HD - Earnings call transcript Q1 2022

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Operator

Greetings and welcome to The Home Depot First Quarter 2022 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Isabel Janci. Please go ahead.

Isabel Janci

Thank you, Christine and good morning everyone. first earnings Depot’s Home to quarter call. XXXX Welcome

and today Decker, Vice CEO us Vice of on President; Ted call our President Executive McPhail, Executive Joining and are Jeff and Richard Financial Chief Officer. Merchandising; President Kinnaird,

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

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

let over the to call me turn Now, Ted.

Ted Decker

is sales $X.XX share year. against X% quarter, in up first the comparing robust quarter and from the strong company home performance quarter of home benefited disruptions, sales the many call parts and tight Delivering stimulus. goods sales improvement for to even spring last X.X%. outsized year, our we watermark last on our comps first from more testament Thank Sales period had impressive of demand to weather in labor new This for XXXX favorable U.S. in to continued you, year, pandemic, is year to maintaining a the despite period strong we Isabel top as Diluted X.X% ago, X.X% our as were in and quarter a were history last market. performance quarter continuing strong given first while demand government associates. the joining year. quarter strong we ongoing from We this up from for delivered billion, morning. up year. are start. first improvement earnings last the the on Fiscal growth inflation same slower appreciate good a the They country. year’s in the $X.XX us and on for morning we achieved high such A highest goods, last historical per navigate everyone. were off the of a you The stores results relentless the supply chain Comp orange-blooded focus same customers $XX.X global their is a were start first positive

are also relationships and of the with supplier thankful partners. transportation our our We strength for

very would in engaged. improvement longer to The working medium like important to more we Customers their quickly as the tell the first project that to been We The support our of exceeded seen and underpinnings as home for to have demand challenging never centers expectations. home as efficiently are remains healthy. been respective homes demand Our I that never term in consumer are quarter to them environment. teams and have continue dynamic us ongoing product possible. a stores tirelessly their and thank for stronger. believe flow improvement navigate to distribution continue backlogs

project driven by in demand. Pro strength underlying performance our We are thrilled quarter in with the

engagement other business with in options, our more as drive deeper a fulfillment of personalized And resonating. our well enhanced tools an online We experience customers. ecosystem efforts continue Pro including we as believe to to invest are capabilities, management

and experience manage environment, team a tools, the are the we unique but effectively We believe through. to we have the navigating

monitoring will While customer in strength across by know forward, we and trends observed and increase see respective more our we in don’t color how categories encouraged geographies the inflation the a this only impacted about closely wasn’t moment. we consumer remain behavior impact elasticities business. the big it And quarter, Jeff might while going ticket underlying average in a provide impact. are a what bit and ticket inflation category have we from standpoint our

have years, customers store in March, continue the held we in-person In the premium time manager to products. an meeting up seen for years. As our several we innovative first over trade past for X

many the showcased with innovation. that share the And is product what the highlights latest Walk, of you our level innovation vendors can in that week is Product the business of of I robust. One across is where

are almost year this the In fact, XX% new on of entirely The display Home products to Depot. SKUs

the So, for pipeline very remains products innovative strong.

Customer the been we shopping touch to innovative a President announced drive named across To Matt Carey the from biggest our help and have approach team managers’ about associate every meeting and are the pleased partner our Vice Last for few but In recently our takeaway develop my Matt and is The newly teams execution remove how experience. energized business product the exceptional delivered our is. risen remain and has challenge. base customer-backed high. our to over to new that we end, solutions to the hasn’t survey associates experience innovation, point formed store design will talked frequently easy, Beyond quarter, been that Experience. seamless role, of Executive this friction the consistently last engagement morale and years of at customers. that We

aspects great promoted a will and the help we home our announced experience to is remainder few to of Siddiqui around Officer, As about that start. also new Richard to all Executive the first got our we enhance Matt a responsible for the he of moves year, Fahim minutes technology certainly transitions drive what been quarter for believe These Information our retail further in has guidance in this President development will Vice strategy. Chief and allow best will is improvement. which but role, us interconnected the strategy, alignment you to us to off talk where

also the the the are two the by we quarter in as spring through U.S. second across of continued weeks strength breaking first broadly business see encouraged the We is more

to team continues and associates focus most Our on important: our is what customers.

call an teams work. and With to like merchants, thanking Our supply to customers Jeff. service to partners met that, did teams, and I’d store the by let me job value and delivering and the hard their supplier throughout quarter. our dedication close chain for them outstanding over turn

