The Home Depot Announces Second Quarter Results; Reaffirms Fiscal 2022 Guidance The Home Depot

Our Pro in particular, is very strong and their backlog remains healthy. Over 10 years ago, we identified appliances as a category, where we had a major competitor who was losing steam and where we thought we could make some inroads. And so as we look back at appliances impact on our business, we would say we’d do that again every single time. Approximately half of the year-over-year increase in inventory reflects product cost inflation.

• And in talking to our Pros and the research we did, they are more than comfortable to do more with Home Depot as we develop capabilities to serve their larger plan purchase.
• And it’s really sort of across the business.
• And if your sales are up low single digits, would you let that flow through to the bottom line since your operating margin would be up?
• During the first quarter, operating expense as a percent of sales increased approximately 25 basis points to 18.8% compared to the first quarter of 2022.

The opportunity in front of us is exciting today as it was when we first opened our doors, and I am honored to help lead this company into the next phase of growth. Thank you for your interest in The Home Depot. We intend to provide the best experience in home improvement, extend our position as the low-cost provider and be the most efficient investor of capital in home improvement. Over the last two years, as we’ve grown by over $40 billion in sales, our addressable market has also grown. We now estimate that our total addressable market in North America is greater than $900 billion. We believe that we have positioned ourselves to meet the needs of our customers in any environment as evidenced by our results.

Thanks, Craig, and good morning, everyone. We finished the year with another exceptional quarter as home improvement demand remained strong. Sales for the fourth quarter grew approximately $3.5 billion to $35.7 billion, up 10.7% from last year.

The stock’s path

As Ted said earlier, we’ve watched the same housing statistics for over a decade now. And we think directionally, we understand what’s going on here. But we’re not going to, at least at this moment, given the dynamism in the economy tied to any given macroeconomic factor. I think it’s partly the vibrancy of the housing market, to your point. I don’t know if it’s income cohort, but if there’s anything else, because you mostly answered it in the response to the last question, but curious if there’s more. Get this delivered to your inbox, and more info about our products and services.

So really not seeing any trade down, we’ve got strength in our ticket above $1,000 and that speaks to the project into the Pro customer. We will say in categories like grills, mowers, laundry and a few other bigger ticket items, it’s possible there is a price sensitivity. You know, we are still having to pull inventory forward. If you think about today’s supply chain environment, our focus is to be there for our customers, to be there for our pros in terms of the right job lock quantities and the right timing of events and other activities. So part of our inventory overage is obviously due to that work in terms of being there for our customers.

We’re not going to break that out any further, but let’s just say that demand is strong with the larger professional customer. Can you talk about the relative performance among a large pro versus the smaller pro? And then overall, I’m not sure if you can track this, but are you seeing Pro transaction growth? Because overall transaction price competitive meaning growth has grown down. And then the fact that the U.S. home stock is aging and — of course, it ages every year, but it’s aging disproportionately because we had so many those years where we under built in housing. But I will say one thing we have noticed, because our strength has continued into Q3 here in the first couple weeks.

We will now be conducting a question-and-answer session. Our first question comes from the line of Michael Lasser with UBS. In bath, we’re excited about the success we’re having with our great assortment of Delta Tub & Shower https://1investing.in/ wall combinations. Delta Classic 500 series is a simple tub or shower system that delivers a big transformation to a bathroom in a fraction of the time. It is easy to install and its acrylic surface makes it easy to clean.

The retailer is optimistic about its long-term growth prospects.

What we’re building is relevant for both consumers and Pros. But specific to Pros, when you think about the example of the Pro in Dallas, we’re building capabilities with our Pro ecosystem to accelerate Pro share growth, particularly in planned purchases. We’ve always talked about every Pro is in our building. We’re sort of the 7-Eleven for Pros, convenience, value, tremendous product and brands. While early days, we continue to develop our capabilities, and we are encouraged as we see a measurable lift in sales with a more interconnected shopping experience. As we move forward toward this next phase of growth, we will remain focused on driving productivity, a long-standing hallmark of The Home Depot.

We estimate that each of these respective customer groups represent about 50% of the total addressable market. We also estimate that each of these important customer groups represent approximately 50% of our total sales. For Pro, we believe this addressable end market is over $450 billion. Within this end market, we believe our addressable maintenance, repair, and operations, or MRO space, has expanded to over $100 billion.

The Home Depot Announces First Quarter Fiscal 2023 Results; Updates Fiscal 2023 Guidance

And I will also say we have a deep understanding of almost all cost components for almost all of the products that we sell. But again, I will tell you that Dallas has been toward the top of our performance when it comes to the Pro segment of our business. We’re seeing just great reaction and engagement from our customers and those who are trying our capabilities are repeating purchases with us and those baskets continue to grow.

Thanks, Christine, and thanks, everybody, for joining us today. We look forward to speaking with you on our third quarter earnings call in November. And we will certainly maintain our competitiveness in the market as we watch what takes place with commodities in the short end, in the mid-term here. But a lot of fun, great innovation in value.

Ladies and gentlemen, this does conclude today’s teleconference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day.

The Home Depot Announces First Quarter Results; Raises Fiscal 2022 Guidance

We also saw growth with both our Pro and DIY customers in the quarter and are encouraged that project backlogs remain healthy. While the business performed very well and our consumers remain resilient through the first half of the year, we are navigating a unique environment. We can’t predict how the evolving macroeconomic backdrop will impact our customer going forward.

