HD - Earnings call transcript Q3 2020

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Operator

Greetings and welcome to the Home Depot third quarter 2020 earnings call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star, zero on your telephone keypad.

As a reminder, this conference is being recorded. pleasure your my Isabel now is to host, introduce Janci. It ahead. go Please

Isabel Janci

you everyone. morning and Thank good Christine

Joining our Operating CEO; Financial Ted McPhail, us Chairman Vice Officer. Decker, Menear, on Executive President call today and and Chief President Officer, Richard Craig and Chief are and

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

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

let Now Craig. me turn the to call over

Craig Menear

safe healthy. this hope that We and our you morning. Isabel, loved you call for your ones thanks Thank are joining and and

repair a multi-family operations entered the we national products yesterday, announced definitive markets. maintenance, to hospitality HD we a and end and leading As agreement acquire distributor of into Supply, in

our framework. a moment quarter, the supply of want to fits results take HD the to to moving Before discuss how strategic into I

The the pro customer know, Home an important you MRO is As Depot. customer for

accelerate with customer existing to to committed the in serving growth had fragmented $XX marketplace. business space. this are in We MRO The billion our highly MRO makes success ability we’ve sales confident a and growing us our MRO in better

you approvals, regulatory welcoming subject associates details the Home HD to Supply The While I the customary to the take to shortly. look is transaction through will financial forward Richard Depot.

our discuss last billion, per last of up the Sales with the for were XX.X% Diluted positive third from quarter U.S. in billion let’s from Now results. XX.X%. year. comps share were grew third Comp to up $X.X year quarter sales $XX.X XX.X% third $X.XX quarter. earnings

saw third another demand The home for was quarter of quarter projects. Home the outsized we as The Depot improvement continuation exceptional for

results were and Our by geographies. driven store the strength broad-based across

since Mexico posted above digit All best its of performance in posted of our the local pandemic, double-digit Canada with posted XX while top the comps average company double markets onset and comps the currency. comps

the the both detail, strong As were and up pro double and digits saw in Ted will customers. digit transactions both and quarter double growth DIY tickets we from

we of that have investments with As in we over the not months change challenges, better last our step mentioned volume actions business six term quarter, witnessed our customers. to have our serve allowed is strategic coupled taken us near its the without last but

of replenishment, continue chain, in-stock and supply improve times, as levels, with to a reduce demand learn have our the helped have Actions we adapt we and quarter meet options across us manage better our times. in our delivery stores, and suppliers in in-store lead improve partnership and fulfillment performance reflection level of third seeing is market. to we unprecedented and Our the were in this to taken

points over sequential scores of All satisfaction in this has customer quarter. the third ultimately XXX translated basis improvement of to for

year orders third a on basis months. of record approximately technology Our interconnected a versus store. through quarter have and web XX% were retail strategy increased approximately XX% our six traffic over and level Sales infrastructure leveraging online for to consistent digital continued the underlying last support fulfilled platforms

Depot. way different digital invest in The to assets, to introducing new and continue capabilities engage our Home We with

have experience we experience In offer we and months, in the decorative several lighting for assortment. extremely improved photos key category response. with refreshed example, past are enhanced the to lighting, more the categories the on-trend our customer visual pleased digital Over and of lifestyle imaging

As growth higher of better changes we category offering, quarter. marketing a to average highlight increased the drive which with effort to engagement have seen customer and our helped online these result the company the significantly above sales in

online to showcase found assortment also platform events. for new We ways leverage better our our to

resulting For in and we’ve to event, enhanced customer which response with our our offering increased our our digital had these the we Halloween events. presentation, resonated strongest customers,

as focused long share of the continued and strategic momentum Key are position investments, remain strategy, on enhancements and over now track, investments interconnected the many digital to of continuing that opening paused experience One onset experience pandemic. supply at of have various we Home ourselves the on components of the such We Depot the the term. capture enhance chain for shopping our investments were and store our the facilities, restarted technology to

the has home through many of the home that season. holiday clearly the in embrace they the hear for been improvement year we through and them results more never multitude Our upcoming projects of continue different to from indicate customers, plan nine invest to months important, a that first will and

engage customers with physical digital the a As continued and Home of worlds. The blend see we Depot, both

