, for we that 'XX. outside, into in are theme the seeing, experienced requests that increase still cost seeing we you but happens same universally, I'd people they're I several seeing the 'XX, hear haven't we for out seeing last called in supplier we the who and or as cost that's said, the requests costs an say, out, costs again, that transportation tariff, are of be but knows transportation commodity facing again, what in facing years a in. things like going is universal and some

Michael Lasser

the that. ticket? could impact impact on your your that provides the inflation quantify Since Okay, just a quantify follow-up commodity you ticket, inflation non-commodity provides you the

Craig Menear

than called to we out ticket we've the XX What the it's the than seen date less commodity XX that basis - points.

Carol Tome

than that. It's less

Michael Lasser

Understood. you Thank much. very

Operator

And next we'll move to with Brian Oppenheimer. Nagel

Brian Nagel

my Hi, the a beating want think, at I dead here. good horse risk morning. a taking of follow Thank up I you questions for So, bit to

On up Michael's the to macro environment, question. follow

going kind that's around Depot the housing a lead have that time? work these it to any shifts if we talk persist me in at at could to point real that or future? like you from very insights knows Have lead in turn now, but helpful, how metrics sales could metrics, data larger detail Home lag with who at somewhat turnover of are that to regard relationship, thank so how acquaintance surprised, you're impact in sounds when Particularly algorithm, Depot your standpoint, housing gave how Carol, which was you. Home not, the the more you the sales some - slower or So, any seeing - talking done and into you're the upon a you about you're - impact

Carol Tome

the with a coefficients environment one-month haven't we different I a turnover prior were it's Well, on been based done than very because lagging in shared that work of and is the leading you yet, lot cycles. on correlation lag, so

as example, too. the to Ike. lot around that's look last again, So happen and will loosened what not up But for standards we going started at affordability the housing down happened of you to dramatically affordability there's when affordability, to that's Dr. prices is a Well, time on led slow and because we of what all underwriting if conversation, know.

so you to two and reform, fundamentally, People the in more look so in got history economy we what's necessarily happening. they future tax of you've very are to employed, the happening, kind And future just business. look at economy you and they've can't going what's have and eyebrows the And of understand at more fundamentally, what's is income, feel good. the as to got the got at to look at we to spend look the with future, about happen good come our the

Brian Nagel

are result but type pronounced seeing there's are calls, United in the Got supply Depot North prior within markets Home at there's on seeing where I - you issues about, markets, West this those been Coast or sales? prices in a And weakness written you it of States of or, discussed areas look your upon and sales, then whether any know, you've a any you you've lot the you impact seen housing East, follow-up certain wherever, as if in a think business, home question, whatever. talked either about,

Carol Tome

the like affordability, when it's really believe areas of you is into very you local. appreciation that and we So local housing price home get and

are to seeing we see market we on any by market ourselves measurable it. and went see we just impact can't So

smart you hopefully watch it's home to but out to ourselves is appreciation projected giving will I'll in we understand one index LA rates of stay numbers, that prices since interest and for we're want top on LA the the one got is And, a point you data, we're performance XXXX, of are home market, fact, XX, this. home and Now, price because it's the market prices to are with rising price increase at and you price and set there. all very rising calling not of at into clearing habit next without a enough you just really year, if stall, affordability give home by the some course affordability good. out it's look because but to worst the terrible, LA, we're watching don't been example get in appreciation

Brian Nagel

Helpful you. always. as Thank

Operator

with We'll on Grom Haskett. next to move Gordon Chuck

Chuck Grom

Hey, morning. lot. Good thanks a

looks like buying? hurricane, October spoke on Just comps Realogy and on were is last for October adjusted about pretty significant down housing up still anything the slowdown they're how little at slowdown week say, stack there look and from a XX.X% your bit where it a significant the just a of or buying October, is a the you again XX.X% front, transaction is volatility X%, year-to-date, the month the of when customer

Craig Menear

October in combined pressure about we the that than Well, of was happened overall, year's you last quarter. significant more in pressure when and from much I clearly hurricane think and a hurricane, October beginning September standpoint Carol out, more the September faced again, were mean, as than called there in what

