The Home Depot, Inc. (HD) 16 May 232023 Q1 Earnings call transcript

Company Profile

Participants

Isabel Janci	Investor Relations
Ted Decker	Chair, President and Chief Executive Officer
Billy Bastek	Executive Vice President, Merchandising
Ann-Marie Campbell	Executive Vice President, U.S. Stores and International Operations
Richard McPhail	Executive Vice President and Chief Financial Officer
Hector Padilla	Executive Vice President, Outside Sales & Service
Chris Horvers	JPMorgan
Steven Zaccone	Citi
Zach Fadem	Wells Fargo
Michael Lasser	UBS
Brian Nagel	Oppenheimer
Scot Ciccarelli	Truist
Brad Thomas	KeyBanc
Simeon Gutman	Morgan Stanley
Seth Sigman	Barclays
Steven Forbes	Guggenheim

Call transcript

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Operator

Greetings and welcome to the Home Depot First Quarter 2023 Earnings Conference 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

of Relations today Decker, Executive get call during and Investor Chair, us Vice President on Financial and Richard to Ted [Operator call our President Executive President XXX-XXX-XXXX. Campbell, call, Bastek, the at our Joining McPhail, President Executive International and unable are CEO; question Instructions] Merchandising; please If Ann-Marie to Stores department are Vice your U.S. and of Chief Operations; Vice Officer. Billy we

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

Now, over let to turn call me the Ted.

Ted Decker

and Isabel morning you, good Thank everyone.

of quarter in quarter $X.XX grew demand quarter moderate Sales would share reflect. U.S. Over stores billion, to XX%. same the which in first we in sales unprecedented X.X%. X.X% X.X% $XX.X comps the quarter our last year. compared the period year the results Comp expect last period negative past first per the fiscal and X year. billion our first first were Diluted or $XX earnings same our of last business declined down the from we years, for $X.XX had from After this were growth, XXXX, the period

weather our in quarter disproportionately events Our Western division were sales by results. extreme Particularly weather. below as our deflation impacted and our expectations, unfavorable driven the in primarily for lumber California

key you such As live was and weather in goods spring-related categories Billy, saw strength categories. from hear as garden-related will where favorable, we other

beyond what look quarter in fourth results we when to saw was the compared we deflation, ago. underlying a performance As few our reported more observed and pressure mixed. business quarter we months the weather across We lumber

was big comps hardware categories in in there had While relative project-related in building continue like pressure ticket plumbing strength and categories. to quarter with discretionary departments number materials, see of negative the a and many we

the outperformed the but both quarter, were DIY Pro customers in negative.

backlogs than relative still While they to internal a are elevated year norms, Pro are and healthy that and external historical suggest lower surveys they were ago.

Reflecting but share this to and data we Though recent changing around sales guiding our the in underlying we take demand the remainder points to and margin cautious Additionally, are the models comp are from XX% sales projects earnings for are guidance, backlogs X%. X% X% expect between to scale now between XX%. relative will this deflation underperformance the a year. decline continued to our the believe types outlook a you updated and XX.X% operating we details warrants Richard the quarter quarter in to moment, external per expectations, lumber large a decline now year, and be only through these comp we between of rate of smaller more one that suggest and into projects. uncertainty

agile value. dynamics unique to remain continue navigate an customer being We to We and advocate environment. evolving always a while respond for

made investments in the we driving we intended have feel confident wage that results. the are addition, In

applicants greater we and of Ann enhancements qualified number are attracting down. discuss, most As is in wage will short the recent attrition since effect, our a timeframe took

business. will productivity and as efficiency we on focus to expect, and the continue Lastly you across driving would

long-term to is sharing our environment near-term on grow many at to market. medium improvement Analyst and forward Conference for we share look outlook in our ahead meet perspective on remain the XX. the fragmented up large June ability coming the We this Investor and While and home uncertain, on our to we opportunities bullish when

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

Our met teams delivering service supply teams, job the did our value an merchants, outstanding store and and supplier partners to throughout customers chain quarter.

only I’d EVP Depot of by the like role, recently brings dedication work. having introduce of tremendous class him responsibility for and a Not to fantastic them entire its experience culture. throughout leader, increasing of Bastek, close is the Merchandising. pleasure world Billy veteran hard career steward is roles like of to Billy merchandising a my who welcome he named our their the today. thanking a to various call And the Home merchant with also is organization. to and Billy is to it’s in us spent I’d XX-year also

Billy Bastek

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

from were the heard quarter, our below during As weather. and our you lumber sales by driven primarily Ted, expectations, unfavorable first deflation

trend on some continuation discretionary purchases. type we quarter ticket the with big We fourth observed consumers and of the in saw also a pulling back

weather where was smaller However, ticket we projects. favorable, outdoor in strength saw

materials, XX building departments which Turning costs, to X plumbing comp the performance are millwork. first our posted our department for hardware, quarter, and merchandising of positive

comp transactions first our comp quarter, decreased ticket X.X% X%. the and During increased average

by core impacted driven ticket categories products. as approximately commodity growth lumber. average average innovative our comp from by Deflation and inflation deflation ticket primarily well by as across several product for during in first impacted points negatively demand core was XXX basis Excluding new quarter commodities the primarily categories the

