HD - Earnings call transcript Q2 2021

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Operator

Greetings and welcome to the Home Depot Second Quarter 2021 Earnings Call. At this time, all participants are on a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Isabel Janci. ahead. go Please

Isabel Janci

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

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

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

over Now, Craig. let turn the to me call

Craig Menear

quarter U.S. earnings of last year. Comp quarter, The underlying continues. were sales we in per across a from Sales the the Second year were as this in our our you, time were Thank last demand Quarter second you sales from strong positive from appreciate over with pleased up in Isabel for the quarter and were X.X% in good morning. quarterly second We business call Diluted the in first our year. We X.X% us on $XX $X.X morning history. XX.X up up the $X.XX last second joining share the everyone. X.X%. with from comps the billion billion, performance achieved

opened second has U.S. the itself observe several did consumer in in up. This quarter, changing patterns the some economy manifested we During U.S. the as ways.

pattern returning home week, sales a We consumers weekend. relative this pre-pandemic projects. to in recreational consumers attributed activities. activities, travel to strengthened in to continue engaged improvement while other performance have We and to the shift see sales our seen to as the within is weekday And of actually them returning we the

row. [Indiscernible] strong in customers customer to the our week on second projects, with and grew outpaced our see respond also flexible as quarter. by than which second Pro more We evidenced for we're comfortable quarter, year-to-date. DIY taking more second the demand in pleased every despite and as sales billion continued comp-the-comp home We precedent customer, comps remained in a with the larger in quarter We strength compares to last our improvement billion and had $XX $X.X positive the year and by the ability

versus XX $XX perspective, quarters, last the last Over our a strong XX basis, comps year. posted regions XX have double-digit than our X regions U.S. in of From a the market. business stock a more billion, level by are comp geographic positive On two-year growth. grown all unmatched we

a The Northern posted COVID-XX, Quarter. division, experience outdoor X essentially geographic positive our stronger quarter restrictions did we by our more Second the customer seasonal posted flat categories comps in First a significant currency. Mexico However, we driven shift to the and comps, Canada with during sales due variability local and were that in is sales during performance the in the double-digit some variability pronounced performance from quarters, unlike Quarter, regional perspective. where past saw in despite

the home disruptions in industry supply chains. products manage effectively demand improvement to significant for continue We strong despite

to XX has but strategic further to market experience from productivity of and support leverage our relentless than leverage and provider to high-demand while set, chain thanks the were with strengthen position focus a partnership depth our cost made our the extend the where they and value. have and supply key investments our we skews where are our we environment. in dynamic over efficiency, from our and a is flow to want Star. a to year deliver come the in this any the North Supply of market. our agile in-stocks years. our further of and We further only drive as to faster home all remarkably In drive they on number scheduled believe experience of growth and to improvement. our network continues It our vision. are We we categories. But in to flexible Depot improved them of we scale remain events enhance this being make and shopping The scale our months, efficiency goals, our the well on low-cost be, we the our improvement Chain home on expand progress interconnected a a momentum supply investments, continue opportunity And critical end, have chain near-term, the Home remain ago, enhance low exceptional track are prioritize also the breadth mass our as environment, network that with next. leveraging a goods to standpoint, of not in vendors the remained customer shareholder focused culture and year will our unique of One buildings team to online Throughout delivery past we out current building also building We on not navigate position with largely to in with plans continues

of associates engaged means were the and In be They spent time time our these recently The of part and get we to know in share have how the with folks Home number culture. blooded orange associates took the a hired to stores when new I connected was fact, these time associates family. that were what year busier Depot struck our ever. were a than new during by and teams to to it past But onboarded and

they while invest also to over in live And many extraordinary close managing history, result ability them is by by communities, want let future Company our the thanking a me for other. most Ted. continue serving that, fluid efforts. direct their values ways and our I Our associates each call with to environment to of for our our turn the customers, the the and to

Ted Decker

and by good communities. and thanking Craig to to serving want morning associates for commitment of their customers our I also Thanks, partners all and our supplier everyone. start

customer to our business, lap We particularly difficult That production store, the the performance Second creating in Quarter possible of despite being supply pressures as record would performance of to said, continue chain chain, continue year. to meet efforts constraints, volumes and as the Raw the and week. last see cross-functional without environment. we after strong significant [Indiscernible] growth As goods you we transportation pressures our not by heard across able throughout chain. a from supply ongoing Craig, are from during merchandising the teams flow modes of be material supply our period week demand strong shortages, were we same

concert about our of culture our Over Many improve to guide in-stock to you've a our And and we've values use teams our with get decisions. our product customers. the continue heard our initiatives talk course and in positions number us suppliers the to to pandemic, implemented. of