Carol Tome

of you actually ways hurricanes, but quarter, the it's other than if wasn't news. prices in fall the in a lumber think, commodity precipitously, that end there in even anything we - At the And saw different ignore good I was dramatically prices. Ted, the volatility some business

Ted Decker

news. good very that's No,

of So, down. costs, so seen we as have those the at pressures more year, we we're if and you At dramatic one the believe and decrease we've come project we wood fiber seeing commodities on which point kick a look the business great some went hand now tariffs, of in the with one cost for is And dramatically down, has obviously us. lumber prior were below we're productivity prices unit prior year. starting year; XX%-ish above moved XX% certain

Carol Tome

one why quarter the concerned this about because unit really productivity. from we And commodity is perspective are see reason we a fourth

Chuck Grom

the or end Maybe of And currency past sales frame how think you gears from of October? That's couple on will bring was quarters, curious Okay. and you items front? ahead that inventory if just the the maybe helpful. was feel more very where intentional to tariffs inventory widened then switch in than year in a just as some a the out to relative spillover you look levels to bit that about

Craig Menear

in feel We [indiscernible]. overall Marc really about is of and that by growth standpoint, a design inventory had inventory an good the quality we From the inventory few given the factors.

Marc Brown

Yeah.

inventory to see Depot, begins service but customer focus Home we so productivity to expect continue really the at our We here with in-stock, mostly on in-stock.

that from our matters the and by good. to our service great are in-stock results in-store and drive customers focused of and sales in records there. it we we've that implemented very we're selling really life of that direct strategies have the store the On new new of setting XX% to processes, seeing where And of We've center our bringing the and out number improved tiered most. the per top that shelf with investments folks SKUs actually in reduced stocks levels top replenishment to provide in-stock fulfillment We in-stocks availability feel terms there. really about

investments levels in-stock we've our and with made the pleased So there.

Craig Menear

in and our The well point, some other part call in of ahead of resets obviously give terms that to invested that plant tariffs. merchandising then forward did to and as purchases is we we've your

Chuck Grom

Okay, great. Thank you much. very

Operator

And next Gutman Simeon to Morgan Stanley. we'll with move

Simeon Gutman

side benefit And that to price and there's weather opting add out, headwind. If have impacts for inflation hurricane anything on you to somewhere the morning. that not consumers with there consistent no something anything Good Thanks. we cracks? now. or you called in tailwind keeping any changing sorry any I'm shows that - that consumer year-over-year I'm the that opening just in taken of range X% - then with affected X% some number lower been that to is compare or by points I for get want the know markets and back

Carol Tome

We US was you throw been the out spread narrowest, and our low, and a those related, you X.X%. out it's digit the was of and performance double always look throw if by because the was region, and was one positive, one at high XX spread low the the if the negative are hurricane high it the long time

Craig Menear

so And up stores, all in innovation healthy extremely offering and purchase products see the the to the both we that brands and of in progression of mix X.X%, that if fact, ticket product innovation. you'd pro trading comp the in at with that was on great in go majority we're look the price continue consumers up in in points, you our is by as driven the increase vast

Simeon Gutman

prepared I And Right, the may of looks QX the cost go clarification, there just expenses had a have you is categories street, in? below fourth? can little okay, of remarks, my freight EBIT a investing been tell mentioned just the you're quarter shift this in two that the bit into inventory, continuing parts, follow-up, deeper guess point or inventory, that is then third extra some from us you what quick

Carol Tome

that be that's the of but week, first. what there's some should XXrd you certainly help expansion can in models. a I with don't you, higher, that I factor with XX offline expense the so maybe modeling, bit issue your answer because we know, the lower margin QX QX. we on week So, growth in guidance the the Based given reported gross should And we've than be

Simeon Gutman

Okay and the inventory?