During prices decline ago. saw relative in significant the year we lumber a a to first quarter,

in of on board was thousand first feet is to example, $X,XXX average, $XXX a lumber approximately the per compared of which framing XX%. an XXXX, quarter approximately As decrease

leveraging of to Turning compared quarter year. platforms digital first our to total Sales approximately decreased company sales. the online last X.X%

were over discretionary We last pipe results negatively in cohorts. ticket After customer of unprecedented of fittings. and quarter, reflects grills demand a that online big-ticket down couple through years pull impact both in saw some to stores. these X.X% were that of like Pro to categories us disproportionate continue outperformed forward. deflation of $X,XXX and Pro deferral and quarter our Big during as across year. start transactions patio, portable For online spring single DIY big appliances customers see ticket transact lumber result our XX% orders comp first gypsum compared Pro-heavy those fulfilled strength item to over a the in a but the quarter, like likely home both negative. start the and power, customers wet a impacted first market, we experienced improvement were of softness chose or and to with those the categories purchases – wet of spring the

value. merchandising broad continuing are of when our stock for provide across And organization factors market, parts assortment of kitchen to bath. home while soften including customers This best-in-class focus demand our a are advocate seen it. products available we’ve continue larger and improvement addition, to This will the they customers’ demand that means there may softer smaller from on our flooring, away to need for other business, impacting moving projects. being reflect in In consumers the and

simplify excited or Leviton, the exterior Decora that whether press to Dynasty and why We into to money. will the of fittings Viega products so our paint, the a innovation also Edge, Copper That’s about continue it’s project, launch bringing customers the I’m lean to few. Bar saving just we’re time market, name

with brands of these upcoming vendor functionality our value the It’s you conference, best-in-class merchant solve most relationships, or organization our points, person. to At at us to allows some that best about pain the performance favorite the our in forward best product offer innovation our enhanced look the sharing with to power of market. customers the in increase investor I more with products my coupled and innovations

turn let’s to spring. Now attention our

we about we’ve season, While with of start or ready a customers needs. have outdoor to outdoor lineup remain them excited and be slower to to for living help continue our had their projects the we products the

As building products RYOBI, ecosystem on tools assortment great lineup Makita power live the have and by goods our innovative an and and offers outdoor DEWALT look times, of something battery we of a say you’ve platforms, heard everyone for same our us of Milwaukee, powered many incredible.

spring from of Gardener. a herbs, for for flowers, with shrubs every to everything type ready vegetables of variety We’re

like call With Ann. to turn I’d over that, to the

Ann-Marie Campbell

in the easier we Home best cultivating good Thanks, We provide to quarter, everyone. retail. the associate we Depot. to on at have and Billy, it the that the succeed investments I believe order experience Last to about best morning, make associates for focus in customer must experience, spoke made

of would thus hourly Today, associates. also want be key far. for compensation to you on we’ve that billion frontline improvement we announced investing annualized that in $X update We I seen areas approximately

even improved tenure March, that have the the of attrition some improvement candidates pools And Our in tier ability pools stores. to across and year-over-year cohorts our attract of we in top these has associated on time. seen all higher rates in higher-volume saw greatest our we qualified in

result, driving workforce both that our yielding less confidence foundation These and set It results customer with to ability across are benefits important a we respect service safety consistency seeing achieve initiatives and the also talent for and to gives our accelerate improvements us investment. incidents are in and wage consistent customer well an this other staffing our in are what is improvements service As as positive key metrics The to with of and customer as service form key productivity. the we out of all productivity. regions. operations exactly to

We drive processes and orders picking speed for efficiency order have when to to changes customers. implemented staging fulfillment our and

allocated overall have fulfillment we hours volume. order on Historically, based

transitioned being picked. have products types we on accurately more the Now allocating to hours based of

less versus Just stage pick set. a us for and example, patio it takes to [indiscernible] time

batches at can also one orders grouping in We time. multiple associates are so pick that orders fulfillment

We’ve direct more simplification. machine to availability help on-shelf or prioritize key also learning continue is logic, low Powered exist. talked focus associates value the out effectively. the to Sidekick leveraging to highest associates where task bays We application about by on Sidekick our

was high-velocity has of business. improvement service key most to an approximately Sidekick SKUs or last self have This we seen in in rolled XXX the improvement availability are out our the seen in points of all have our on-shelf SKUs, products scores. translated increase Since for our we availability customer but year, drivers our basis that

just efficient our a activity and improving These the initiatives can that our app to us few impacts projects and task the examples drive started. more customers, in of shareholders. associates many our getting are just our significant experience be customer different this is Sidekick of process, types for While with helping in is

take forward be care our and this possible I of on to excited weeks. sharing without store want of that None look am in do dealing I so focus every to all they customer and customers. what and few to to a teams associates, all for our would thank a amazing the about experience associate are more our lot both them day

that, With over let turn me Richard. to call the

Richard McPhail

Thank year. X.X% total good first everyone. morning, $XX.X decrease of the you, from and billion billion Ann, approximately last In a quarter, sales or $X.X were