Jeff Kinnaird

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

the Ted, first and supplier partners. to from we improvement quarter, heard outsized execution for you see home continued demand projects and As our teams during from strong

our during our the led XX of XX building and quarter, plumbing, paint. by first merchandising to positive comp posted Turning performance comps, departments materials, millwork

quarter comps shift this negative timing, of seasonal arrival During our in the saw been we in departments for late comps. posted the to the appliance quarter. comps event double-digit positive would for of Adjusting have a due year, slightly Appliances first negative spring.

strength across categories, seasonal the the business project with demand. thrilled Excluding we broad-based and healthy are

basis categories X.X%. driven anniversarying primarily and from the comp Inflation were and several increased core commodity spring inflation comp lumber, on Comp as average ticket and impacted in during ticket late healthy during quarter, and inflation ticket points new quarter. positively quarter, decreased the stimulus. a average in positive. And approximately ticket During transactions remained the first billing and by materials. prices innovative X across demand XXX comp driven our and transactions transactions comp well copper product was X-year and our the average for basis, XX.X% Lumber reflect start by growth both categories The the volatile our first as by to products. growth average of comp

during categories approximately at before many peaked saw first XX.X% and the were year. to Big per quarter fasteners. lumber to $X,XXX pipe those $XXX gypsum big first and the last or feet ticket quarter Pro-heavy framing up transactions example, compared $X,XXX We an ticket across like $XXX. strength X,XXX over approximately comp fittings, of falling over board As

During both – both with On consistent the DIY was customers growth Pro growth a X-year first with and our DIY. Pro sales outpaced strong. quarter, growth our and comp basis,

well and we saw quarter, the renovation projects. with are can to flowing We’re with we by showers that of tubs larger the kitchen and This seeing and certain comp turn in-stock of in them Pros in customers momentum us tell their our during double-digit as materials Pros, our they kitchens, our the encouraged performance bath many like strong. building as And categories are help departments and to countertops. backlogs be and seen

demand project Sales digital installation X.X% first in our the growth We during This strength also across kitchen saw increased are underscores business. leveraging bath of the and quarter. business. seeing our platforms the double-digit we

assets our are We the company very digital highest sales as our of dollar volume with history. in we pleased the performance delivered

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

business. from As Ted, the about innovation we you introducing across are heard are the we very excited

project, plumbing. We simplify is more on our that products take time ProPress line our One continue the helping into jobs. of saving them lean Viega customers example to and

uniquely This in ProPress and Pro projects. continues vast multi-housing Home of spray than a preserving no painters. Viega sealants interior exclusive spray applications. industrial-based wide point and wet a formidable our our The and well put as fittings giving quarter, Cox the In connection with in And paint working less that resonating Masco for painter is and to us And channel. well range job. an added leather market to lineup majority in can spray fabric. offerings The covering as the paint in box specced with water-tight we and work series. expanded In Depot a GlitonMaxFlex the in Speed large exclusive with stores. time Pro-specific a plumbers scale in together jobs, solder their we paint, PPG, is is have PPG Your big-box leader copper Masco’s feel flexible, that create entry this commercial Home channel. Depot and in the larger High we to Pro and proprietary first have exclusive XX% PPG’s now stains. launched Viega our is to their look with paint. paint, is copper in space this perform bare-formulated, of big of original we PPG’s paint, And Pro including technology Pro-specific offering require services, is the flame traditional Masco,

products exciting turn attention we let’s have for to and our Now, the lineup spring our customers. of

across new to categories. offerings thrilled our our product showcase are seasonal We

something and offers stronger mower seeing lineup mowers. Demand riding our unmatched. been an XX-volt perfect of can We cordless create are gas-powered transform DEWALT’s platforms. grills. building set new space an LXT RYOBI’s everyone, fuel industry-wide mowers, have continued battery-powered tools to of for In Milwaukee’s their mowers experience. zero-turn is today, and to Makita’s enhanced mower, by And add This walk customers outdoor through from on mower, battery lineup MAT And the optionality. shift FlexVolt have patio, of we same ecosystem battery-powered we online walk living and for walk expanded never powered mower assortment innovative including to an their patio our

surface, new cooking Traeger burner Timberline particularly a provides maintenance needs. side XL, larger We and our your a cooking about enhance are which to excited easier

app or is internal cooking temperatures, a Nexgrill The temperatures hours. Nivo the your consistent controlled new an app experience propane-powered mobile timers, and device. food Our grill via providing for displays first grill

We provider to Good varieties the improved program. new Live overall enhance Each with customers our merchant are and excited about experience. also our garden year,

drought-resistant and offering performance. products disease our expanded have superior We

to vibrant in are hardier weeks beacon longer. to easy our petunias example, and garden customers and lasts allows now less require Adding a and For plants these for healthier patients disease-resistant up way longer. sunlight our X new have

Our Cabo incredible. Live Good looks

and turn to ready of for to spring edibles over are gardener. I the Richard. And every variety that, We everything from of for a shrubs call from with flower type