Craig Menear

the about we're to a for [ph]. as categories, where couple going reasons we of invested inventory As far specific give not

Simeon Gutman

you. Thank worry. No

Operator

Matt we'll have with question. next our Barclays, And McClintock

Matt McClintock

is actually and to delivery I'd you DIY. van the you everyone. and other increased build morning, either in good or ask Pro seeing like roll utilization to as both this and two questions, one yes, the first gains outsized Are out car Pro on Hi, awareness? for relative DIY

Ted Decker

rollout car pleased with Car so we're engaged. pleased XX% Greg that van very the more up with mentioned, of and get van, Pros get and the The as population trucks the car rollout. with - available, as the there, bigger, we're to

down and about So option focused. big out We're consumer to your flatbed that pleased if very it, work as focused; more way to think more you that's you deliveries our have Pro though car, part think the of our any those for options delivery in an and range important occasion. are our important options given there to customers, the of meet across it's we portfolio needs all customer's that's

Matt McClintock

helpful. than of it décor, just that the or you And year, this more year, as is category on That's any seen is different then you follow-up, leaning did what is any same? there any into the I've - there home there way a build in are Thanks. catalog last

Craig Menear

through we're we we for Depot decor The outlined online and in with year, As in an direct next lean and home we've said results, nice certainly. and we Home with at catalog the that the going decor us seeing our investor of were in last doing this to that the in the conference end play been continue the and is engaging online, to home categories related customers we'll and year,

Matt McClintock

the there of end back rest about with I relative holiday the of you think is - to Can to year? is, specific category just the that on anything that that the

Craig Menear

business, that we that decor in into mean, store fact, it's online. success the continues appropriate do not we I perfectly the incredibly that stores, to the that product oriented, No. to obviously, our be to business we want more bring a holiday set decor confidence little the customer in but engage strong an move gave us in that could

Matt McClintock

much very you Thank Perfect.

Operator

Steve Forbes to on Guggenheim move we'll And with Securities.

Steve Forbes

the the components as you Good maybe then the given strategic if thoughts of usual as what investments quarter? did and than like down rate looks part think morning. usual. appropriate on I XX%, you counting us comp run at us the Can growth is update little it just with can. help wanted performance, you that in a still that X, to the that expense third factor X.X% as start business XX better your year-to-date. break I that, And business year-to-date it

Carol Tome

view guidance, BAU our nothing the can and the XX%. is year, growth XXX% Well, of breakdown the change changed. you longer terms And you invest math. the dollars XX% on in is the the full the what I'll I think guiding is for is given of year, you then term forecast full and materially XX%, of for for the expense of because accounting has that in is do We're for components do quarter down break the I've

Steve Forbes

finding the out just still your initiatives And supply or dynamic your employees employees build just you update need around competitive of chain, follow-up, availability given the the views us to that with the trouble then workforce quick given and the plans hiring maybe meet need? you that upcoming future having obviously are Are - retaining your front. on a and within

Craig Menear

associates more be really I it XX,XXX seen on but a to right Mark, spring concern whether able now year. challenging, we selling end. were different not Candidly, we you've don't Yeah, didn't And to over had case. the we season to chain would for this be hire anything think as that little find or supply

Mark Holifield

No, pretty no the it's same there. we've real there, had been much issues

Steve Forbes

you. Thank

Craig Menear

You bet.

Operator

Sigman Credit Suisse. Seth with And we'll on move to

Seth Sigman

a perspective they're realize I turnover the the Thanks. it front is and urgency, you purchasing more questions, go on part from taking wait urgency a now, approaching bigger behavior and talk back similar its consumer but A signs lot not own to as demand you of there's just maybe lack how there's actual follow-up very small on the mentioned, is Hey, see are to relates business. obviously just of housing a of a turnover, as a to approach about I'm is guys. the housing, right seeing any that of curious consumer relates as of couple it lack the the home? But projects to to healthy