One alive Depot. of at entrepreneurial well our and The spirit, is values which is Home

creative found supply and way a chain use. exclusive scale recently serve our customers vessels another teams teams several Our our container arrange for environment. leveraged our in better solution dynamic Yet to flexibility our this for to

not still inventory last quarters growing evidenced be, same made depth the we last to faster are levels where maintaining the building key categories, in them to improvements than few sales by we year. period are in-stock Our over want we as the compared and

our Turning to performance. comp

by XX During positive quarter, departments and and second merchandising lumber. led our XX kitchen bath, the posted of comps;

the this quarter a negative hardware, we our were of during important posted It note year, that healthy second and strongest and comps indoor performing stock During two-year these the of quarter to some of each garden. of departments last On in year. is paint, saw basis, comps. departments outdoor double-digit our second single-digit

and driven comp was On decreased positive. ticket lumber. categories, both X-year lumber inflation This average average for and historic ticket certain was in basis, volatility. comp another were average notably growth our a XX.X% in stock by comp increased part comp ticket transactions healthy and quarter transactions The in Our X%. comp price

of their peaks. the the lumber quickly weeks quarter, During and few first reached from framing falling both highs for all-time panel second before prices

quarter, before over falling As to framing board thousand an approximately approximately during feet $XXX. the second per lumber $XXXX at example, $X,XXX peaked

Inflation up was $X,XXX and approximately in from pricing during to Big-ticket vinyl across points has our second pipe -- the the during still were saw from the average the XXX higher flooring, strength of period many Quarter both commodity approximately over fittings. comp last basis same growth XX% year. peaks, quarter by significantly positively panel gypsum framing and are down quarter. plank like categories While compared ticket and come ticket Pro-heavy the impacted the lumber, year. price transactions big core average for We last ticket Second categories, second those

Quarter us outpaced strong. in growth and with our of to seeing Pros, two-year DIY our the our We're Second Pros. continues on momentum with encouraged they was consistent for stock Growth growth tell basis. sales Growth are are Pro smaller and DIY a Quarter, that growing. and Second customers that their long row the backlogs During the by Pro and we with our a larger outpace Pros

many essentially our in-stock increased have customers they stack the the quarter. customers an to can turned the and X-year our Association which lapped the platforms it center XXX% never quarter digital of year. digital we've hit the thrilled engagement of National experience the manner. We with or while customer in of basis, second the interconnected larger of And gotten physical On of average. second like comps index, them stores we during majority a and and the kitchen and vast categories, our more due the And more the in to leveraging know digital support; the remodeling worlds. quarter, Homebuilders seen our our fact, Company and several sales be to our fulfillment, blend Whether our been engage project, our us online, X-year buying We're transacting, across from with our nature with inspiration, importance platforms. XXX%. comfortable customer through in of confident saw project research, showers, This customers our projects. quarter, renovation remain customers digital in approximately physical during all-time bath platforms X-year interconnected of and of as Pros of of business. approximately sales flat during strength last posted be above were as the growth In tubs vanities, help we highs second of kitchens, Sales all

transact our testament our quarter, For the the that us of those during chose with stores; our online customers orders interconnected to fulfilled power to of a online second XX% than more strategy. retail through were

As to the best products for we secure busy, are our get we back half the jobs Pro highlighted exclusive know of look year, forward our Last to working and quarter, our we several done. are to Pros hard their the products help Pros we customers.

new exclusive to Solutions, OSB Box This a LP boards. of relationship panel Building with quarter top announce excited a Improvement we're provider Home Big

touchpoints Xtra and Xtra pleased we inconvenient with membership thrilled offers are engagement been Pro take-up volume benefits. Loyalty relaunched are our tracking in frequent with purchase we we Pro we've seeing our Pro the we along addition, like ago, and Program. services more quarters the Several other Pro Xtra with s are pricing, with In with seeing. momentum

In able access offering addition, experience, online Pro more all to our now Pro Xtra Pros members personalization are on homedepot.com. BXB

Pro is that all product like With call professionals a I'd over The design Depot. scuff the stain new, paint years, fast interior BEHR most paint, also can. announce quarter, to a Richard. we the that DIY-ers, Painters, repellant, is offering in from our brand believe one turn to to is and coat the through one are our relationship third what resistant, coverage It DYNASTY most paint exclusively with unique offers the Home roll-out in During exclusive thrilled we of innovative Behr. X-in-X drying,

Richard McPhail

from Ted. sales everyone. $XX.X were billion, X.X% morning, you, year. Thank or quarter, And In the an good increase second of total billion last $X.X

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

positive comps all X.X% comps During our positive with Company total in the months. second quarter X were

from Second basis in last X.X% points U.S. were June, a of X.X% During X.X% June, X.X% Comps in for we comps of the and in the in in the margin in total In Company July. May, XX approximately gross the was May, and X.X% saw with comps X.X% decrease quarter, in July. of Quarter, X.X% positive period the year. same XX.X%, our quarter,

during primarily gross that of the driven While year-over-year lumber, Second there accounted which pressure. was change approximately impact by margin, XX points for Quarter factors basis the many are

our transportation the addition, canceled quarter benefit rising several margin, Chain impacted a year. including lapping Supply gross In factors and other second negatively costs, events investments, of from One in last

expense basis XXX a second as of points to decreased percent XX.X%. quarter, operating the During approximately sales

during notably expenses support in operating quarter, strong payroll, second associates. Second meet Our offset leverage and to our partially to reflects the These Quarter second COVID-related up the XXXX that we staffed last of of incurred as we in expenses other expense demand. items significant year, most the quarter by underspend were the

we Quarter at of during the the expenses made year operating Second investments Our of wage XXXX. this that end include also

for Quarter approximately by to $XXX from Interest second second expense increase quarter, XXXX. the an Second Our effective XX.X% the tax our million. operating second XX.X% the down In quarter million of XX from for basis XXXX. margin XX.X%, points quarter other was the was the and decreased fiscal rate in of $XX Quarter Second of