One other for serving advantages our have have lived each they many competitive incredibly I’m unquestionably associates times. of As and strategy values been customers, a the benefits during result, our relevant. Depot these that ways overarching never interconnected challenging communities the Home and more our of proud distinct an by

communities natural than our supporting ability direct extraordinary result first more efforts. a through Our of pandemic $XX business navigating the is the by months grow associates’ billion through nine of to disasters and while year multiple global the our the

the COVID-XX. for to on of spent duration our quarter, temporary associates the benefits the continue in in of taking $X.X of and demands ongoing approximately bonuses the third the people on have Through distribution third and current and for to environment, focus we centers Given of care quarter. end response billion weekly the in pay we by stores part extending complexity our hourly

transition in approximately now weekly $X have program an to we associates. enhancements invest temporary basis. incremental bonus result decision will for hourly discuss, from on permanent frontline will billion the in of annualized our This to compensation expense our compensation made Richard As

associates of key them Our We continues against execute to are our that performance demands highlights work and the this serving of proud thank to orange a remain through and and and of strength the and dedication hard environment progress to time to third be to flexible heartbeat Depot, that adapt. and their continued continue learn could I beyond key our I communities. associates the we partners our supporting to want The know uncertainty for priority. customers and more not apron and quarter Home as demonstrate agile must the resilience made of have our have and be we we supplier them and that current

invest have to promotions to to today, want have call that a recent on grow are we that the of their continue like talent leadership bench Depot. over deep moment The that, Their the with are on expanded I Finally, of new to made to moves quick congratulate the development I’d take and we With Home are number turn roles to among here me Ann-Marie call responsibilities. who Ted, Jeff, and as and we a Ted. at fortunate

Ted Decker

The to morning thank been last we’ve want this good partners serve unprecedented of supplier customers strong month environment. everyone. the associates seen in consistently and our incredible to our remarkable. all over for and I six demand Craig, effort Thanks their has

partnered for last our and pressured quarters, improvements. supplier the chains, For the XX% The supply seen strong with have north has comps have XX we two we of to XX weeks. various partners make of demand

focus adjusting our some the As demand we mentioned include products. to last the cases, assortments SKUs and, took certain we highest alternative in and quarter, products numbers categories introducing plan-o-grams, the actions of reducing on in

buildings. are rapid mechanized mechanizing facilities, in our We’ve now productivity deployment improving In two-thirds further in of we our addition, network. meaningfully floor loading our center implemented those

seen lead result improvement XX of The stores our times a all continued reduced have these improved in-stock weeks. product has in and in-stock straight for positions. U.S. we actions, level our in As

we are While pleased with at not we results, pre-pandemic these levels. are

year. paused revisited earlier customer in have the We of some which fulfillment choices, we’d also

As reestablish windows van are express and that XX% covers starting and over premium to a delivery service of population. U.S. result, we delivery car the

comps, each décor and merchandising departments. double-digit quarter, our third by lumber of storage our and the departments posted During led

our we in innovative saw demand comp Our comp increased The in second transactions growth project was XX%. categories the and items, ticket average inflation driven of like customers increased comp XX% new ticket in well trading average and as commodity lumber. certain continuation the to quarter, by primarily up as

months, four demand. seen in pricing as the last we’ve the Over supply and works to of balance volatility industry significant the lumber

than During XXX% the the the third approximately of was average same framing lumber price higher period last year. quarter,

significant well sit in double-digit categories exited peaks time had lumber Despite saw but last pricing we the the in the still quarter. we above comps mid-quarter quarter, As lumber we saw fallen inflation, the strong certain year. this third we this saw from levels for unit

During the inflation commodity categories points. from average positively basis ticket by XXX third growth approximately our quarter, impacted core

online Additionally, consistently same the trends was continuing quarter. our and second strength comp transactions, the growth in-store saw of driven strong the transaction we by in

or across ticket third of the comp up flooring, and transactions, number strong During a ticket approximately quarter, over big those We categories lumber. appliances, big performance like saw XX%. plank vinyl $X,XXX, were

strongest sales, growth third posted double-digit DIY the our growth while our and pro sales in pro grew than saw seen customers, business During all DIY we’ve quarter, both the year. and we faster pro

including being and pros hesitant with growth related still strong pro homes. accelerated pro is cohorts, from some year. our with their environment, pro large with quarter; to different operating consistent larger growth our headwinds our face at customers however, the second customers Growth smaller month some double-digit look invite we been pros every to current of into the the As has customers healthy

levels improvement project, both these are we tackle to project our of gaining customers The with Depot. from complete their and next a re-engage existing continue they variety to and projects, see unprecedented a Turning across customers, engagement home confidence customers the to Home DIY new importantly and of as

resulting we ceiling quarter, in are all only riding third garden and growth selling fans, was seasonal organization, equipment; annual saw working from of like not was we garden categories in the outdoor season Halloween company on. customers XX%. seasonal the seeing a quarter still customer significant above soils, projects an like average. exclude event. results, take our garden we our our extended hardscapes, garage working advantage in our well We saw If power north the in of power departments comp however, The home and customers posting on vanities, projects were third evident categories, our During tools also customers for across and comps engagement and were mowers our their of categories variety

our our our inflatables sold XX-foot giant offerings. Customers of online we and both the hosted to the drive and successful During record by quarter, animatronics, as most yard event. helping responded décor, a October, in-store assortment event that level with before skeleton third for of evidenced out Halloween larger sell-through

upcoming turn we quarter, our excited continued the believe in attention are As customer are we fourth to holiday that and season a we engagement. great the position for about