During first the March of X.X% total in with comps February, were were comps negative the and with X.X% and negative negative April. our for negative of X.X% X.X% quarter, in in negative in negative March in U.S. X.X% X.X% company February, X.X% X.X% negative Comps April. the comps in quarter negative in

missed own sales and the comp driven months factors. particularly quarter our April, first notable of X March primarily in expectations, by Our

negative versus First, quarter basis XXX of lumber drove comp first a impact the approximately deflation of XXXX. points

from division our points was the further XX.X% shrink. year, results. quarter, primarily the margin quarter unfavorable by pressure in a last In our particularly first increased weather, Western gross first decrease X from of our Second, basis driven impacted

We and cost the product successfully customer’s position for pressures while supply as maintaining offset our value. chain continue to advocate

sales quarter During first of compared percent the operating as approximately expense XX.X% to of increased a basis quarter, to the points XXXX. XX first

the our Our legal increases first well quarter a operating during fourth benefit expense quarter during performance the a announced call XXXX as reflects onetime as planned from compensation settlement.

balances the first other ago. million first debt in on floating than first compared quarter of interest well quarter million higher XX.X% $XXX primarily year as rate XXXX. to for XX.X% due for quarter margin expense a and increased Interest was operating $XX as debt our to the to Our the by

up the in quarter XX.X% In rate effective fiscal of the first was quarter, from XX.X%, our tax XXXX. first

first Our first the quarter the diluted to earnings quarter per X.X% share $X.XX, of a or decrease XXXX. for of compared

footage compared X,XXX. first stores, At quarter, our and first XXXX merchandise X.Xx the billion, end the were the approximately X to the quarter, we of feet. year. was selling total quarter turns down count opened million During inventory XXX were from square flat new $XX.X essentially inventories X.Xx square store last Retail bringing of to

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

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

I Now our guidance on will fiscal XXXX. for comment

you for recall, fiscal and quarter, last sales As may provided guidance flat XXXX. we comp

our performance did impact from for quarter impacts the not we lumber guidance the deflation, As potential which our negatively we mentioned include noted last year. and quarter, could

comps by XXX basis lumber the quarter. points first in approximately a As impacted result, negatively

relative sales uncertainty expectations quarter demand of a to we patterns, between to and demand sales potential and the Given to further X%. consumer of from expect our regarding fiscal now reflect XXXX of lumber guidance range negative first softening are sales continued outcomes. decline We comp our weather, and and the impact updating X%

As sales for XX.X% and outlook, the are year. a of between targeting our in an margin result operating now XX.X% we change the

XX.X%. Our effective tax targeted at is rate approximately

in billion, We to we and compared XXXX. X% of anticipating decline are a share between and approximately expect earnings interest $X.X fiscal per XX% expense diluted

in impacts of in Setting actions mentioned, monetary the customer in we positioned aside, believe the enabled assortment transitional our customers is market, a levels the to monetary moderation broad In view, in short-term economy as our our healthy in-stock economy. be long-term As of the strong and whole. improvement year we and in make we The markets of demand. operating investments underlying a fundamentals associates. our meet overall policy consumer retail one it well policy business the improvement are of know to of Ted consumer to home we home dampen the to are have attractive improvement made a and driven that believe period the XXXX a model. that the of home We most knowledgeable expected with needs products, we we’ve medium in agility by

will leverage to our to our market As position position, to prudently and look we we shareholder forward, our invest competitive scale and strengthen outperform value. continue deliver low-cost

for questions. today’s now Thank for And in participation you your call. Christine, are we ready

Operator

with with from proceed [Operator of you. Chris Instructions] the Our comes first Thank line Please question Horvers JPMorgan. your question.

Chris Horvers

everybody. morning, Good Thanks.

in ticket two have the Average quarter. I on So side. was first flat questions the ticket

I high you of think inflation last had same-SKU year, commodity ex the year. single digits all

of deceleration last just SKU much relative how same a things the trade disinflation year-over-year was ticket XQ and a size project simply down? year versus like on So to basis

Ted Decker

morning. Hi, Chris, good

are in SKU seeing We items. inflation still same

being we lumber So gave we putting – aside down that XX%. example commodity of the

unit We’re ticket inflation average retail. still experiencing our and in our

prices live And are So in the inflation non-commodity the last non-index still year. moderate or from in still cost XXXX. there this lapping price is year then

So present ticket. in still average the inflation is

Chris Horvers

headwind in thinking about guidance? are and how So the year? back the incorporate how as quarter to but in that that, then should you And versus the much sort over related XX% of is what SKU. of look you of ahead, becomes you And maybe of third levels, I’m transactions quarter, the guessing to first tickets still are that ‘XX. ‘XX same up a first

and size risk trying also context the terms disinflation to put of and trade just project then So around ticket into in down?