Our second $XX.X of quarter this billion diluted an of and XXXX. for up with end At compared quarter increase times X.X $X.XX, the X.X time were were share inventories second from last earnings to $X.X quarter, of compared year, billion the year. turns were inventory XX.X% last the the times per

investing to dividends to cash Turning after shareholders of our return allocation, form is capital share the our in repurchases. intent to and excess in business

long-term $XXX expenditures. million during the business approximately approximately $X.XX XXXX. shareholders. into $X second our the billion we from Fiscal for in the the in in XX and Computed Quarter, ending the we of form And up our debt the on was in capital quarter, During of XX.X%, share of shareholders the capital And and of repurchases. approximately Second form dividends trailing return to to paid we approximately invested equity returned back on average months, beginning quarter XX.X% billion invested

saw pleased very heard these to performance are compares half from saw the you we we we Craig, we as time year. As last this what during lap quarter, of while we encouraged challenging strong back the second the we're year, the with are And by growth, the continue particularly unprecedented seeing.

is and home a for weeks X several the out supportive with the Housing healthy. engagement of of relates home look see seen significant That remains we've of we a consistent the During COVID broader comps the the as years. first and there's August. in amount and Customer the and Second pandemic the strong, in Quarter. still U.S. over as uncertainty we demand next spending for said, spreading variants. environment improvement environment it new evolution to -XX improvement the

impact environment believe external accurately As we we it do shared, we've spending. consumer will can how and evolve not previously the will ultimately predict how

shareholders. now and open If and improvement, we intend position performance. And, We the execute extend our to for things, be with shareholders. what value our do investor believe intend participation what of experience grow remain call. on continue home we to we and our Christine, Longer-term, driven will faster questions. to is we will capital in the in the best we will our than as customers, improvement. our and low-cost in to most the we continue these winning committed you associates, provider, customer for our to efficient today's Thank market, we your for our provide we'll formula believe We flexibility focus successful has the call deliver to exceptional we intend to home

Operator

Thank you.

a conducting session. will question-and-answer We now be

you. please, ask questions. If poll moment, a we Thank [Operator while Instructions] you for to question, would like One

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

Simeon Gutman

everyone. morning. Thanks, Good

Craig Menear

Morning.

Simeon Gutman

if evolved just for And ask Hi, maybe couple or had your Hi, think thoughts has ask growth X. several wanted given next I Richard I the wanted massive ahead. Curious every to we've I'll it compounding. past have next healthy his the to ask I over whether in years mentioned couple of Home -- expecting the quarter demand comments, this Richard. now. on years, of demand, Craig, of to about can keep we Improvement years the digest

Craig Menear

when housing looks index, at Simeon, the support to backdrop good Richard predict we about from Improvement. we perspective, the short-term, a Improvement the but re-modeling Hard the don't the from for solid. pretty long-term outlook I longer-term for overall you Home and feel Home look know to. if outlook want

Richard McPhail

You just Improvement home at the in price believed you fundamental support a demand. appreciation look -- have is of -- we that home activity

you are to becomes As more valuable, it. likely spend your more more home on

the We it more ago. XX% are years X housing over a at than is where the point valuable of stock was now U.S.

that forward, healthy appreciation, incredibly reasons homeowner look some seen balance As sheet state The healthy. as that's we're we why so is we only the not finance the we why of is price mortgage but incredibly -- optimistic. have home and of

Simeon Gutman

helpful the dynamic gross half rate then occurred happened in the the from that for well, question, improve but second the not quarter? quarter, the improve back least gross in does margin. near-term and -- allowing in second margin That's change ease one to it the what improved, second-half outlook There's of at this

Richard McPhail

say week-to-week dealing we've think I'd dealt focused effectively. certainly we're ability comfortable with and with that. we're our There cost and cost environment the on I in that all executing environment through But history we're to our throughout manage pressures with here. are the

Craig Menear

unprecedented competitive I you Normally Simeon, Richard being the lumber in as from rapid the the speed with lag and of actually going created customers. which, unique the which was But lead extent in drops. decline are don't possible that with have market there up, level a one we normally impact, we to think Unprecedented philosophy have out. see. quarter, decline, and this we very impact an that only scenarios unique, always the some that our as called it in down for quarter, mix. obviously remain of as the is to And the drop want

Craig Menear

the given of customer. we're share growth. may great to We're the a from when business are is taking we we we that the meet market volume an our that comment driving is at That predictable, and confident but it. growth there impact more not through operating another I'd we're operating generating profit we're demand that And system look dollar have make know dollar we Company, the we feel looking our and about which profit as driving shape but mix is capture share that see coming the at

Simeon Gutman

Thank you.