adjusted gift we are they and and and quarter, remain event year associates this safe our promoting period to prioritizing day. Friday Black our will holiday, going the Black year to of as one little focus this to customers safety on During and hosting not We’ve an extended of Friday center committed different time events; we just however, a shopping cover our the environment. a be annual health and look

to how Additionally, events, distancing. assist product we’ve Friday center gift reorganized stage Black our both and our social with we our place and for

the racetrack our our some of to gift great included reduced to We’ve will core created on to of space on as with replenishment customers, and deeper which we’ve made for more strong our example, buys event comps. bring see presentation. values product For also we’ve SKUs we SKUs we’ve continue center our front amount our help in and fewer displayed

and customers year, Black this more. pro performance up platform are than motors. marketplace to For today, future power are new and have The example, HP from industry-leading to XX-volt serve exclusive from been XXX tools the products tool Ryobi more ground DIY XX% tools. with ONE+ These This more million and our power today. of about our year, center ONE+ DeWalt, Ryobi assortment durability brushless our improved tools of and Rigid, pipeline home Ryobi in job ever. HP designed featured the gift more brushless the HP Makita, than brings lighter the excited Friday XX% and customers’ has and Ryobi and compact sites tools launch batteries with Milwaukee, delivering a more line-up this we XXX strong our of features events innovation than ONE+ to especially and our in in while up

the kicked a early Friday are and to with ago, With to gift turn thrilled a we I’d over over and Black off like center that, results. the Our events little week Richard. call

Richard McPhail

morning and Thank good call today billion, In and a you safe appreciate Ted, your the increase $XX.X we the healthy. We XX.X% year. total ones and quarter, loved everyone third and joining everyone. are sales hope you from last were

negatively rates impacted by sales $XXX exchange Foreign million. growth approximately total

of XX.X% total for September, comps XX.X% in XX.X% positive company the comps with October. positive in August, positive XX.X% in comps XX% Our in in were and and XX% XX.X% of the positive September, October. quarter quarter for the XX.X% in August, with in U.S. were Comps

comps from year shift If fell impacted our in reduced margin last year gross XX factors, points Gross year. This Labor this including In comps August in decrease pressure during the margin fiscal currency. event and margin promotional it August product by impacted was negatively Mix gross as Labor U.S. monthly approximately in third last September. of our Our XX gross the was quarter, U.S. and the by in in year, lumber by events Canada the pressure in as well the our a Day XX.X% points positive mix decline were offset fiscal the margin quarter quarter. All quarter. fell a approximately shift, basis comps third partially double-digit in shrink. of our alone benefit in and XX.X%, several event. was and XX in XX.X% from The this August. from Day for September by and of be impacted during September, negatively adjust Mexico posted regions, in local would of basis we our

were XX.X% of expenses representing During the to XX year. basis points a operating decrease sales, quarter, approximately last of third compared approximately

our me to a of few a comment take items. moment on Let expense

of in enhanced approximately which XXX First, to benefits with support we $XXX during expense to continued response basis quarter approximately the our COVID-XX totaled associates points in resulting million, de-leverage.

from compensation heard pay associate temporary third enhanced weekly through program enhancements to decision $X.X earlier you on and in make fourth the for a and them hourly result We of in bonus from approximately our As of benefits COVID-XX. frontline associates. majority basis. adjustments expense of to third the quarter making also will basis. the end billion $X have began continue the approximately This we annual an spent will the permanent these transition to We’ve Craig, quarter market-by-market response to the made on on incremental in our in billion quarter

equipment approximately and incurred protective operational including our of million resulting customers points Second, expense we of $XX COVID-related basis de-leverage. expenses, approximately operating XX cleaning of and personal stores, in enhanced associates for our

year. increase investment an Third, we strategic to compare our of expenses of related plan $XX approximately recorded $XXX million, to last approximately million

basis for approximately strong of leverage. points during success of leverage biannual are drove points expense Finally, program expense and sharing expense third success the and management related we points the field-based the showed for areas addition store and control in enhanced by outperformance billion XX accrued of primarily this of other to quarter bonus bonuses sharing and is management basis in driven The XXX and XXX $X.X current second our Included store the of basis in business in approximately bonuses pay pressure half. and COVID-XX. store to our response benefits to field-based

flat fiscal million period our was the in grew term the XX.X%, XX.X% with for third effective $XX XXXX. quarter higher year. the of approximately compared was and levels last other by XX.X% third tax to compared In year primarily $XXX debt one Interest ago. rate to long quarter, expense quarter to third the for to quarter margin due operating Our the million same third