Richard McPhail

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

Comps our positive were U.S. positive April. comps for March February, During company the this anniversarying XX.X% positive of X.X% in year. and in in total with the the and negative quarter, in negative by a with positive February, comps negative Recall in essentially spring were first March March flat the X.X%, of impacted April. XX.X% and reflects in April quarter, in X.X% that stimulus was X.X% of comps X% delayed

primarily regions. in results decrease Our comps points particular all margin broke impacted of was supply the continued were pressure quarter Mexico from In a but the quarter, from again business. of currency, investments by XX Canada In gross northern by this the strength our and our last XX.X%, above year, posted company some once local approximately Spring driven average. lumber. late geographies, basis across first driven and our in both temperatures chain

We significant transportation customers’ the product as continue position pressures value. to successfully and our maintaining offset advocate cost while for

expense were expense to the quarter, year remained operating reflected pleased store During operating flat planned our the and wage of environment. We to sales as in of which a during investments first last increases XX.X%. performance planned at in first approximately our essentially quarter, with designed percent drive efficiency rollout

X primarily Interest quarter for to ago. margin compared XX.X% operating increased of the first the debt year for $XX levels to quarter was higher than other the to by million Our in due first $XXX first XXXX. quarter XX.X% long-term million and expense

first Our effective XXXX. XXXX fiscal of and XX.X% quarter the tax both in rate was

the Our of compared $X.XX, XXXX. first were X% share increase an quarter to diluted quarter earnings for the first of per

turns area. to of This inventories the and the California a actions X.Xx, store and job home due of the taken of and and footage a to injured the the has serve was the we all count were last reflects to no compared selling of our quarter inventory Thankfully, projects, associates $X.X a lost square first billion, feet. the to reassigned from year. $XX.X fire. was start million team up down our billion in the total for outsized X.Xx have nearby customers the quarter, quarter, in-stocks delayed demand San improve Our and level square done of inventory to fantastic at other XXXX quarter was one the At Jose, improvement end were stores of end Unfortunately, to spring. during been in store continuing XXX impact X,XXX

position it While not healthiest back the is been has is levels, since pre-pandemic pandemic our in-stock the to it began.

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

on mentioned an of calls, to have previous of in annual plan business we sales our X% CapEx As on we continue with approximately investing basis.

maintain environment. depending to or the faster plan move flexibility also slower on to We

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

updated will comment for I XXXX. on fiscal Now our guidance

sales now we surpassed are from guidance performance fiscal Today, heard strong during the we comp saw XXXX. our expectations. Ted, you first we As pleased XXXX. and very quarter, which the for sales are growth approximately with raising X% growth We for of expect

the of of year. half the in comps than half expect stronger first the be year We to second the

the We share diluted approximately XXXX XXXX. percentage fiscal and to for fiscal operating compared earnings mid we XX.X% year, growth in per expect to single-digit expect our be margin

now will ready While And that for feel through to a for in a number faster value. manage delivering shareholder dynamic Christine, are than of we confident environment our be while participation we market call. you to Thank able uncertainties exceptional and today’s growing your remain, questions. we continue

Operator

line you. Please of your proceed Our Michael comes Lasser [Operator Instructions] first question. from with UBS. Thank question the with

Michael Lasser

either interest question. have starting for results signs inflationary seeing morning. were that soften fatigue business? rates pressure, on very pause quarter are you improvement here? Understanding were as down home Good any or that your Thanks And taking give overall single the comp high could that to rising are strong, leading you transactions simply my in business negative a a maybe impact the digits indicator does it the from that

Ted Decker

Thanks, Michael.

lot a that in question. So

As we’ve great comp-to-comp in from said, had year. we a last

XX% highest long in recall, and was comp year our very time. our at you As QX highest sales first quarter the very, last

year, engaged. thought but very spring. start. those is strong how is QX pan we’re to off conservative we that fact, it’s we So were QX, early, much as Pro saw out. consumer The we results we as into strong, a to and very But with understandably very this we posted the delayed went in would In

think mean the that in but incredibly also comments, nature – are these fundamentals all fundamentals the home We short-term I remain improvement very for supportive.