Operator

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

Michael Lasser

Good morning. Thanks a lot my question. for taking

Craig Menear

Morning.

Michael Lasser

the business where should you performance outlined that trend to to consumers we weekends the summer, the diversion a on temporary DIY more moving you in how attribute vacation condition, think with pent-up demand How inform forward. [Indiscernible] like they'll Do can weekdays alternatively, on and return or pent-up go this of to fall, the had DIY that projects on sports, College versus about and returning segment you think that activities put to the it's for going that? office, do enough demand Pro the as there's watching strength offset Pro sports, And the it families to the and traditional pressure and return gradually business. accelerating

Craig Menear

They environment. And research question several for a and seen carefully quarters is pro in them. pandemic It's would as started. hire the with Michael. this did for see DIY to result, on as projects consumers the more gets tendency great since quarters Pro well, the the do strengthen row more to a the normal and time have customers a the consumer last our watching a X consumers, and What our Pro-business the to as where first outperformed have a taking larger projects. are back suggest Hey, we're we something we've

the of that that care we're Consumers are And opportunity to home DIY to Pro of and Pros so strength projects. is than tell and laundry the tell those the grow. us is very business. a sure they customers, us of where their feel there list our solid making with optimistic business continue that focused but take than ever. like continue to bigger more we ever, have can along important goes backlogs Pro on we're And about Pros I

Michael Lasser

do gonna dynamic Pro labor activity-based? DIY can business you That's impact which have save going for how here. decline it dollars all And the is this So funky fine-tuned is quickly good, and back you this may that have flex how maybe transactions helpful, to how might if so the dynamic the is maybe labor half, decelerates your is that negative need you as in turn Craig SG&A and where can comps that. DIY you're that, where much business a in from actually on not you some well motto,

Craig Menear

head Michael, a which quickly. the few we the model, is you hit in We It's transaction. plan make go. has activity-based weeks we adjust on and we'll can short-cycle appropriate component in terms out model It's of it in there our of labor a -- a an adjustments a advance. model, as relatively

Michael Lasser

and much very you good Thank luck. Okay.

Craig Menear

you. Thank

Operator

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

Chuck Grom

morning. expect guys of wanted I XXXX? you Chain sometime just out benefits in gets built HD little the you good to once Supply the One Hey, on bit see more a to elaborate some

Ted Decker

supply X this population Sure, plus build-out. and the purposes parcel of really to day. deliver of next years big whole all chain and to our same And we're into is of XX% products, bulky, U.S. ability our and the the

customers. have all being expectation building. to able fulfilling Speed well They're deliver satisfy facilities up required, is performing We particularly that with multiple the of in our that we're and reliability Pro and type customers. what's of each

to its carry assortments us addition, allowing In our from stores. what we our expand in

this our quicker, the fashion So activity a quarter to foot we get stores. cubing get assortment tremendous our we're broader past reliable $XXX lastly, And We not building. just a that And it's of up a amount of to only can customers. a sales in to our more customers. can square in product in

in that able the And out just our the to deliveries helps big particularly with store, associate activities and get to that thrilled the bulky in be store. So deliveries, customer we're flow particular. of our and

in relieving of We're tremendous amount exactly in planned flow the out new directly the it. has out opened facilities the up. stores, of delivering activity our have Chain of FDCs Supply way cube Team delivery Our

Chuck Grom

unit And lumber, great. on volume then what throughout as dropped a just perspective prices seeing That's from the you're quarter. I'm curious

Ted Decker

clearly, waited. we in market tremendous a of wasn't And the out sure X,XXX board it feet, of $X,XXX amount marketplace. plus hit till supply for the people new got when Well, of backed and we

board I think backed you feet fall, step per hit a high even and levels, lumber. those where on once was point said, even falling week. $XXX back quickly. that tipping off People about to as so and started saw prices people just impact $XXX, X,XXX $XXX it Craig margin sure, further. for $XXX at we That's for an now at framing settled units. And the

negative, turned had units have units come basis, responding to improving but lower down, on And still price. prices negative. in Our are that sequential a as

demand supply dynamics as pleased, very worked expected. we're So and

Chuck Grom

Thank you.

Operator

comes with Barclays, Our question. the Short proceed next Karen with from please question your of line

Karen Short

very Thanks much. Hi.