X third last Our the XXXX. to an from and $X.XX, $XXX merchandise per were for times billion, compared an XX.X% inventories the quarter, diluted increase turns the the quarter the were third of last period quarter year, up versus share times, from X.X million of of increase inventory same earnings At $XX.X of year. end were

onto to in cash healthy a is excess for not Moving it intent how paying deploying changed. share principles through our capital return shareholders the dividend investing about we approach allocation, of through have and long-term balanced our business, a to repurchases. think After capital

moment a priority. to take Let’s first our talk about

a the the of committed and stock net in the growth common subject HD outstanding of acquisition closing and commence of of all merger The of closing then on share to outstanding ends Supply fourth $XX a to cash, HD acquisition subsidiary to the We enterprise to sales business the on Home cash a the growth fiscal and accelerated value, space. be terms cash positions for approximately of agreement, The purchase approvals during strategically including of to of majority is customary including a new basis diluted tender in offer faster a regulatory market, January expected and per are common on fully reinvesting will $X drive HD the offer debt. for to Depot is shares conditions, total completed a drive We Home of plan The Depot’s tender us MRO Supply stock than highly billion. fragmented the Supply the Under hand tender XX, shares finance with quarter, XXXX. which to

to significant XXXX creation fiscal expect with for also to transaction long in shareholder be EPS potential We term. the over value accretive the

liquidity position, back XX.X%, the the our was $X.X o program of XX.X% in repurchase long-term primarily invested we our including from of approximately share for $XXX March. on shareholders. our million in reflects of decrease quarter, to This the XXXX. temporarily suspension our invested dividends equity in on approximately and return down months, third the fiscal quarter capital XX business average decision enhance capital into debt expenditure in and our trailing During beginning of ending back and paid the billion form Computed the

Black demand holiday Comps and the accelerated the reflecting in last versus macro strong year. November, start two environment, weeks an first to events seen Turning has we’ve our have the earlier of continued. for slightly Friday

encouraged than show historical when and home household as hovers inventory we are trends home of Housing We and stronger by market in we entered consumption significantly metrics are near than spending. Turnover growth formation, on consumer which prices the consumer its lows. share this rising, see improvement continued record receiving sentiment more crisis. is are appreciating

the never investment us tell improvement homes. customers to continue their and been they homes their have in of more Our intend important their

not current the the to that do to and think trends is to While we performance. are extrapolate remember pandemic is we recent COVID-XX not is demand through it important environment strong, it predict prudent future

focus last the main meeting while our on remains ready your environment. we that over and believe needs share prioritizing regardless the capture several uniquely questions. investments positioned today’s of have customers’ you for Our the years are have and in we participation call, market to safety, Thank us for we made now

Operator

Horvers Christopher first from Our instructions] with Morgan. Please of the [Operator question JP proceed with comes your line question.

Christopher Horvers

but large to colder and good seen it COVID outdoor business DIY what proxy mentioned good think the that’s looks the cases underlying area wondering I gets the like benefit? guys. have trend, would where in you ex-gardening a you the know as mentioned do you if was Thanks, you XX% provide quarter acceleration comp expect gets and what a about pro slight tougher? to spiked, think low or morning I continue do improve you’ve to You date, the for -

Craig Menear

in would relates we correlation be first as comment no cases. business to the COVID see the Chris, it

geography-wise, we really and saw strength the across actually was broad tight overall performance Our store.

season feel of the the we mentioned, with of the recover the Ted had performance As we pro to about pleased our extremely that. recover. categories, in were and garden, seen large pro we outdoor so good but outside continue because an We’ve weather extended

Christopher Horvers

the SG&A you’re about the the sounds follow-up plan XXXX? XXX related questions now the build the degree in that the was plan, the outlook so think Got at you on outlook. those MRO, on impact acquisition planned on current year-over-year the related and investment and It does that? it, original you couple to many you then HD of of versus Then how HD that you. building a you’ve investments investment are buildings what store have for down Supply, curious making and investment Will Thank which under end buildings Supply up again. progress dollars like track new or capex and and do to to the

Richard McPhail

past, with large to deferred $X.X made to we as approximately investment certain investments principally With capex number deferred. year have store. a the relate investments plan said respect outlook, A inside we’ve billion. started that We the in remain investments of the those of the

have We plans from say give we half billion of, I will dollars, than would won’t in our number, I a an million exact to less it while see you call deferral original XXXX. so million $XXX $XXX deferred

and be that Some on; is but may overall, into terms push in XXXX, XXXX would time to you of that capex. we’ll very of as say going similar update I goes XXXX to

Ted Decker

serve And to base total, and combined as relates the Supply we’ll our forward we’ll we leverage evaluate is fragmented the which to approval, billion and in that once think we’ll a pretty what this about. grow take obviously in the best HD excited gets move it that space, a base MRO asset market asset $XX look at with we’re and point customers is the

Craig Menear

XXXX, we could look did are of we’re finishing If accomplished, new minute, the we’ve a just into on the push Chris, in a our while that bit take and I we thrilled feel what just store. investment