Ted Decker

that been retail look a broadly something in something expecting our in Right. deflate. There is but Well, average we lot are it’s ticket inflation that our at price certainly to we clearly carefully. in cumulative has of not unit

of products that years been on those we or increased ticket Now price levels up and the over innovation. commodity prices a price in and past basis. a embedded our established in weekly weekly, have But number and will X prices down essentially those is higher

paint just So and it’s we’ve in you when cost better paints a is department the innovation there of it’s and ticket, of price, better think points. equipment, price of trading done product. with higher outdoor lot not When what usually with up you is to and battery-powered think innovation, that better power

period deflating see work moderation. So we don’t this we as through of broadly those

Chris Horvers

in cause you become project – ticket become you’re it? the over negative that – the just of – sort does size, that on thinking at how Is to guess years? terms if trend that of look you do I think about will

Ted Decker

now, of over years, of two seeing is, say wouldn’t I the as the certainly, factors are we on we each right and said. transaction biggest ticket

while our set discretionary to have and an are appliance. be in We’ve was projects or grill, specific examples chunks. in is size like project backlog newer into a on We bit time. project tend seeing still projects those being a discretionary the deferred elevated. patio quarter one-off that that What projects that items, it strong items, for And be are we the smaller. could those. being is been seeing the a observations pressure pressure some Pro broken could and best Those of this it getting things still be are The are is up

do working So And an an in overall impacts – start chunks. way per rather clearly in smaller entire room that basement, items it basket or activity. than you whether entire at the

Chris Horvers

Got much. it. you Thank very

Operator

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

Steven Zaccone

fact What for high of taking versus you’re should what the Great. the guidance quarter second comment seeing bit just Good year in maybe been in U.S. back kind range? about my just so end And volatile you versus of year? of get how half low that, can of full the the we end your think the context second quarter to morning. then could a the the I hoping that date, to on across weather you given question. the has was Thanks

Richard McPhail

you. Sure. Well, Thanks, thank Steven.

provided. are X out quarterly consistent guidance, but are we guidance the So weeks of provided. the – the with the guidance May We first weeks break the X first we’ve with don’t in-line X

over to with demand next going learn weeks We’re some largest respect weeks a of selling ahead to still we of underlying have us. lot few as the our

guide about of a think our from first, range. the let’s what implies perhaps year, building you If our blocks shape talk about of the

QX talk we to really adding QX performance, on the basis also negative points in the little XXX through there we share sort we rest impacting a adding was that based which current then be QX. So holding We the X, then at X of QX PCE, that year. of year. in X, will our the lumber pressure of a the of shifted expected reflects accelerated about how lumber that quarter than built the And of first negative scenario and flowing comp the rate the X more pressure negative guidance, could for price. got see at the on lumber shape that rate think negative further The in will the

are PCE end negative X PCE of levels underlying those shift that The X negative takes in simply assumptions of share and our that the by XXXX So share of is. year. to fiscal back revert we the assumption, share assumes the PCE case the

would imply about we basis. vast range, that end the exists X in for talk case. on half. pressure of we the in half the shape a X% be expect lumber The the the year-over-year than negative high of majority to So would better normalization the first lumber When due really half of half, that year negative the first second the year-over-year would second that

the first versus our X of would due negative half. normalizes that the outperform second assumption in we would improves PCE. acceleration of the our again, first lower that second the of case, half continued as share to half the expect in half, range, end In So

Steven Zaccone

it of and for that. think being an down. the as how moving month. you that a a period trend to multiyear And there the comment on have be another Day I could versus the all XXXX have at improvement on of for you’ll for pieces, about do But then Analyst is being helpful. Thanks a about on – details consumer. trough I potentially a lot would a know all follow-up in And question year comment the and home potential maybe Great. demand you the In this if step and is you’ll is context this transitional a wanted

Ted Decker

just don’t and Why then on Yes. the and up I take a consumer improvement. home bit health their in their it engagement

of still market overall, best I consumer continued If you we mean, look at you look And as sets in are when they any at evidenced the increases consumption. in customer, strong have relatively personal customer our sector. then the by one

you and Our than is overall values since stronger the home and jobs, they and by collectively, think have good consumer tend those wages have trillion increased increasing about homes customer $XX to their XXXX. own

in we XX% disproportionately $XX past comp. cumulative few So these as said, years, we growth, billion grew

as after As exactly undoubtedly, consumers healthier shifted spending growth, see what to that consumers which shifted QX. moderation saw of home these their going And you’re into spending, their we period improvement. in is

time at the did an there growth pull spending pandemic. out this obviously, years. the aren’t think you future improvement, improvement, like then reflects spoke has to back to their earlier, And patio home we’ve categories, of normal certain engagement a the all about what appliances, about accelerated as years service the deferral about home forward about early in few grills outsized and prior the of or goods So broader in of few we home think consumer an economy in the as in saw is of that I gotten people impact seen that’s, when they and particular, in shift things, spending