Just wondering, with respect to inventory.

about where You're you're growth you is from the product? up lacking at any to still area inventory against looking your last in areas And the of think half there then inventory, think of year? comparisons overall but year, how second

Craig Menear

been First at Karen, say turns. pleased super have able X.X incredible build to yet up at we've to we're same of inventory productivity all, continue that I'd the time but

perspective. that. from to still pleased where in So we're with be want There's we're in-stock an where still a very, not we're -- very exactly situation we

Our have suppliers are on narrow suppliers merchants our worked hard, to key with our the working but SKUs. focus

right to matter. the we bring across on trying of breadth product to continue in more stay focused But opportunity that are the assortment. things And really, so still, now really there's the to

Ted Decker

tends I'd of on the the plumbing, by depth can Pro we've there's factory, category-by-category a a lumber outbreak category be heavy job And recovered been And all There's departments, domestic a and as but to nicely it category. COVID materials, in velocity of again, build depth to and we're that in Craig for a those constraint, it's in a customers. lot building trying electrical, story. capacity there's SKUs. in transportation material building our constraint. business, quantities say, build be shipping fixtures. said, And our We're highest And side to trying

but one financial So why two we the it's of into lean been the that's with strength We're inventory. liquidity. steps we're progress. making and forward, And story to back, happy step blessed are

Our product. a goods core in tend to obsolescence lot be particularly our non-perishable, of not

have, product, So this they product, and merchants has supply market and lot in this reasons is as so think taken I much the -- our well we've share of is the going and one of who's responding sell if who a the to environment. chain as

Karen Short

That's provide. color, helpful the And Okay. the then loyalty. you could non-member provide, wondering any was I just be that program. members and members Pro versus of on average a on you'd was pro if number give the the just in update wondering to metrics of I willing if little can Xtra on you spend any or

Ted Decker

over sales, so website prepared have is members those, in being we're And Yeah. up makes of that XX% X% mentioned number in Pro BXB our our of BXB Very into program. building percentage this But, you Won't the get the a in now, number of remarks, to strong core details. Xtra transferred our experience. know been as and Xtra rough of I our customer Pro base of our my the now dynamic, Pros. about or all mid-millions X% Pro those are a of

the combination So has that functionality of those to specifically all Xtra for the ability with with build-out the and Pro. that stood the we've on benefits using, are separate engage the Pro which website of you're BXB Pros Pro a sorts up getting Xtra app

reorder building for capability, material all builds, preferred receipts, jobs, pricing quotes, tracking instances. quotes, jobs, and tracking So of in certain think

website as of something All that results. together so Pro coming like search relevance of well that is as personalization think in on BXB building

pliers of in getting relevance, that to in We provide electrician provide we're the thousands have performing pliers If know we're be we flyers, is going results to so as you now would that that to or search We're electrical point search going search first that I returned our query. put result. an that and could in the

and now add tremendous with been is Pro BXB just and Loyalty the program, website. another the to our this Pro just app, engagement Xtra So ecosystem great Pro

Karen Short

Great, color. all thanks for very the much

Operator

line proceed next with Our Nagel your question. of comes from Brian Oppenheimer, please question with the

Brian Nagel

morning. Good

Craig Menear

morning. Good

Brian Nagel

regards question. you pretty quick Thank couple with taking of my ones. A for and questions to sales,

with was know quarter? your about you comments could in extent to talked you just the to questions, off, what First say comps a it to and this but lumber, respect prepared response I from benefit lumber in

Craig Menear

About billion. X.X

Brian Nagel

Okay. -- half we'd -- more weighed way the the the guess, towards the first, out, was it of you've say the Or And laid that first got quarter, quarter. more in way we've for I early much towards that. sales better

Craig Menear

But a it geared fall. unbelievable sure. was heavily Xst the Yes, -- fast was part towards Brian, was that yes, quarter. for It of the

Brian Nagel

then know I during pandemic be taken And Pro about I able to think is Pros right being now? your because this work these being strength Were to that jobs are are in Pros starting available those started jobs that question customers. now Okay. awful are you now? fulfilled the connections in or actually your the have talked on you the Pro have, the are but nuanced, were -- the and are with only your conversations, Xnd and Do the business projects

Craig Menear

Pros, we backlog a best know, know for I that combination, for guess. time. don't probably but that would we for had I a sure, when example, have talk some think to you've be my they've

been of that in where start it's probably job there's a been have And quicker waiting think, clearly, really then to a that don't but a some has and there's -- way cycle have knowing works I where they've waiting a I customer so scenarios to probably for Pro think we a been the

Richard McPhail

lot a The within of National it. Association index interesting Homebuilders survey of has data

of really seen projects, projects, And projects, components optimism One proJects. actually year. intent, is consumer of and check-up sequentially intent and we small large the survey sort for through around the medium-sized have

think intent, it of backlog same you leaning is the say, and I take customer, at a seem the it's all or the And customer homeowners into if question are what's you projects. demand. know, So off Pro does that whether eventually consumer the you

trend the demand. like looks is in it strengthening So project

Ted Decker

accelerating. projects, are businesses, that look Those And as services, or I installation, of business are well you re-phased, proxy, seeing HVAC. and all large our think think service if and as bath, at these our carpet installation, cabinet strong certainly we're