Carol Tome

in in our with have more than their ticket aging big home which their quarter. wealth in home. interest is One home homes hypothesis rising that intended that. so Ted they're and their stay grew out X% called seeing We're and on rates is spending money consumers to categories not and And are they the in strength their the

next I is will impact XX tax the consumer's flow of the filers done Another actually they just way was on about meet file say could remaining really that over tax in that's tax get if today, we'd their The all of benefit how lot today it's and only way tax about $X.X adjusted that return their to out there is we've it, would paychecks thought benefits realized that And consumer into the like they to about have will XXXX wallets. the for what XX% good share when filers that consumer's interest reform projected is we this years. flowing in claim and The credits reform trillion the because their is XX% benefits. really benefit withholding. work next playing that's I year, the thing a of because receive think other some of regard is they know be consumers,

or X,XXX adjusted withholdings. we at to withholding, XXX,XXX their associates associates whether they had only looked of So had their not and Home see those adjusted Depot

many we that consumers So a going believe year. nice have next to are tax surprise

be is and of high in have they're said, negative earners $XXX,XXX. and be it consumer the Now, our surprise. like our a average a if tax our bill to folks, or we less hey, to a going and that tax prepared are that is customer's Connecticut, state high well, New case, more. But the a going earner a are but for won't local high than went to Those they XX% or insights with you team state well, of customers? York of or actually bit haven't $XXX,XXX California average income what's income those

consumer we the XXXX. the think health into So continues of

Seth Sigman

for Okay. color. I it that appreciate Carol Thanks

Operator

we'll Ciccarelli on to move And RBC. with Scot

Scot Ciccarelli

that Scot increase some play Ciccarelli, starting are grant to you're and markets you're in that of think environment guys. getting any there rising activity down see the to would and categories from because a morning, that you Good how of request do or vendors? so related product out even some you trade price price where tariffs maybe your

Craig Menear

new XXXX, in depression,customers willing Even spend and a with to the to turn the difficult obviously start for Ted. was since product. I'll So which innovative the of comment it most were downturn

Ted Decker

Yeah. is Scott. Ted, this

vinyl we'll right productivity go haven't are best, whether to at, sure up good, today, now ready premium. but and very see We price to people the not by closely to seen be see better, Craig and point making it, unit Making we're have just you we I'm level point referenced going inventory as and at that yet for we're dynamic comes trading it, if we're priced sure looking it levels opening are that opening price that said, you a seen premium at ready something looking and category mean a then that almost it's sales. of install example of customer, a value was out I product. vinyl drive stores it's flooring, example at the have innovation and you flooring a innovation deathbed plank to to it's use, is innovative classic the a along to like new now for the why great classic vinyl for that simple easy and of take is Pro flying came on that's flooring price, the and its

Scot Ciccarelli

to focus you're you any down clear the And already isn't on starting market could as maybe overheated would example, see affordability particularly trade of front, you activity housing kind to like, mentioned, great? markets or view if LA the markets, you for be market where on what Carol, where

Craig Menear

at haven't seen I that like anything all.

Carol Tome

it. seen Haven't

Scot Ciccarelli

thank guys. you Okay,

Operator

Lynch. on And of to Suzuki Merrill move Bank we'll Elizabeth with America

Elizabeth Suzuki

guys thanks. mentioned additional on Great, comps in you that give it strong Canada was on performance curious detail basis; just how the currency were constant the any I positive, there? Can think you a

Craig Menear

Canada there performance, government Canadian currency. are great a and we're you seeing posted as the Clearly terrific from numbers, the positive that in in slow Canada pressures a see online housing they has local in e-commerce comps conscious standpoint, well. as housing Canada Canada a made a growth but decision to down embraces customer delivered in in

Elizabeth Suzuki

impacts quarter this in pricing players any rationalized quarter? from large inventory they there the from other was and some competitive as Okay

Craig Menear

folks as activity promotional more to close much have stores seeing certainly made We're inventory. liquidate and decisions

Elizabeth Suzuki

Okay.

impact quarter it this You had call to would was - or not that on and enough your material then would a out? you say sales

Carol Tome

measure that. know We to don't how

Craig Menear

that. measure to how clue a had never we No,

Elizabeth Suzuki

Alright, thanks.