with particularly I And the certainly to and less made there ticket items. lastly, including then newer the now bigger a discretionary availability. just what concerns, then business Pros our consumers And given a on observing our we’re the sensitivity, is with And buildup we’ve discretionary about taking some this consumer, that with past that credit that is respect seeing, broader those is projects. macro again, comments quarter price aligns of really cautious in seen, inflation and dynamic we’re smaller, more

out the into healthy. So is matter and of – in of those goods services general, in and growth consumer consumption very the spend home digesting particularly a homeowner remains our improvement. It’s outsized shift

normalization. period. where talked this Richard’s talked argument stays elevated. values age about or All don’t of home average. There it more the reasons is considerably on quickly and the know get an that higher. older at home. is through ends are about how home PCE spending before, that will improvement The People goes. we home are PCE We the So the we’ve so much time

sectors suggest remain level the this a this So It’s spending might retail. of in all be, period incredibly market, will higher on bullish all absolute normalization of fact, PCE best the of get in our But one and in health all of we could transition It’s forward. and dynamics sector. we regardless those through have we of opportunities sector. a going large and fragmented growth tremendous that,

Steven Zaccone

for all spring. Best the Thanks detail. the of luck for of remainder

Operator

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

Zach Fadem

Hey, And good And last us else expected. about gross versus gap parts talk specifically, to better help bit how than XX% impact the Can think were today? highlight EBIT the Can year XX.X% legal the then to morning. controls anything bridge should the through SG&A? of for we margin you specifically you And XX.X% from us you’d moving settlement? a the cost QX, margin the around there?

Richard McPhail

the Zach. question. for Yes, Thanks

in At which So a let’s flat XX.X% in expenses. deleverage of XXXX particularly environment, guide see actual our is operating our will first business a walk in of margin our degree an inflationary original from comp, to XX.X%, margin.

designed Ann as initiatives deleverage. point And productivity so view. real benefit there a billion business, customer then deleverage three investment Natural experience to, a which said, to of from offset are $X factors. proven provide has in in And some that of the wage, really

guide And other, each at you so of all flat three our net when those XX.X% to that a led against comp.

operating levels. our In As at The to the of still comp there levers operating words, there – is an blunt margin other reflects de-leverage help guided model. have that range we greatest are model. toward negative reflect the activity-based is mitigator guidance, but revision payroll have the we that in on is margin we de-leverage, these there that natural

so our our payroll. stores And activity does sorry, level as lever of decreases, in – our so

negative Began, the a we the we settlement from be settlement, to operating legal this benefit natural a at benefit and the did about realize legal of XX.X% natural one-time a the negative margin think have offset there. assumes the do you will When would so one-time be the So the XX.X% year. during buffer X guidance our large remainder the X.

And so that’s just a simplified assumption.

protect We year – progresses, levers the margin, be agree backdrop of degree evaluating environment. we the financial operating that against And available a we’d XX% of to will will as the flexibility. us with the with operate

Zach Fadem

Got it. then considering of big Could the takes And you about there, recover. your longer talk Appreciate and correlated materially today? business color. picture golden you a macro turnover I’ve now mortgages most the that got think now indicators for this you are housing believe to question. handcuffs sub-X% the out to housing do

Richard McPhail

first. the I’ll We’ve the Well, already to one second take seen impact housing turnover.

hold a and XX% on XX% owned are homes mortgage, I to X%. remind outright. this environment, of In under the the fixed fully owner-occupied think mortgage, rate if let’s hold ourselves, that of potential rates close have mortgage fixed higher you that low we’ve mortgages households probably seen the those rate impact sellers. And of just of

to today, rates So to more mortgage. sell an as have And a incentive older. is home time greater there and is and in where incentive in sell stay and reluctance a take rate a to your is And do there said, place are with at improve not home, Ted mortgage place. higher you’re they you home getting spending and that on

So I think housing in already that we’ve turnover. seen

the is of the we we’re in think of the tighter macro as I impact interesting policy now saw I reflective unfold. respect quarter broader business monetary said, what tighter as Ted With indicators, credit think to and seeing conditions. It’s

look how trending you quite did actually during positively. business was at we If our February,

curves rate comp for run have the dollar February’s implied would normal fact, positive In adjusted for year. a seasonal

environment, tighter share a the as think there first that think also most were just notably we don’t March, the we of accelerating saw of extreme influence, California. factors about where about think those that direct SVB. a shift. was by caution the You collapse external saw There weather but among the impacted external you well, in point was conditions broader were March a broader maybe – all, result And credit in some March, to we And that consumers. build of you know, all of have

homeowner seeing. extremely think healthy, consumer we our very customer economy sheet, This said, Ted As a is is broader healthy healthy we’re balance dynamic income.