Brian Nagel

all the Thank color. you. appreciate I

Operator

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

Zach Fadem

good morning. Hey,

quarter? have the to then, know, very what QX, events with a QX low Memorial Xth, as July Day, events in margin You're half. as what think Day, lapping this mixes the how X the Father's and should that promotional period topline did margin, impact second with extent respect could to promotional in extent talk we holiday the material major driver gross to And these activity, you the line about in given gross of into impact an a you were about in and

Craig Menear

say last our back year, would to the were canceled 'XX. because say year, so than promotional we promotions from many last margin only we I but up going on were less

we events our with all wasn't were events sell-through on happy and things very huge we're particularly sell-through, our our The our programs. it of in not while -- the a out So called had margin meaningful. of virtually comp in impact, record Richard it driver our wasn't

Richard McPhail

meaningful. wasn't It

Zach Fadem

talk trends Pro the does you then weeks QX, in versus August, could And performed are helpful. in other. one for for the does the And hold during trends if how from about trend the any was that through of quarter. then first also Richard, both your DIY Pro That's versus X there commentary DIY? versus variability it. that And Got line

Richard McPhail

where break of faster grow direction of the to we're DIY Pro -quarter. Well, second It our quarter, our out Xst the the the in customer respect not so we much quarter intra than say I'd saw with has not customer. our X gonna weeks changed business. was

Zach Fadem

the Got it. Appreciate time.

Craig Menear

Welcome.

Operator

question of the question. with proceed from Bank your Suzuki next Our Liz America. of comes with line Please

Liz Suzuki

give you. even mentioned your year? we're Pros MRO And market there? so big you're last outpacing Pros Pros small just seeing easier you thank was trends an MRO given that Could Great, on against growth relatively above the those and update comparisons of you the that big

Craig Menear

those products, much Supply. but in better XX we're serve very multi-family, is households forward. Liz, serve relationships have on with the about, pleased acquisition business, The we're the capital of Not obviously to refreshes What with is those as and for million million participate that in to MRO is that the we the our going that MRO a can MRO them multi-family build households Depot are Home opportunity then actually business we our only XX and business property opportunity with there opportunity the excited in very space. owners huge business, for HD solid. through candidly,

So progress the and there. the business super we're making pleased with we're that

Liz Suzuki

than I'm year in like you normal and but it we to promotional but a standpoint shorter are this, cadence procurement like started a the last where marketing question more longer, to about promotions the and promotional standpoint? may back go it you Zach's holiday it to do be seasons? a expect pre-pandemic were I shallower from approaching just checking Wait, bit and season and early mean, or a a little bit. this will Should year to look year think a thinking deeper early extended how be

Craig Menear

in imagine, type made buy the as Well, chain involved the chain of merchants sometime teams bulk can you those those supply with supply international ago. and the events, decision

items, huge to buy, in fixed buys, expecting We're stronger great values, point, a think it's it's fewer programs. we growth your So But not and those have we deeper programs.

terms In normal look That's we're in online I trends. going decorative to our our holiday we still up in almost engage early, just Halloween Halloween are sold very and our sneak to setting going people had product of later and marketing peek pre-release October. out indication immediately. a strong all follow to think decorating, with a opening that We forward of

Liz Suzuki

you. thank Great,

Operator

of JPMorgan, your the Christopher from with question with next comes line please Our proceed question. Horvers

Christopher Horvers

net it rain weather the everybody. headwind had was record the It's long morning, second Good holidays do potential been a was question, Northern a a you in but Thanks. the DIY major during since geographies. time some quarter, of think the

bathtub just effect XQ? And so was of the XQ versus beyond it

Richard McPhail

was I saw beyond it, we but say certainly wouldn't it. it

it think the comp points impact, QX, QX basis accounted division. low from from sorry, may we Northern of XXX QX single-digit pull-forward So XXX particularly I'm into have for that in of comp call it to

did view. driver our primary really in As that was in the difference Craig divisional called while performance, a see out, we

Christopher Horvers

Got it. And reflected headwind then on comp year the the is commentary? lumber the balance side, in of as quarter-to-date prices stand now, the would and modest lumber that for be a

Richard McPhail

under lumber, XX% XX% a units, LY, is Yeah. market there LY. and the now, would pricing be negative under approaching neutral right panel impact. Lumber just is comp of framing With Chris,

prices As progression the project perspective, nature, in to is direction these price but a lower and I that not going from unit said, the lumber. all expecting in right speaks with any tailwind

Christopher Horvers

how then as you you higher lumber Richard, pressure pressures So from in inventory, Got back that cost about think the the the as much as you gets itself, last so question, I gets is half? hung the margin. you worse assume look do actually transportation in it. transportation as some doesn't of have and transportation cost costs repeat up re-pressure gross could on And think

Richard McPhail

The you to bet time. look is not to single what might would period transportation that that back to our of half like. a through on able team costs just I day on going I'm I long manage dynamic. every speculate will be tell

supply exceptional I provider team the is our low-cost as market. position have chain And think Our in and they creative. that reinforced the

the market where So goes. of regardless

an advantaged we'll position. be in I think

Christopher Horvers

was the got one. there comparison low that promotional, questions competitive although quick competitors One would level just you July, of I'm last out more last promotional your In you sorry. a more a to There some how maybe of it for some environment? are characterize year?