United will that been think stores opened be the packages all - two U.S. in year maybe across this done has is brand sign States stores time the our the probably all Our first same, XXXX. standard in since I the first stores

completely COVID departments, in completed our we’ve leading those tool resetting work corral and job brand department, have those work brands completed ton year to also We’ve paint self despite stores to are standards in implemented all equipment, the completed we’ve battery for our all setbacks wall business, some that early of checkout with in refreshed taken of labels be storage outdoor in tool the platforms outdoor a leading sign industry. we’ve our we’ve equipment experience of our done. We all our power getting The our of a power next in the most just by that added our all electronic did team terrific this brands again online pick-up, and year. color done refreshes, our by appliance we’ll that

Christopher Horvers

but So was an think down perspective you versus I you funds mentioned still Do the ’XX dollars few then in being originally years. Richard, from I source opex to know, in, deferring dollars ’XX? those up a know opex expect year-over-year investment capex of investment past - incremental you be down in

Richard McPhail

those They’ll deferred investment be in the in down to flat the respect program to ’XX, dollars continued with that specific ’XX. alongside spending expense

Christopher Horvers

holiday a Have it. Got great season.

Richard McPhail

Thank you.

Operator

Our next proceed your question from with RBC. of question. the comes line Ciccarelli with Scot Please

Scot Ciccarelli

morning guys. Good

primary be You margins the of? the growth, did should factor really product has product other there were ecommerce mix as about impact as margin from decline. gross all Thanks. store we there on channel or much mindful Was talk outpaced or of for was factors an any it gross mix the on side

Ted Decker

By lumber Scot. driver as the big as lumber was. that particular, the in strong Nothing the mix, penetration, far was business

Scot Ciccarelli

wind the from to, right mix, it So perspective? a seeing more think kind about forward, call is we way thinking as this flattish about up that if Ted, a margins, going think to about of we gross normalized should it let’s getting we--just cadence back

Ted Decker

environment and of give I wouldn’t expectations uncertainty the dynamics think level in the at we business to with with today, the point margins. any respect in the this forward

on it run portfolio We business. basis. healthy very a a running We’re

picked where mix have channel that reflects to the sales the years, our are - on of and our seen digital gross assets portfolio so in many, up stability this we up as over essence that we you’ve and store in a and many XX% bring run an mix, margin store are identical that’s for in Remember mix that. You our purchased stand. have

mix We’re comfortable the see. with very of we business

Scot Ciccarelli

very Thanks helpful. Okay, guys.

Operator

line comes Our UBS. Michael next your question. with from with question Please Lasser proceed of the

Michael Lasser

Thanks pieces your for There’s between with think consumer earn earnings recognizing guidance, HD you associates, you the expectation you’re that costs the lot my Depot’s now knowing the paying any in relative question. lower, had taking a you expectation higher, that previously? behavior, channel what incremental the same of providing a Home of operating do about morning. Good power moving Supply, what can than a longer that’s know longer run XX% margin changes not previously, mix, thought so put acquisition you’re to run you sale business and out lot margin, today the or

Richard McPhail

many a I’d dynamic, the but is Well, stay same. things say lot

have well in of I in the think throughout expect from the and us think terms expense we executed that exceptionally you year, management I can future.

make our associates XXXX thing think our will of sure the support goes XXXX. to I one that how clarify we is into shape investments from I just

As we through totaled said, associates expenses approximately in our three our the of first the support quarters year billion. of $X.X

dollar to the those transitioning quarter, programs annualized the into billion some during into down permanent as rate We going run that these quite not are of the beginning investments you fourth the to so investments of wage nature of fourth be the if think leak about fourth we’re quarter. quarter,

associates. billion, I’d so remain base important be most will investments billion likely billion We our say that lower to and $X.X cost $X add sure quarter think end run than with fact third it rate, in respect I Of billion like our that. $X in our total at the to in XXXX, we a only will of the will of clarify $X but XXXX that to cost that’s base. make

Ted Decker

the trying Depot And comment only to operating what than Home The get to we’re basis to what market op to faster done. on that margin result. grow is, the matter our deliver no focus. and we’ve is I’d been Michael, try a investment to that other everything incremental consistent That’s environment dollars the position That’s as program doing a our through to is add

Michael Lasser

up second shape very Great, overall is next make of down that’s hard my that year, what ordering think do a you’ll question, to an home is had how to improvements be categories which going to good percentage prognosticate next segue you demand for SKUs estimate, if recognizing to year? it’s inventories you your your or

Craig Menear

from We short on day from cycle. comes Depot for very all, in lead the week time-type anything by really this XX% current extrapolate The looking Home that day, what domestic day, performance, and planning what purchase of so First every based see is at on basis week. plan we week by goods of to manage a We and we’ll is point orders release we inventory really performance. short and on we’re week to not single a demand,

Our agile to and is focus and able adjust be on whole being flexible accordingly.

Michael Lasser

to the heart improvement you of going home guess was think question I is grow the Okay, demand next do year?