So and than higher when interest take thought. fatigue, you order, is inflation those at inflation rates any in definitely look in if I we

have we’d we X% recall, last year, growth If in you ticket. thought about

lot We are XX% But are in inflation-driven. seeing our that A that is than obviously resilient. much higher with ticket. customers of

inflation And rates, on inflation consumer very big tracking the we’re it’s balance year levels again, shift Richard, repair/remodeler, that home the hanging for customers higher we don’t on rates? these out we’ve touch interest sensitivity cover why And more that the Richard talk we business. rates, transactions, we’re given of but improvement, the a then the norm all. to not initially and the fatigue housing, while level inflation, seeing and would We’d recorded. a in a our do that On that we’re housing, But look shift in intent always activity sure. with highest with lastly, then there. are is and expected. nature seeing can not and not in we about to interest seeing bit again, general, in impacting of look of rates greater and are And little seeing Richard and our services detail. have will of And the still at again, ships fatigue, some seen ticket but not We have at transactions, not a you is unique for PCE, interest ticket we and seeing in PCE and at

Richard McPhail

Sure.

need customers to with well. over homeowners first as sales on mind are who So to XX% homeowner, you to our homeowners. and Virtually DIY our are in are of is, keep our just Pro customers our all start a behalf customer customers of

about home history, talk appreciates it. improvement in price on is home we’ve more home demand the your appreciation smart value, let’s So When improvement driver investment of you it Over primary drives our spend and seen you a and that it. what home view as demand.

home at of the appreciation prices. look over happened at years. what’s seen let’s X over last So We’ve XX%

X increased the In last X years billion have just fact, years. home equity over or last over XX% values $X the by in

a balance they They’ve been the had spend. that Pros all homes higher. means in like tell has important, So never more appreciation, us backlogs. about sizes never the intent say has the our their to have the that same And homeowner their price and sheet projects seen this. and of our been to their do looks And thing have surveys, never customers

talk let’s So about interest rates.

X% XX% are homes not million our Nearly it’s housing are more XXX only in of or units are important units, housing given XX% of mortgages on million mortgage. over about market place. outright. those that our any plus the the staying addressable are that occupied XXX and They’re those rate. customers those those owned Of to think Mexico. XX sold. of for it, in a XX% remember Canada shopping mortgages, call is million fixed who have to means U.S. XX million probably, in X% about year, That I Of

at about low And and So paying what mortgage and stay we’ve instead. rate interesting moving, addressable actually what mortgage what’s more more about tempted their attention – when look when market, majority they you that think their do is rates. remodel they’re vast to heard, home aren’t fixed the in to our we’ve really

locked-in mortgages low a probably benefit an are improvement. to So these

Michael Lasser

it that margin Recognizing do out quite follow-up time, change XX expectation increase every helpful its decrease potentially to decline talked in conservative basis margin question, the a Home advanced years or very be on think and Historically, past? the few of or all point business that, of that. such point if last that conservatism, in decline take we comps has greater want the about would a X% supply a operating the hasn’t been for environment with if through forward X% might to were deleverage would significant factors translate necessarily chain for that, ask to it a And sophistication perhaps same-store in has a other overall as so negative just of XX macro, over deployment of I’ll the as moving an usual as to Depot that to basis sales. abundance wouldn’t business be some have in that much That’s reasonable light technology, been I but hate of the information.

Richard McPhail

So operating model cost. Michael, largest first, our which payroll, operate with activity-based to respect an we is

And naturally as so decreases. that decreases volume

we us operate is environment. importantly, in degree financial financial we think to with and that in More a allows any as flexibility flexibility of P&L, manage our appropriate given

confident we P&L environment may given, So that have manage, to can per environment. share have old we take to and this With we the in room we’re any we’re wisely any manage and respect that. benchmarks beyond

We in the sort would flexibility flex we meet to our have And them. of financial again, circumstances see model. would we

Michael Lasser

helpful. good luck. much Thank and That’s so you

Richard McPhail

you. Thank

Operator

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

Simeon Gutman

everyone. is supply we through versus mentioned. talk Curious some pipeline that backlog little the question more detail you’re first the Hey, continues My constrained, projects and or the pent-up around was could come if seeing just there’s because build. intent what demand was to a backlog if

Richard McPhail

These the think the Homebuilders. and are survey, can survey says, Association optimistic just – goes if And me, these are the back here. I bear of just are results. being that of is you sort start of some XX kind are medium to This mark XXXX. you public published by or National with Well, you with survey pessimistic, conditions a

Today, XX. an stands up the never above XX. for So at optimism years that XXXX, got index it a XX to

highs. the stands XX. is never XX past is of the Both got XX. it backlog are sentiment Today, that sentiment of that number remodeler. respect an surveyed, also With those a above the years all-time that at to numbers over So

Simeon Gutman

enough. follow-up. maybe And a Fair

in holds turn It home macro seems business up the well. that’s prices away You if Canada and business most be bit, to about that being if mentioned same trend? starting breaking and the for a lever. home important the Can are of exists talk holding dynamic, you relationship like to sort that conditions appreciation the customer the is or looks the from why the price

Ted Decker

stats I’m our Richard they not in as up the yes, the last to business Well, I much But just Simeon, curbside terrific for Ontario, that U.S. mean, Canadian our through Canadian more pickup in went year. we lockdowns our were had closed stores had speed, particular, business. the is on shape. remember, in significant Canadian first quarter, and only.

the very, don’t have strong. as I So with relationship home much the detail is very business prices. on

Richard McPhail

sort let’s Well something. but – just on of reflect

So last that. was company, XX% QX, as a higher Canada reported a than we comp.