Craig Menear

see didn't majorly different. I anything

Richard McPhail

notice I much. Chris. that didn't

Christopher Horvers

so luck. Got much. of Thanks it. Best

Craig Menear

Thank you.

Operator

question comes line question. proceed of your from with with Kate please Our the McShane next Goldman Sachs,

Kate McShane

my question. Thanks morning. taking Good Hi. for

saw at I something you quarter? and couple if commentary that can wondered QX? the And continued around trading any a trend by give, up Just all, specifically the if of see questions. during you you the to was appliances housekeeping-type what could of in customer, you address,

Ted Decker

shelf in on stock the continue say example, of power categories, examples, or to equipment, goods we're on tools, look for zero-turn situation lots to trading substitution seeing But depending it's modern to batteries, appliances. the time quite category, you ever. happily features of people up the through integrated as fans but and trading if see riding to those driven, outdoor the just not used strong just strong particular on as would grill that report equipment. going of People it newness innovation moving not up clear as all That and Kate, that The that's longer at categories. run are and we ceiling inventory few It's I appliances. on appliance innovation design outdoor category, I aesthetic, price up. what's powerful, the yes, in of day. as and are and as just power fixtures. lawnmower, a trade-up we're points is LED to bulbs in More lighting, trading seeing light power into over because

Operator

question? your Does complete that

Kate McShane

Yes.

you. Thank Sorry.

Operator

Please Our proceed next question. Evercore. Greg question with with the of your comes line from Melich

Greg Melich

with a guess I on SGNA. had follow-up I Thanks. start then SGNA. I'd comps and

we that what So you And that the that have Depot did the getting less? about unique in be leverage the in second guys the means about expect something back last had of first XXX to happened leverage is year you to there past. half or talked half. would had type bps way leveraging Should Home similar

Craig Menear

XXXX to Well, from are was and unique for of XXXX year a comparisons XXXX factors. Greg, such difficult number a

year. that associates of place our expense in last about in the think of COVID we put support amount You

You meet towards think comparisons about made bring to investment All end that up difficult. demand. staffing we levels these of XXXX. as you underspend expense to to make about then think worked the wage we And the

expense operating in leverage to We first committed long over are in generating delivered term. that We great and the about we've feel leverage QX half. operating expense the the

of a going and how see operating from we're out. with very of may to but always it and again, Leverage fluctuations a you're happy is seasonality You're factors. half quarter-to-quarter. leverage. see And function quarter, us volatility, the a In period going quarter see be other played function expense you sales, a of quarters, any can to over topline given

Greg Melich

is Quarter to maybe Second inflation? say X-year the there make If stable fair I right. the trend correct? And linked it is mid-XXs that my comp the but on I sure trend, the If got it is that no to on follow-up, lumber, interpreting that without inflation in similar just Am comps. that to I is is in want

Craig Menear

of two-year is comp its to weeks in first month. similar the Well, one-year comp in of consistency the couple

Greg Melich

and a I luck. Right. it. lot good it. appreciate Got Thanks

Craig Menear

Thanks, Greg.

Operator

in Wolfe with question. thanks David to morning regards good of comes proceed I question taking line Bellinger with and wanted to please the Research, the next Hey, question. from chain. your supply Our ask for

the a comments is the the environment. maybe a sales you the industry, in issues or type you're One Home the all You across incremental out is now few seeing months prepared pressures change anything Are there of ago? versus on a missed QX period? some making through bigger-picture in Is some question, now And within working re-evaluating that you alluded Depot just chain difficult level build-out? recent of supply through that there

Craig Menear

have hard level that there And say the so potential that's so substitution result pre-pandemic. we the really of substitution. to reason I'd the on impact? as you of tells that is pandemic think we on but tell. sales a than The was, Is relates I'd gauge level a the impact, more is get customer's there of is to gauge hard a since comment much really to the fact parts really, first it there that most some and high logic probably it's of hard began, this as willingness captured to

David Bellinger

any in of One larger Home build-out Depot? to And change your plans regard

Craig Menear

sorry, where to build-out the focused I'm at on us, no with and how engage want so all. that all. has is at customer No. build-out We're The they Home it that not -- Depot, taken 's No, impact --

David Bellinger

level maybe more more you that that Pro on new the that mentioned you type and Building to my a as Got next you any the further? reflect side. business Can Company more expand new into relationship Can exposure just further? Pros in expand construction some sales the new here, any of home tied upon it. just construction growth the home of where give shift LP exclusive Solutions. follow-up upon with you And just Does lean