Or maybe you could just update us on your methodology on how you sort of approach your planning process for investment spending. If you look at vinyl flooring, electrified tile business, thrilled with the LifeProof private brand strategy we’ve got deployed. And on top of that, we just — we’re leveraging new capabilities that Ted spoke to with our supply chain and larger format tile. I think an important thing to step back and look at is we delivered 5.2 turns.

And, I think, there’s an emerging interesting dynamic that kind of pushes against reversion. And you think about those who may have looked to move into another house a few years ago, we’re looking at their fixed rate mortgage and saying, I like that mortgage, I like my equity position in my home. We see that in the survey data where customers say their intent is to do projects of all sizes is still very high. It’s really all the dynamic of the home improvement. At the end of the second quarter, inventories were $26.1 billion, up $7.2 billion compared to the second quarter of 2021.

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We’re trying to give you a sense that this is a huge market and it is fragmented. I think that trying to measure market share with precision is difficult. That’s why when we check ourselves in market share gain, we do a lot of triangulation, vendor partners, third-party data. I would say 2021 still included COVID cost.

I know your — there was a comment earlier about landing product earlier. So from today, but that — is that looking at it on the price of inventories? If the rate is up 800 bps year-on-year and the level stays the same, then presumably by the end of the year, if we just stay at these levels, we’ll basically have zero inflation by the fourth quarter. But in the first quarters, you could have positive. So presume the rate that was built in as we established that outlook based on our run rate. And we have no planned adjustment, up or down, in the guidance that we provided.

So we’ve kind of rebase lined a significant part of the business in ’22 and that, it opens the door to growing next year. I’m not asking for any endorsement on ’23, but curious how you’re looking at this reversion question and anything interesting on units as you look at it. Our next question comes from a line of Simeon Gutman with Morgan Stanley. [Operator instructions] Our first question comes from the line of Michael Lasser with UBS. In bath, we’re excited about the success we’re having with our great assortment of Delta tub and shower wall combinations.

Interest and other expense for the second quarter increased by $58 million to $379 million, due primarily to higher long-term debt levels than one year ago. And we do look at Dallas very specifically and we look at incrementality and we know exactly what we need to drive an NPV positive project, even to add an incremental sales force. A single individual sales rep, we’re tracking incrementality of sales to make sure, we’re paying for that resource. I mean, it’s not by accident that we’re growing our Pro the way we’re growing it.

We now expect fiscal 2023 sales and comp sales to decline between 2% and 5%. As a result of the change in our sales outlook, we are now targeting an operating margin between 14.3% and 14.0% for the year. Our effective tax rate is targeted at approximately 24.5%. We expect interest expense of approximately $1.8 billion, and we are anticipating between a 7% and 13% decline in diluted earnings per share compared to fiscal 2022. Turning to our department comp performance for the first quarter, 4 of our 14 merchandising departments posted positive comps, which are building materials, hardware, plumbing and millwork. During the first quarter, our comp average ticket increased 0.2% and comp transactions decreased 5%.

Our next question comes from the line of Chris Horvers with J.P. We’ve established a goal of $200 billion in sales. We intend to get there as soon as we can in a sustainable and profitable way. Our next question comes from the line of Michael Lasser with UBS. So there is no inflation built in, if you will. And then we’ll deal with what comes at us in ’22.

[Operator instructions] If we are unable to get to your question during the call, please call our investor relations department. In addition, as referenced in our quarterly earnings release, after the call, we will post a few supplemental slides to the investor relations website. Home Depot’s earnings are expected to grow from $15.24 per share to $16.25 per share in the next year, which is a 6.63% increase. Home Depot has not confirmed its next earnings publication date, but the company’s estimated earnings date is Tuesday, November 21st, 2023 based off last year’s report dates. Rather than paying for media, the chain relies on organic social posts and word-of-mouth from excited customers such as Petrucci and her ilk. Home Depot’s social team works with Trade School on some of the Halloween creative on TikTok, Twitter and Instagram that taps into existing trends.

• Again, everything is sort of mapped out is what would you want to see to demonstrate that this is working?
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• We’re sort of the 7-Eleven for Pros, convenience, value, tremendous product and brands.
• We have a high degree of confidence we have a really good perspective on it.

Well, we’re priced in cost and priced where we are as we end the year, and we don’t have any incremental inflation in our plan. And it is my honor to turn the call over to Ted, who will share a bit more about our strategic priorities for 2022 and beyond. ATLANTA, Nov. 2, 2021 /PRNewswire/ — The Home Depot®, the world’s largest home improvement retailer, announced today that it will hold its Third Quarter Earnings Conference Call on Tuesday, November 16, at 9 a.m. © 2023 Market data provided is at least 10-minutes delayed and hosted by Barchart Solutions. Information is provided ‘as-is’ and solely for informational purposes, not for trading purposes or advice, and is delayed.

And that’s on top of the 40 billion in growth in the past two years. And as Richard said though, we are operating in a unique environment with many crosscurrents, inflation and interest rates and supply chain disruptions and the like. Our operating leverage during the second quarter reflects solid expense management for the quarter. Our operating margin for the second quarter was 16.5%, compared to 16.1% in the second quarter of 2021.

Some analysts will also offer forecasts for metrics like growth estimates, earnings, and revenue to provide further guidance on stocks. Investors who use analyst ratings should note that this specialized advice comes from humans and may be subject to error. You can think of the impact of lumber being kind of an assumption that is equal across all cases. So, about 120 basis points of pressure to Q2 and then very, very slight, really non-meaningful pressure in the second half. And again, we have given a range, Simeon, to just provide sort of a balanced view here.