Zach Fadem

appreciate Thanks, Richard. I the color. all

Richard McPhail

Zach. Thanks,

Operator

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

Michael Lasser

morning. a Thanks lot for questions. my Good taking

your at normalized what and are if categories and grills business current what to normalized across of product the perhaps math above what where today versus look from a and XXXX patio even rate, still about here? a suggest would the be units assess and trying How comp a unit you downside and rest be well As would scenario entire demand that appliances, rate. are would you that look by assortment furniture suggested many extend versus

Ted Decker

I appliances Michael, have those with of were you great with into elevated. elevated The that detail outsized categories we units as demand. by of were wouldn’t question, number called ones grills, Certainly, level out, retails as well gone say category. patio a innovation, on

have attach which you those and unit materials are And pull come haven’t normalize. Billy, building units we hardware are strongest down going normal think where attaches that attach of about picking our – seeing building really still lumber meaningfully both the categories think hardware, when booming We that seeing in time up and a like productivity then product, with take it’s quite project and to to so attachment we I unit rate that little as are Other we think of just in talked see categories, replacement volume are materials frankly, cycles starter you forward some get ever categories we on of strong. to lumber, and much to I are that’s materials. highest recorded. prices bit that running rate building

Billy Bastek

right. that’s Yes,

some about think then we our place. as that you the performance, If taking that of did attach across as great lumber, well. those And with of out did – building we unit outperform, Ted smaller materials certainly businesses initially about and some we businesses some called the along forward mention seeing seeing see pull talked smaller, projects in productivity those still

Michael Lasser

for dollar like comps or the start benefit consider will we The be on do of expect over the seeing Home leverage be would Depot growth, My catch-up Presumably, transition incentive first this XXXX guidance. expense, expenses and growth follow-up to lowered on return question course if to your the as you of back year give XXXX, in legal mentioned be some your you an will year? there you you comp that Richard, there to is, of

those So, your we dollar expect on our items that wouldn’t comp, back next come positive next such first leverage year? see if we models necessarily you expenses of in will some growth have a to you the year

Richard McPhail

into the get outlook when detail more in will investor we June bit on get for we together XXXX conference. a in Well,

Michael, to to We model have are of not modeling some XXXX volume. few at is our broadly, But take the costs XXXX. that as and only of with leverage a meant are And we specificity business. into level months we will out leverage

higher inventory For transportation sure, with particular, in if growth. COVID. will transportation on And we our store the that costs through rates and model, out levels the the you labor, you significant see with will think with on then leverage side, current operating during work always experienced come as the product

Ted Decker

price manage Michael, we obviously, costs transportation independently, and are market cost and dynamic. And a

respect price. sure we value for as advocate – make sorry, into so the customer’s are And in get XXth. to in said, June positioned we Ted more this June, will will But with XXXX as that we

Michael Lasser

And deflation advocate Richard, value, whether is is continue going that stay, related be what so Depot how come would of to certain to comment for or you non-commodity areas there the going it intended over one just question down, transportation materials, whether have of like-for-like of Can year. advocate is that is costs means is clarify costs that, there raw because like but debates clarify to Home I be an product to for sounds sorry? growth, this course in the a

Richard McPhail

Right. No, again, and manage independently. price we cost

said, don’t in Ted we broad-based As market. this deflation expect

Michael Lasser

Understood. much. very Thank you

Operator

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

Brian Nagel

Hi. Good morning.

Ted Decker

morning. Good

Brian Nagel

just My between weather have you detail come, the arrived, was and has than already, I look, – at markets. looking then data, a markets of and weather more spring been where in And issue wondering a between comps in question, first can go – a I if I what discussed the of was kind bit we weather. saw spread in has but markets where our you little more know have am lot an as normal? may the

pickup categories far So, hold? spring as seasonal type take the you any starting conditions what in seeing as then of to light are are as

Ted Decker

thank Brian, Yes. you.

most So, like record said, in things West even California. rain was was snow weather in as we the weekend. pronounced pattern. This wasn’t have unique Southern weather a and very a This in bad

versus country. about when of in guidance relatively at back. sustained look on talked we that a was on weather other the effect, the our divisions, have the and the and weather would updated where have the we the And wouldn’t multiple West what and to was we Northern parts Southern generally, because weaker QX saw So, we sales of impact we bathtub based look in get in past base bad stronger

So, get spring limited when done that going in a season are of of North where you activity shorter in a to think weeks. the people number

the first it done it quarter, quarter. get in The more guidance X dynamic X, the patterns. minus in don’t it’s the went people the to is in of into the level up weather you make If West, West, tend minus our this second to

short have a effect Pro-concentration. weather, high very when looking you in stores, bathtub And up large make really bad get are it at not to a We season. you very

You week. of selling just sort that missed

typical have when is did but we geographically the difference more sort pronounced selling In mean we behavior we the the I bathtub. So, at West, didn’t in that the lost good many the were north, was as and just incredibly of look strong. sales weeks. weekends to

weather So, QX. hoping in better certainly we are for

Brian Nagel

you – year? varied improvement some – as continuation etcetera, a with what the further you you there question, recognized through look But or year. as at think comparisons lots you then here. as you of and Okay. parts helpful. is again, my are very And helpful about second – dealing moving the And That’s the assume of are through have updated either guidance of does ‘XX, for or of ‘XX so seen we in far type basically assuming deterioration, that us you gave kind today,