Craig Menear

home, they feedback we at customers Look, folks see we homes. within everything significant the the to more you us in at people of in they the suggest only going is surveys, us and do a do customer months, a their to next home that tell and would work when are say has is up this we percentage that point tell customer talk point time can on maintenance way to their never going terms more as in been this to going that invest tells the spend thing in there’s important, I project of six so home the our continue they’re

Ted Decker

comparative moment, I improvement to There customers--you we’re a the be it to macroeconomic are the as same space be as the it’s great about at if subject that fundamentals at so uncertainty think a all you there’s home Craig environment. interesting. and lot know, in to, think on time, in going a of And said, is basis,

a you and their we the we dynamics the and invest when in housing of uncertainty customers’ home our respect this they but Again, see the macro with so environment, homes. can’t comment of tend minds. price at our more on improvement to comments, home do say there’s regarding really in confidence in to look their at point lot because think customers appreciate, ’XX You

Michael Lasser

and holiday. a Understood. have much, so Thank you nice really

Craig Menear

Thank you.

Operator

Your next with Karen from question Barclays. line the with comes of question. Short Please your proceed

Karen Short

Hi, much. very thanks

customer think had Just a inventory guess your you quarter? then little wondering on the respect to following if last a little about age than wondering shift is ecomm quarters, actually and general seen question, or color income DIY now and fourth a couple from lean, cohort. was you biggest I’m that you could for an what have that to for more looking questions. you’ve on maybe your up what like I changes inventory on question how information or with more I’m and the demographic several is you had think inventory, given more second the the sales with give I wondering you’ve the lost penetration. Then too do obviously Michael’s the

Ted Decker

hard On the go QX more hit. us with likely to sales impact a some of gauge of approach lost little did when it opportunity. That been for because in pandemic be have inventory, would conservative would more we Karen, a the

effort As sourcing team, you between incredible an team inventory. limited and really limited on done we just the the transportation Since pulled and merchandising teams customer hours, we also counts, that and and supply chain the into know, flowing customer back have product team the time, though, they store.

said I of we my improved levels remarks, quarter. As in the week prepared in-stock every

in be, our like some not supplier even to the to the pure but inventory our our it’s this volumes, we seen you increase the the over Our the still gives them the work million in-stocks the incredible into $XXX and by - that our year. like, on the still first exactly partners, that working indication merchants items of buildings product in-stocks we much we’d billion point, with improvement. accounts for. are you looking prior if the low flowed goods done, right year-over-year In plan-o-grams was have we updating from at have customers and over type so SKUs have $X year, that that have though we an the are how believe payable, from grew store ways look The have where of and our go,

you’re of translates up interconnected picked to relates the right our our everything be online the sales know, couldn’t in that - trends, business. billion $X are that to quarter we are the goods over digital online business, our XX%, business, absolutely in of remember business, and remember by Nonetheless, I’m an performance happier the store. grew growth with our interconnected say, nearly with As the to our online our so it of about was for to sales--you assets, business XX% we penetration XX%-odd

dramatically - mobile mobile, Our desktop, up we’re in visits web. are up

to that lower despite in is have mobile growth than web, hyper and conversion desktop. app rates up conversion Our tend

these users active up set are we are obviously are Our up app The folks app engaged orders up. an better up, they - or who Home know account with way are our when Home setting our way are My downloads Account Depot, Depot. up, weigh with up. so them an account are Millennials highly

with Depot. customer stop customer. a our BXB it is - robust and now volumes Home profile is our interconnected record environment asked You website our highly I’ll pro right there, engagement at are seeing engaged, The but digital pros

Karen Short

much. Great, very thanks

Operator

with line question McShane proceed next from with your Please of Your Sachs. Goldman question. Kate comes the

Kate McShane

comments Hi, synergies, the taken more there any could source but taking good gave question. might I Supply, I you much you or morning. be give and debt magnitude for and raised my if your was any the on on color know HD for wonder deal? of how Thanks

Craig Menear

through customer. shareholder bring the create about excited of these creation to value two what think really the combination We opportunity MRO got We’re combination. our significant to that will businesses we’ve

We’re not we’re about in see accretion, we’ll per going earnings to degree accretion but share of that confident talk XXXX. the

Ted Decker

Kate, we’re is excited rough these numbers. know, about you--you are what if

of on is well, in as rental, think facilities occupied single a the owned as about side, million kind capital Depot you customers XX, to that refreshes able is that in households, build but MRO of million The million which the MRO of That focused is on. Home something in is There’s not relationships the huge for million business. or about grow only those XX give on to build households operations of $XXX relationships to opportunity XX we to States, about pretty that family. is multi-family United XX and the continue the If type take with side we’re participate we be

We’re super excited about the opportunity that comes MRO with this space.

Kate McShane

thank Is in Okay, how just seasonal the that way to business fourth wonder of quarter? you the if in business an in is to I follow-up a dimensionalize big unrelated size regards I that any there question, you. quarter. your or fourth you do ask could becoming for

Craig Menear

Ted? breakout I’m the of head. of the is quarter top of fourth We to The right about my off trying year, outdoor talk categories. the lowest remember seasonal

Ted Decker

and that’s outdoor of business. mid-XXs, that changes low generally this deem we XX%-ish extended range engaged customers low as a as garden QX and season very being would shifting with year business, the of so think the traditionally bit have much been. little the so - usually it’s Yes, penetration of we what been think of sort But point of given QX is the in of high point the

Kate McShane

Thank you.