And So our Canada. tougher this we higher in had in Canada than was a company quarter, average. comp comp

Simeon Gutman

Thanks.

Operator

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

Michael Baker

should have simply, hurt can contribute One, to what much way expect there’s How just question. that any we impact quantify, Two. to And you I’ll into Okay. that April? weather then a if May? late quantify, spring? of follow-up the And the

Ted Decker

So for the about quarter, impact comp in QX. negative the X%, Michael, we it was sales to think

Michael Baker

in that of that Is most say? to presumably, And April. fair occurs

Ted Decker

spring Yes. month. Because it’s our anywhere February, and lowest-volume it’s not

April-driven. So yes, that’s

markets, impact particularly south to northern toward quarter, the as As Richard and was well the in April started as of a more notes, for in weaker spring a as March X%. move said cold his weather and in stimulus then you

Michael Baker

How the We’ve I that price this such although getting home X at price to X now. question. get we’ve decline record people home And that wanted concerned are also Northeast, interest it’s raising that Yes. in better eventually important. cold home most felt Fed existing think all looked that a as the months on in the row, appreciation many has that here eventually rates. follow-up appreciation seeing I particularly appreciation for sales? We’ve is down you or all years, up keeps down, home that higher seen and the price to weather slow we’re that rates slow

of concern rest you the so how big the And think that of year? is about a as

Richard McPhail

U.S. now steadily unique a position last of in in built recent we’re where think for housing a history I years. in and the housing the chronic have Well, XX units we shortage consistently

assume a X Some little economists that than less is that, shortage million.

You X hear as million. as numbers high

estimates could a take likely at X not at looking will years, get equilibrium. if of actually X X what point other least years, of you before built, If we or be back we’re to

So that, be of for home are know believe we be that to main support going is and and a price chronic to we time. quite undersupply for demand the condition that appreciation, going supply drivers some

Michael Baker

Okay. on Appreciate Yes, thanks. that. comment you

Richard McPhail

Thanks.

Operator

next line of with comes Chris from question. question JPMorgan. Our Please your with proceed the Horvers

Chris Horvers

Thanks. Good morning.

seasonality despite So in bathtub you shifting mentioned above-average the think holds. as you guide in quarter the the about you year, sort second assume of that the the on lens that first effect of this a It the late doesn’t quarter. saw looks like spring seasonality

You’re actually forward. sort of degrading the seasonality going

– you is effect So could quarter? And half? back the second why normal reason why I wouldn’t there hold guess my bathtub into first through any full – the two questions: then a are you seasonality the think expecting

Ted Decker

morning, at bathtub a early say necessary with time to we because call the the as think year. commented into with certainly our raised And quarter posting we generally Good an we spring weather, the beat the haven’t would expectations. say and results effect earlier, degrade. would don’t for very posted determination. the guidance expectation too spring to after cold extent, Chris, such to wet we – and I exceeded of raise it’s certainly the by yes, this going X% felt I we to make our But that first poor a QX even the

spring ahead early still just Home of of at back or the view a QX, two spring a largest and back been three in worst all X% taken mean Depot. so into is of I least even We get our haven’t we generally us. of QX. tracking is sales We But at are to the early, know specific QX. weeks it our since going to flow I’ve

want don’t get we but skis, our bathtub we’re normal too to the certainly far anticipating So over not of effect. that degradation

Chris Horvers

the of year? out of as the expecting And increases Like over it. the have Thank vendors coming. price ticket inflation? more is as year? number we just lap you Can next talk turn you. much increase a are progresses? indicated out expect we more How then units my sort question to play do – the positive are was you you Got And inflation how to flatten follow-up through over price of as about year

Ted Decker

Right.