Craig Menear

of new with we electrical play is be Carlon construction. as particularly Pro, top I -- providers, LP intent similar any is arrangements on into in to Pro electrical boxes. critical of with suppliers a our a Pro Depot these OSB quarter position last the focus inventory shelves, that is taking very There in couple customer. LP to And PVC having largest likes not chain Home or was after. with on and did all brand. what our provider, one LP we the home supply of for depth the not and boxes, is this regards the the top to about Carlon their making Carlon we so exclusives of serving is us, that matter a so market focus It's categories strong care go the can of mean, consciously can different in No. is they that in

David Bellinger

color. Appreciate the it. Got

Operator

Loop with comes the Our of Please Champine question. from Capital. question with next Laura line proceed your

Laura Champine

the the transaction and in Thanks onetime should through QX transactions that up for able tick sort Is that lumber to of be of home move were drivers next? some the back we given rest I down. strong taking prices, down that of the just question. And context inflation to around year my there thought get macro you and commentary comparing other as to this largely comparisons issues. lap were the wanted the the outcome transactions and and difficult because of that the should

Craig Menear

in we don't environment first our we due past be exists uncertainty We would and Well, forward really the can believe today. going that provide the outlook performance didn't comment any to that project forward. take

last to mean, I it As huge transactions relates the a Ted, want as transactions, PPE. year if you to of comment. result

Ted Decker

in And sanitizers. departments is and improvement. by build doing is and I'd like and say paint that customer take more been category weekend. a other the consumer-oriented. a several to home we soil at years single masks mean, that of home in improvement for sales, gardening of unit biggest above In and can talked we that They've outdoor paint, be up our hand that had indoor one improvement. to confidence pandemic. saw project dip fall-off. work, those four in I've millennials on QX, things engages X alarmed Lots not mulch seeing painting and that We'll until hardware, was tend grower the of in before. the generally. in initial are are fall-off we're of a painting Yeah. and gardening in and unit the did projects a housing. get all. activities first drivers starts done some I is in of volume home levels are a that people while the And coming for paint engaged not engaging Is home, in about negative DIYer was the or one We're X see paint, that is and paint the through that. Millennials XXXX, well units which They and

to and thrilled So are we're they bigger on category, engaged moving projects. in just that the

Laura Champine

and/or a are percentage where terms do a we sales? as sustainable be growth have should And digital out then on of better sense of it. Got longer-term now in rate Hopefully, the settling there. follow-on, things

Craig Menear

really this interconnected mean, at experience. we an as I look

nature our clearly look to levels, digital but not blending business. an or with rate of channels, are through worlds sales a from and at together We we've engagement our of Certainly the customers how on seen terms project that's Our of accelerated engage view pre-pandemic Depot. the Home that we because our in for it. focus digital it customer as the physical of capability

Laura Champine

All right, thank you.

Isabel Janci

Christine, we have one question. for time more

Operator

Thank you.

your line of proceed the Research. from comes Please question final question. with with Cleveland Eric Our Bosshard

Eric Bosshard

things. Thanks. Two

clarity all, some of for perhaps on lumber. First Richard,

I the wrong? about down or Does the margin about talked customer. for more do am thinking gross necessitate that that best on XQ lumber leading what's from price You pressure with to way in

Craig Menear

the no. has the the for now recognized from the But been precipitous and least most moment, market what in the so And its to at pressure lumber it impact on the decline seen large, price. lumber, part. we've By at had date, in QX prices depends future

Richard McPhail

gross you It's this decline very the that, compressed time going the result to a lumber. of the reason see We down. for going timeframe. on key margin it's to we normally, be lag best Eric, focused we price for to in was as happened our mix. want coming to always up change value of a Yeah. steep it try The the lead any market again, market. don't in our it the We and it's customer. saw that incredibly And pressure approach weren't because driving when when from all

Eric Bosshard

the last the now out. pointed over couple growth secondly, as then And sense. you makes That is of exceptional, Perfect. years sales

or expected, your nearly take years. the there last or next normal away? cost a of if associates bit of to some to is return customers. released things of your little growth years margin in leverage XX% that next figure obviously of You've is other on to care business the three billion, the if doing and couple focus and would than we lift have the years and invested enterprise of been that Trying a can of what increase the operating some improvement you've on out more margin. in taken embedded incrementally made, $XX sales The operating get care releasing operating the in sales investments couple has less of Is the margin can of if over take with margin less

Richard McPhail

I think so.

an possible as have I which is fast a and to have to perspective, think operating go profit on back generating as return we on that focus performance we dollars from central dollars. the those financial exceptional that investment growing

what being improvement home in And is well. we're to that we feel very retail, last formula the with shareholder experience to the so share capital We feel as best and going of over market that a market provider we've we in the X can't and value the being the do. to captured investor X cost pleased best think that and the pleased created we've having that's lowest continue the formula the beaten, with be years, that exceptionally of

Eric Bosshard

very you Thank Great. much.

Craig Menear

Thank you.

Operator

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

Isabel Janci

to Thanks, look on Earnings Christine. with We forward And Quarter our call thank you, November. everyone you in for joining us today. Third speaking

Operator

teleconference. today's concludes This

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

The Home Depot, Inc. (HD) 17 Aug 212021 Q2 Earnings call transcript