Operator

to Next move Jefferies. I Jonathan with Matuszewski

Jonathan Matuszewski

taking my for thanks Great, questions.

you experience with teams so average off, on you peers online prior that. start in some quarter of terms cross you What the see a on do advantage to for seen and as to sites today customers, purchases? a transactions or your benefit maybe last focused relative based when Just big personalization online customized competitive improving mentioned push, expand values on have functional just the order

Craig Menear

we're sharper very to of I a efficacy, of chain on part initiatives work of online, think lot of supply into reset we've with a virtual strategy of large a as And our results delivery of component laid work investment do big we they've pleased work piece search our lot Yeah. our a out, very team we've in investments that is from gotten as Overall, a ETA. call lot the our our chain obviously supply also dynamic refreshes, with on online leaning is this delivery windows, category our it with absolutely, the that that. a but started

we put We day So would traffic better that by before when you're code years. to product, that much seven all to traffic. had of checking be we've delivery, these getting days can now we brush XX a our of in out, the seen a you'll quarters put number led for broad have of things that zip one strongest

our - then in and single in sales growth it due of increase increased XX%, visits that's was conversions. were absolute in resulted and all quarter also the Our the to largest in visits visits comp our

product, getting engage ticket, So experience we're getting to the the we're this all the to in modest the and in of average increase app getting to while right all rates close, people of mobile devices side, we're the the where and and digit to is right our to more more very seeing pleased moves increases mobile traffic conversion initiatives. in in so double of with

Ted Decker

customer in store choice. digital the the the clearly at up orders And is in in of the obviously picked engaging XX% the quarter customer's were world,

Home forward, truly this physical interconnected experience all world. digital capabilities Depot and leveraging assets going So an the is both in and of the

Jonathan Matuszewski

on that's and the what conversion better follow lift believe maybe update a pilot? store to labor the and quick XQ Can an you pointed helpful not. I in give just Great, a you from pilot, sales then up.

the discuss that ahead? rolling what's from out the pilot just potential and uplift labor sales be Thanks. in may So any from XQ trajectory for

Carol Tome

We us quarter quantify our and that model XX the that rolled It's put leverage And to new of in we off we've large new easier a for part enjoyed the the of into payroll has basis points stores. - of productivity fully because which model. Ann-Marie labor third out saw labor

Jonathan Matuszewski

Great, thank you.

Carol Tome

company, we across Yeah, the the in get so we've benefit full fully out XXXX. will rolled

Isabel Janci

we have question. one for Porsha, time more

Operator

you. Thank

Wolfe Our with come final will question from Mushkin today Research. Scott

Scott Mushkin

for Thanks in. fitting guys. me Hey,

we a How just XXXX, had a seems business, looked wanted also, question. business got - you we the ask think do if sharp consider that? at just that? every sheet an then think. to get you at guys that's turn look the into but business, you on if investor guys the you using through if we would because to we housing performs And So your obviously a first average aggressively Carol, more looked assume like very almost at downturn the So through you downturn balance my I situation ever as

Carol Tome

but can I operating crazy The reasonable, comps through done culture what our back so investment XXXX little which last plan we've to point downturn. flat, the if that's apparently to investment I financial of of strength So true say at a to recession XX%. flat modeled to our true know and and a we looked was wasn't margin recession over the were reasonable Staying timeframe. recession comps that think it don't plan is our just the company, went we reasonable. and is mild take we say down our the that's because

Scott Mushkin

all of thought cut I it. down of you that said kind

Carol Tome

every we comp little flat we operating over a the fully our day. in margin as use And take true it we to down sorry, to I'm scale a environment a XX% competitive investments. staying advantage,

the our we Ted working As lots and got Depot. we're coming the people of things knocking that on power mentioned for of doors with through Home asking

Scott Mushkin

using Again that a more as far into little aggressively if balance as got downturn we situation? sheet bit the

Carol Tome

yeah. opportunity do had we to scale, our that, the that's Yeah,

Scott Mushkin

questions. Alright, my perfect. Thank you taking for

Isabel Janci

us on earnings thank Well, in We you forward today. with fourth for February. quarter call speaking our look you joining to

Operator

today's will you call. your participation. We conclude thank That then for

The Home Depot, Inc. (HD) 13 Nov 182018 Q3 Earnings call transcript