So earlier, but to of XX-odd will is then impacting extent had have was majority we bit little as we the detail. would Yes, the that start was said, we extent I’ll Xx. as not and transactions, give more thought. expected mentioned is to the about than ticket a I It The vast percent higher Jeff inflation-driven. inflation that

So good. that’s all

taken there have into more in finished costs cycle is May. our table. year, and a just ocean effect contract That’s goes up contracts. that we’ve the Transportation, global We on this

So in Those for from on XX those contract XXXX. higher the are certainly a basis are months. next place

up would our inflation in that it the but doesn’t So think we XX%ish go of hold this, steady are from product necessarily low double-digit, at through year. the call where it, we balance categories

we a in that just a in bit, down transactions In the we’re year-over-year. just a in prices bit we’re number QX, When then business was tremendous we’ll results in lumber on have going lumber. on and on in about we transactions in given been year in in spring QX. average time, those the down lumber QX terms a transaction the But good seesaw that’s get you and high negative it’s better last think of – quite we’re of that impact garden And transactions, transactions, and spring. and feel saw now XX% to was of of very to amount of our

QX, So in in we in up expect particular, activity. to lumber pick

through of about the this, year the provide In and think we let some color. more managing I’ll of how Jeff terms balance

Jeff Kinnaird

Yes. an through Ted’s managing we – we to we environment, we Thank continuation are Xx expected are see you, what comments the Look, Ted. in inflationary that. quarter. of about first And some

spring complexities working supplier the we’re to with the the this advocate that seeing. And value we partnership through suppliers, it’s with in are across are on We’ve business, the across you our customers’ we we’re had inflation and our environment. categories, What the are it still doing many our of look managing at ongoing is We understand relationships long-standing exceptional. a if for of partners inflationary the is entire value business. offering

project with and as across the inclusive seeing some of what have to environment. And that value, manage have the capabilities the tools you advocate strategy the the portfolio and demand, project-related pleased are the at for customers organization. look we broader our we’re If business, we again, of inflationary manage we experienced in the inflation

pleased business very the inflationary with across to the this So, environment. manage partnership

Chris Horvers

you. Thank

Operator

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

Scot Ciccarelli

Good morning everyone.

certain new markets you Pros, guys your TAM. MRO, the be where places – some One markets having of So, impact Depot presence as with the and a moving on some effectively maybe strategy, are certainly expanding new are chain etcetera, Is way verticals supply potentially large into of your that or any in you weren’t results, these to Home size expanding just there couple it’s whether it years competitive your ago?

Richard McPhail

about terms in to But when in short-term. about building here out that’s thinking ecosystem go very contribution not you we to results, about the It’s and we excited are delivery. the It’s incredible is what none fulfillment building the the an after traction necessarily able occasions we to that we repair speaking, Generally experience second think haven’t planned are seen and past. ability just start remodeler are about our Pro. of that purchase an to been and capability online for we over

And it the maybe enter you into with relationship were last comp really you will in the we But any over And that quite see a little and Hector, a X to store to years, second able talk we second We are to take coming will up add none. with weeks. the model the we for of some Pros think share with to our Hector, that again, going We pleased far a years. with by every a $XX results, comp to turn pleased element Pro. think to billion over grew I we respect in were detail. have that are quarter about to the our strong second ability I is so environment. you our But two bit market

Hector Padilla

the building of occasions purchase those Pro planned out of other Scot, attract one our capabilities Richard stores. of lot pull Yes. planned Every the and to a us Pro of we help purchase. more are

all So, remove about in the every when to capabilities Pros the from it from and enabling Richard channels is friction talks across our transactions ecosystem, experiences about instance.

encouraged that super early is we and are seeing We And are and the signs we involved from the encouraged the supply engaged. making. super chain on of commercialization the investments are team that

Scot Ciccarelli

guys. Thanks Okay.

Ted Decker

couldn’t MRO Pro Depot the add in with Interline legacy TAM, be combination with Supply. I Scot, of HD we business on would happier the Home And our piece the

two not did combine had one Home only that number but that business in verticals didn’t the additional we participate So, in. Supply Depot our industry, players and the

forces, or sales MRO with we way about sit market one we are capabilities of So, building, the are combining those the than share. and combining sales force two our less that $XXX getting customers to we to in on oriented essentially TAM The well businesses, still think XX% doubled legacy that billion, customer we other.

able We What are MRO now then is going in supply travel come And as are occupancy hospitality integrate robust. business particular, has for do is up. in new back. multifamily are the just to chains. incredibly to booming. the rates verticals, beginning housing hospitality, That In we

the are in are our in love job position doing And team we verticals So, and great O’Kelly business. we in. that just Shane MRO a of his

Richard McPhail

the the actually XXX those I multifamily XX occupy about think, million in just million households about to TAM of households we point, dwellings. the U.S., talk

The and that of And up us Home Depot. acquisition so that Supply TAM a unique opened for is attribute HD

Scot Ciccarelli

lot a guys. Thanks Excellent.