Operator

Morgan of comes with your question. Simeon Our with line proceed from next Please Stanley. question Gutman the

Simeon Gutman

Thanks, good morning everyone.

First, a question for Richard.

a any it were on than those macro mentioned few us You calls. maybe prior of a a give home you Can sounds like you’re you like give etc.? extrapolate these look it’s getting trying inputs and magnitude, I’m you to sense--I appreciation, better. Can know for said factors, what housing - more could it bit in bullish XXXX price us you little whether in directionally turnover, sense just terms

Richard McPhail

the those prediction we’re In my macroeconomic to make a in earlier and pleased the consumption not levers in sentiment consumer where going of future. comments, go the I on current I’m really said with level economy.

Ted Decker

the on I have you’d hold The to to six in of believe would and supply X.X only values. last months that the thing, average Simeon, housing, historical that number continue so I is up to months, say saw think is somewhere going home in that’s the is I

value the think home have I improvements been surprise year this

Richard McPhail

positive a it’s think environment. housing I

uncertainty principally into extrapolating the sales, that the expectations because in macro We’re environment. not for of

and lot optimistic a quarter. certainly favorable is are We’ll but improvement, uncertainty. for are in the conditions learn current home fourth We there

Simeon Gutman

about follow-up, I normal, that to that from asked Then on pro back indoor backlog coming the indoor, may seeing? outdoor Are fair customer’s the my coming how type, you’re taking you have the talk been back, you transition place? Okay, that but think--it to the is seeing right by customer and results enough. - based earlier, the can are jobs jobs,

Craig Menear

we’re - large Simeon, as you’re we our if ever well. the strengthen the we quarter seen, comps and seen really pro. you’d leading coming the has in the back. pro see at larger last We backlogs been as pro, in of one as a business, We’ve have to business, right that double-digit is metro that we’ve pro large Small did pro you sales of markets, look and business of our benchmark to-be-installed that is services jobs pro and larger so a bespoke seeing, that particular labor are pressure, to also more seeing pros the job services special order and continues to and larger to special backlog. that sizeable of markets, so to to bit the imagine, lot what be shipped a the getting in certain leading large a translates what install then a made job order this that getting goods, would backlog. be if But the

Simeon Gutman

you. Thank

Operator

from with question with Grom the Chuck line proceed Gordon next Haskett. comes Please Your your question. of

Chuck Grom

the which Great of caused few morning. supply are Can past good that about ’XX? that outlined quarter. you can the a how Hey, build-out up you’ve over you you COVID’s degree to in chain much make maybe talk where quarters, in and delay and the

Craig Menear

a COVID Largely had comment let and big we Sure. impact, I’ll are. on where Mark hasn’t

Mark Holifield

to and able supply continued open our We’ve terms here. opened to initiative. Holifield one through on impressed been in incredibly Mark that track the program we team the - In morning good chain Yes, has I’ve keep three open the We facilities the pandemic. track of XX have been centers QX, initiative. with about supply delivery - we’ve MDOs market we’re that for so very pipeline we’re those operations. solid on flatbed a now ’XX working, delivery up chain one very are got much

Chuck Grom

great. maybe just Richard. that’s Then for Okay, one

past margin inventory, the shrink, but lot a where are inventories, year realize the spoken You seen physical maybe I over about the ability some you’ve and headwind the in ongoing sight do flip to Any your the from cycle? third it limited think like of to from of life the was line shrink negative could an here a you a that positive? in quarter. issue seems again on when It in we

Richard McPhail

be that the consistent expectations. to see original been the of the impacts XXXX. roll on our said time of basis. the until really we third from It year out. beginning through results We initiatives these with that weren’t at going at the anticipate the seen The year-over-year a would we essentially did year pressure to year, beginning quarter Well, have our takes

Operator

Davidson. DA proceed Baker your Michael comes the question next with line with Please question. of from Our

Michael Baker

fourth in One, words, A typically Halloween other buying thanks. being are for big a leading blow-ups business if big should but expect do a if even for does the as indicator people Christmas does into that the or translate that, strong, Christmas, all Hi, big that Thanksgiving; does at couple. don’t what on Halloween, act translate Thanksgiving in to or--I quarter? we know you that

Craig Menear

was anticipated I oh to purchase markets. think year--because space looking type back was, storm customers more product. well our hit, that, the customer our a long had When advance, that a had want in probably in correlated cycle in saw thinking holiday, kind buy anticipated we’ve beginning and historically What We that’s are product be that’s of from we’re customer the is event we some you, holiday business through Halloween the wouldn’t rebuild as purchased years of engage jeez, you that in you what the we actually on programs, what ago anticipated and we’ve to to accordingly. we ever have and seen the Halloween and that where we what and needed exactly hurricane want pull because the us seeing for was think normalcy strongest we to product was actually no, told in the had. that for the focus needed all product I would we that