Richard McPhail

we what which to That’s consistent end is that we what the beginning that with it’s reverts you of the gave of of of deceleration range. to the observed case reversion hypothetical end the look, range again, right, say, the PCE year particularly would we the of if Brian. at out was you the versus would than have share year, by would we rate assume And to-date. And I that the mean seen. see. be would have XXXX our at levels an accelerated That’s greater say laid why bottom

account not we – sort of it fact negative and hold QX the a into saw we science, gave perfect that the year. range. and It’s would a So, again, the than a has the why we X, share takes reversion that of that’s expected in sharper you that end through

Brian Nagel

Appreciate Thank you. it.

Ted Decker

Thanks.

Operator

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

Scot Ciccarelli

Good morning guys.

is bucket, not So, biggest the plus – have a with investing even because point. you this how operating Richard, SG&A on are but year in you your What labor other more XX% kind I have you protecting margin you much talked wage the line, I of actually investments about do guys made labor, mean, know less. this that you at flexibility think

managing that should think are you So, how guys component? like about we how

Richard McPhail

really again, the proven Well, in that’s of embedded has in on our wage, driven side, lot investment have experience benefit a to customer guidance. the which

that We to our be us and progresses, a margin the will environment. the structure, against year of over long-term. roughly $X it’s structure. to have embedded Again, will as backdrop evaluating addition made the win billion We the to available invest cost our the be levers but investment in we

our with investment of comfortable today. are it as stands We level

We some against too. the backdrop continue assess environment, the will to our of there, have flexibility and we investments

Scot Ciccarelli

with necessarily just guys want strategic And to back basis, a how change are you terms of be but you buy debt about quick marketplace, Thanks. in issuing higher thinking not rates follow-up, in from the interest that a to how aggressive does capital stock? allocation,

Richard McPhail

good stand debt-to-EBITDA and feel $X in a didn’t about from refinance where We We maturity perspective. we April a maturity, a had that, it. we billion repaid

no the unfold. conditions short-term, and to capital need go will we necessarily watch as debt have they market the We to in markets

Ted Decker

But are a good about leverage perspective. we where feel we from

Scot Ciccarelli

you. Thank

Operator

KeyBanc. the with question next from of comes Brad Please line your with Our question. Thomas proceed

Brad Thomas

a talk we about I seeing more Pro Hi. trends hoping was in Thanks the questions. for could bit you business. my little that taking the are

has this you think Pro? first had underperformed about a seeing the improved? DIY. are I Has time is in thinking gotten quarters are Has out that it going the weather What of better? you And it few the forward? it how

Ted Decker

West. like what Pro Pro the with a and disproportionately like from and with don’t again seeing a engage what out forget are strong perspective, let broadest we then, customers will lumber bit our we But seeing. I Yes. that Hector talk as the about our capabilities. Pro very by they we are But impacted business the was we

Hector Padilla

that and and Yes. Hector. Ted Good was morning are What On is Brad, excited weather. a disproportionate basis, lumber just and our seeing mentioned impact this most with we Pros. X-year from positive what performance our about are is saw Billy, as we we

with chain we assets supply the engaging are about in expanded Pro capabilities our talked past. We and new have that

are they with our as are They and love them Home with and their in we forward Pro our detail a business look purchases they and the have seeing to you wallet willingness brand, capabilities assortment June speaking love in with consolidate building. to share gaining are that about value We really we their us, Depot. growing spend I with how doing markets. that the around more our are and proposition, they across is many

Brad Thomas

deflation. Great. for new digits. some assuming pieces a market outlook? obviously, and improvement And What outlook your you in are a here believe with quick decline as was your the prior follow-up, home of moving weather I low-single

Richard McPhail

PCE PCE. a for we to have high-single seen, observe market who are digits. So, we with we But down market mid outlook slightly expect that as our There PCE. be year the shifts for holds we economists lifted the outlook that have share to flat and that began our

continue we will implicit share. in to so the that is take And expectation our guide

Brad Thomas

Thanks so Great. much.

Operator

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

Simeon Gutman

morning curious to ask adherent case everyone. suggest are that? ask that Hey. want There core year, has of made could turnover prices prices, lag back Good restrict worse. you that’s the how a been matter that a the home that how if the half I bit I about am effect cadence you about little the to that bit think inform because could just prices. more. could gets from I about specifically to demands Thanks. and decoupled a want