Operator

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

Karen Short

level. more for assuming context inflation I shake year. bit gross then if in to you color ticket little more and context full guess I then of margin and And the puts one XQ Wondering out XQ the and just the at Hi. a for very on other have bit also And remains give current question. with you much. could on a respect think traffic how takes will SG&A, to Thanks

Richard McPhail

Sure.

year, to back we assume That we those reflects the the expect to if ticket all expense we guidance. leverage in generate persists are incremental transaction, gross on investments margin operating the If that transactions the margin, range believe XX% guidance to Those we see Supply respect half as have current we to raised that comps planned net mix-neutral, for a persist could up, by our year, are One taken will expense to gross operating Chain. at for we in for and year, pressure inflation expect have ticket out slight for positive. that of the sales. have So, also have With XX% making to With for and leverage, the we year, respect while. we sales you comp operating be year. just the offset a the expected in levels, sort from margin three of our been stay

Karen Short

follow-up basis on guess there to mean I X-year X-year to multiyear point investors at start on So, efficiency focused extent. on traffic X-year, appreciate maybe the concern I – are with the And a traffic negative you? trends. labor question what But a is be, I would your that, my X-year, some traffic component does

Ted Decker

unique year dynamic. for Well, sure ticket this transaction is definitely and in our a

will and transaction. mix less transaction. more As look usually that And ticket and we growth an do or we for I ticket plan equal stated from between a of come earlier, balance

a the X-year – billion your things that off comping point commented to XX% plan are huge on, comp, of that, we the longest stacks, X-year are Richard positive. sales to Home growth on. and Depot. on two And fundamental we time the And a at we in that is Karen, With to comp didn’t going in on, at highest $XX one comp QX, the comp

isn’t would for knew the into level That’s year, inflation a the offset level engaged. talked thought. why again, with we hit staying is and backlog the we transactions. the inflation, helping consumers space, more sure, and balance year But about much we the engagement I have The the customer’s to have Now, in potential really the unique and our – of of knew is this going we activity norm XX%-odd. more the the resilient that impact intents, in than

$XX we to prefer. balance the as growth of these lap Now billion inflation, comps we lap that we from through back certainly would through get would certainly and the hopefully the extraordinary

Karen Short

Okay. That’s helpful. Thank you.

Operator

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

Zack Fadem

trends? morning. your offset could the that Ted, inflationary QX talk good about you of environment was other macro expectations, about business? or second And the your beat your pockets they if you you as that year, half more what variable from here? the versus Hey or up could then of following DIY this to do comment think a extent Pro-driven on Pro extent softens And stable incorporate DIY

Ted Decker

supportive all the a a in Sure. but we right. vast home. consumer-driven, ultimately the I consumer buying home for the is in majority or home, by than is even saying for the – business, trades other whether the servicing of start mean on spaces our And would Pro it’s is projects our consumer’s buying certainly a home. traffic activity themselves of I buying our fundamentally Pro, product Pro have

is Pro stronger yes, though, we that’s said, from. mean being the beat where that with So, came than thought. would have I

business, have that tool new large then the penetrations heard going consumer-driven. new power of, of is spring more consumer. stimulus consumer. check continue as-expected outlined, strong. the and Pro about so an we momentum customer you We And plenty incredibly last anecdotes or consumers building. we Hector lawnmower. I is garden, buy in all When Pro really as March think in offset And business with terms is we a just a certainly of are so don’t of gain ecosystem to garden their optimistic Pro consumer in getting Our a have mean of we are truly as our that impacting to

unique the was what was that So, consumer. about

to trend in and higher delivered planned with get purchase. an a happening we customers, to from get Pro as is store, up unplanned call our the customer stronger comp, the to comps we when time, comps our the Richard build our we with comps of talked what’s ecosystem, progression but the what In in which a that strong at continue sequentially purchase love still going we a higher with the about terms Pro intent Pro in that look about, of we not Hector over just what confidence is but talked we and

do sequence project that when think program, with buying of lowest getting cash forces, still our going way delivered. staging Pros who versus unplanned purchase all sales comp So, our cash-and-carry think out Pro not the a unplanned project one planned engagement in of a are Also, positive, the to who The the you know while through highest loyalty the that our again, the positive, coming our our with while is comps higher and is program, higher purchase engagement is far, to basis loyalty the just Pro in carry who a gets purchasing loyalty that is contact, and and that who and about delivered. we of models by higher who an with being outside to store and within sales the with the is an have and an by those, managed comp on us is interconnected engagement Pro. in highest

of strength we are Pros love are that with starting just keep ecosystem the building, these Pro trends to powering see, the business. think yes, And get going this we to that as we engagement more the are So, engaged those we sequential us. comps

Zack Fadem

And the inventory helpful. growth your past terms how outpacing here with margin promo wide Richard, a pretty the about do that about margin, position of That’s you think having the on line? should growth then gross the slower sales quarters you of think how to higher And inventory? too enough your four called much potential for for with by Thanks in we Ted. inventory or out, impact start spring

Richard McPhail

of in-stock we we the – are in are we all, steps, we in in our have years. And not took we were earlier improving call, to we healthiest first last invest we So, the are been had Ted – quite where pre-pandemic, few said the are while position. as

in-stock. also up consider that being the is of sort other increase inventory and of impact about the service we half landed you think you makes if really this the business, impact late that pull-forward in half in making inflation. starts of a because with And inventory, sure inventory, about That So, the of spring. simply early of customer

are will the that think as So, kicks this And through seasonality. year, about we we the spring see in, inventory reflect hard. obviously, we – we work as to begin

hard vendor make partners sure advantaged Our merchants have and and we chain work our position. supply our team that an to

Ted Decker

Yes.