Michael Baker

Do Christmas? Did you similarly? for you that have that same purchase expectation

Craig Menear

bought the for Christmas, - the some into customers want whole normalcy through Yes, of know, We to that’s kind Halloween entire season going you because all the I anticipated what the life. their décor way mean. were holiday in we

Ted Decker

the the with store said, has in for several program. in The set now as engagement set the for in pleased I very we’re sales and weeks been holiday now, early Christmas

Michael Baker

implied getting it? to then think and in Supply, could said analyst thinking X-plus I Depot Depot billion, If the share. an the one think $X $X.X about was about you that which follow-up few had, that share have would you--or Supply, right MRO you Is more you’re add Home to way understood. it, about years about day ask on or that for back on XX% Got Home about we X%, that I billion your implied a

Ted Decker

with Supply. $XX it’s think market MRO combination current will our and a business about a We billion with be added of HD plan that we what

Michael Baker

of billion? And your is think you what that do share $XX

Richard McPhail

roughly We transaction ours Supply’s completed won’t on billion. to back speak theirs. We’ll financial said, The as you yet. $X call hasn’t refer Craig But information. HD

Michael Baker

math. do you, Understood, can that it. we Thank appreciate

Operator

Our Fargo. next Please Fadem comes Zach question from of with Wells your question. proceed with line the

Zach Fadem

the to easing of think Good attribute stores, sales that think curious in QX, quarter, morning. impact would some With that so in-stocks the I of this would COVID your other I’m digital XX% your better the you in-store imply early sales or or call that would restrictions customers there up in factors if accelerated more you were incremental out? on like you demand do from pro and

Craig Menear

I at our the control are business our situation think managers versus our improved, to overall. our the store services We ground as with on customers, Ted overall position, over of it’s We roughly saw indicated. that improvement stores constraints our all did We the turning and in better still in-stock company-wide improve pros up the operate. pro ended to a larger to of beginning been We who closest approach. for We’ve above, Zach. learned smaller and pros our the we yet quarter. steady, there’s them, improved opportunity saw have how of

seeing we’re right led the a there’s in pleased with to that that think the business number factors performance of in this I so we’re quarter, now. trends the

Zach Fadem

it, impacted timing curious dollar could think you relative about the business decision about to the HD investments, you across sense and why prioritizing to plans? think with particularly lastly how makes customers facilities investment of the most you Got incremental their Supply, on some due MRO strategic talk the COVID? end like now, to reacquire existing then would hospitality strategic that On and your the

Craig Menear

say things. I’d couple Look, a

is Supply this offer fiscal HD we with few deal, get to hopefully the accomplished we’ll today, a prioritize, allocate years lines on, of year just did We a up and but strategically close the end we facility business put that’s to we’ve much and determine got the then business MRO so there. to the so here, standpoint, first. essentially deal trying business and look First maintenance MRO over that logic than our period get go-forward what it forward the timing we it how of more all, approach we’re time, in closed the ago. in From as it came down that during this a

Zach Fadem

Got it, thanks Craig. I appreciate the time.

Craig Menear

Sure.

Isabel Janci

time we one for question. Christine, have more

Operator

you. Thank

final Please line question. Guggenheim. comes Forbes your of with from proceed Our question the Steve with

Steve Forbes

discuss it’s to hourly I thanks associates. could the if forward. are about compensation and or hoping was concentrated or possible, wage there’s expand fitting don’t for I you Richard on Good for cost benefits are morning whether think absolute if Craig, as other that know the of or structure enhancement the the rates in. investments compensation being going in maybe if aspects the me changed we

Craig Menear

believe our wage, relates we in as are overall we think Home of that The associates, Depot market-by-market it associates the to yes, as investment essential basis competitive advantage to can and you that’s customer critical and our Steve, they’re as largely--it’s experience. a done on a This is overall. do everything it to wage. But

Steve Forbes

time way time we or it full expect know any pool? discuss the any be our to should can don’t full Then cost as about XXXX. $X should billion as higher in to the considering transitory maybe--I mentioned the to Richard, follow-up stemming $X think from potential billion there costs best a employment for associate permanent, pool, you factors incremental versus if other but are we models that, you pertains pressure

Richard McPhail

frontline whether our essentially, associates, full they’re part It’s all matter. doesn’t time, time, of

Steve Forbes

you. Thank

Operator

Thank closing over for you to like back would to floor comments. Janci, you. I the turn Ms. now

Isabel Janci

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

Operator

conclude teleconference. gentlemen, today’s this and does Ladies

your a may day. and Thank lines have you disconnect participation wonderful You this time. for at your

The Home Depot, Inc. (HD) 17 Nov 202020 Q3 Earnings call transcript