Ted Decker

all and formation the certainly, generally spend, we turnover to if household home home are spend. to to housing or you has tightest influence And is think price Simeon, the effect, as depreciation. also Well, metrics, there say, home appreciation lag improvement value correlation a

weed sensitive up from how be values the at we is That still are rising people from with here general home end up off am difference where I going the are of now the general given I is and value inflation the a recession. to a we was but all XX% apprehension yes, or in out of XX% have slightly, are think going psychology XXXX. to to not going end talk, I the are to have tough rates XX% macro consumer was And month-over-month, the I that interest XXXX. recession, in and

that have So, an I big impact. that, wouldn’t would think that of

impact XH. a that’s thinking in not are We big

Simeon Gutman

the to as Okay. as QX That’s of impact well just worsens negative lumber more negative from Richard. that One this to assumes QX? X%, The updated core fair. from the the question midpoint of worsens that clarify, X% guide around for

Richard McPhail

think kind of cases. can lumber being impact the an assumption that is equal of You of all across

then here. and of in to have we non-meaningful range, again, So, provide just a extrapolate view half. sort very, pressure about this second the slight, Simeon, QX to XXX basis in balanced to pressure given And early year. It’s of points the a very really tough

approach so can range we And helpful like guidance the we feel the that most give. is

Simeon Gutman

Right.

Okay. Thank you.

Operator

Sigman your comes Our the Please next with of Seth with question. from line Barclays. question proceed

Seth Sigman

implies was about talked to pull about lot also been will this XXXX I a that where and it levels. scenario on time? wrong obviously, wallet the get on But normalize But back before, lower from share where morning. we and guess scenario things do be follow-up already how cycles home today. assumption overshoots think here. wanted downside some Hey that forward why you would that to goes there everybody. wallet And share and than that I has worse Good improvement that prior

Ted Decker

for reverted year given XXXX the have the have Well, that as of said, downside guide in a to you haveX we end by the of levels. XXXX our would we best the minus be X% of view

we So, would frankly you some hangover And XXXX. know. don’t there then of could it mathematically, question into be overshoot, that does your well, say,

class is have dollars. you there strong is much of as are billions than where If is I I asset so mean earlier, case, if a not said settle higher. that As higher based share. talking your in stronger, more not we nothing

class asset literally We trillions dollars more this has talking are that of value.

So, have is so big witching hour We wear home, XX-year at that of spending We if any you higher. and about talk bigger are you investment time now in base. of and much are more and the reaching over about chunks home the that of a know thinking is class, XX-year percent XX-years-old, are homes sort age. got have of average asset tear we age all of we

talked you higher. these say, call the it, all would ultimately the would you have spend had I if out and we potentially dynamics settle say So, to would about in past

Seth Sigman

Fair Okay. enough.

can comps laid that. lower? does there Maybe an consistent include what here the underlying about that is to XX% it help you QX Just just us I quarter, is I the you. that SG&A margin imply does clarify said actually digit on Thank benefit. better you think low the you the one Can just talked understand, follow-up you very guidance last point. that EBIT may margin this mid-single offset year, on negative think scenarios have you end, so with out at for but

Ted Decker

underlying the for that not question. To the be lower. would assuming clarify, Thanks it’s

year. assumes through remainder the would be the that offset gain guide actually that, Our of

Seth Sigman

Okay. Thanks very much.

Isabel Janci

time question. have one for we more Christine,

Operator

you. Thank

will final proceed of with Our question. Guggenheim. line Please from the your come Forbes question Steven with

Steven Forbes

follow-up Good wanted morning. just trends. I work lumber to on

back volume second You happened during right, the deflation. compares specifically guidance as what price talk you Curious in half assumes expectations, could the made ease in terms a if the then what price about unit of And unit the comment half? about with quarter. the in

Billy Bastek

Billy. This Thanks Yes. Steven. is

do greatest mentioned Richard comments, half. previous first about, in lumber his the talked in pressure the we from As anticipate we

For XXX is about the the total year, we think lumber points. comp basis deflation impact to

plywood, in expect in we that, is I XXX points really as with points, called basis seeing but impact dimensional movement we unit And it’s a XXX decking, from of in in the lumber, then QX, another unit across are which QX, mentioned categories Now basis performance guide. that strong the roughly seeing don’t we material still for the back out. year, half strong lumber PT

Steven Forbes

trajectory the of implied what dynamics, just in And to – the you in with or of lumber unit do right, so expect improve is specifically the so volume half, maybe back guide? unit sort

Billy Bastek

the year-over-year, half we rational will units see last normalizes we a had the towards Well, get pricing as state reflect in of the as that that more in year. back you

Steven Forbes

before we any And but of should Day? expect speaking then to wasn’t if clarify upcoming potentially any just sure we of to a can the Analyst preview Day? what quick you of should XXXX, maybe sort follow-up, at you what comment the about I expect think made on a Analyst I previewed sort thoughts at hear

Isabel Janci

question, Steve. Thanks for that

what will the excited for go bit out think about to updated about growth business. talk TAM the I you, we we you little our the opportunities and are sector and after TAM that so lay us is hear why a about more will that

Steven Forbes

Thank you.

Isabel Janci

welcome. You’re

Operator

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

Isabel Janci

at June Christine on Investor for thanks and XXth. Thanks look with our us speaking today. everybody We you to joining Conference forward

Operator

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

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

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