Just we comment shift an driven May, activity, by appliance on mid-April. a Easter into did event following the promotional the

we performance the as As our point, with the May. on I event appliance at we business – in this promotions of thrilled don’t focus all. We finish commented, at

in our experience driving terms customers. providing is progression, for value innovation day, That we years of the of has and are single driving every been a Our for day are everyday focus great great we right multiple providing value thrilled with being our customers. every and priced

Zack Fadem

Thanks for the time.

Operator

with Our next of your proceed question Please Citi. with Zaccone comes Steven from the question. line

Steven Zaccone

Great. ongoing seeing Good spending towards since strong are Maybe you morning consumer detail projects. taking Clearly, the demand here. a my everyone. question. for been follow-up in Thanks about home from it’s discussed

because to fact home spending it’s the home importance your at in point the that spending grapple the debate? think I that post-pandemic. some trying are think past? take on that What’s has Do been makes more you macro, recession-resistant home may also increased slow but than investors of improvement the with

Richard McPhail

large and do we the never have projects to intent listen Well, we right surveys those respect customers, consumer where also today, survey, the of also of And to higher small, strong. to have to at our is look really intent now. medium projects. is Homeowner do than has with been our same customer just health one to Pro which there to sizes

Steven Zaccone

investment, helpful. the And been Would TAM? XX M&A the for Supply choppier? Very you potential buyback How if since I to balance additional macro and the M&A? HD you about specific do How next reach capital capital get guess open could just criteria? priorities the higher allocation share Then were Got few M&A, environment you about think in acquisition. best to the talk it. a you your to years to months shifting, did it’s be to bit

Richard McPhail

respect view. over long-term so Well, respect to the and the flow strong generated decade-plus. we take shareholders business, free and investment capital cash significant to allocation, a last With to CapEx returned have in capital with we

We are always going to invest ahead of the customer.

home always build sure looking improvement. make we best to We ahead customer the experience in years that are

take into consideration, in And stance. event. always we we so do that circumstances would have to But and likely that be any our

Ted Decker

group, M&A, smaller on an size, we companies on really of strategic business looking are in add for have size, maintained they marketplace development the and that active can regardless And always capabilities. the generally always

space. have we active you an accelerate supply are our various some shops and acquisition us review that acquisition and market development an spaces that into acquired. So, market we ongoing talk have space, help heard looking can in helped data is larger at capabilities about that the of us Certainly, that a

Steven Zaccone

Great. Thank much. you very

Isabel Janci

more time Christine, question. have we for one

Operator

you. Thank

Haskett. with Our Chuck Grom your question Please from question. come will proceed Gordon final with

Chuck Grom

and Thanks morning. congrats. letting Good Hey. and for me results in great

or On is very are different if Walmart front, and that than signs in unit curious know there demand any destruction the been any have I of seeing called you theirs. morning, the you taking basket? obviously inflation trade-down retails out higher, your basket this as is

Just wondering if you are seeing on that anything front?

Ted Decker

Chuck, good morning.

environment, innovation. seeing that earlier, we to no commented We with as are the we seeing are commented the Ted – for trade-up and trade-down I we in innovation customers. are offering our thrilled are

and we project for their the of Pro commented example demand, great both the seeing just on consumer. one business, And adopt are lot electrified and examples homes, business, We to project there. many we trade-up. of as earlier activity talked improve then the our are seeing I on the That’s for about the lawnmower the new a around opportunity to innovations. business consumers looking of

Chuck Grom

the expectation geo compares your consistent. Okay. second you look Richard, I front are in be for better stack, That’s half? comps then to on at they than pretty great can to If a flesh hear. half And the for the one X-year out

Just little the bit year. there to wondering expectation the in trend the a if guess I slow you or months six are being of the conservative last for

Richard McPhail

to the I but It’s And expect of year. would do say we positive expect year. than is do expect we half, be the second the the higher early. comps the be first quarter highest-comp QX to What half through

Chuck Grom

back the half. In

you. Thank Great. Okay.

Operator

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

Isabel Janci

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

Operator

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

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

The Home Depot, Inc. (HD) 17 May 222022 Q1 Earnings call transcript