Latest news with #HomeDepotInc
Globe and Mail
25-06-2025
- Business
- Globe and Mail
Is Supply Chain Modernization Enough to Lift Home Depot's Growth?
Supply-chain management plays a pivotal role in supporting The Home Depot, Inc. 's HD overall growth. The company has significantly invested in modernizing its supply chain to drive efficiency, speed and operational resilience. In the recent past, it has collaborated closely with its vendor partners to diversify its global supply-chain network. As part of its supply-chain diversification efforts, Home Depot is reducing its reliance on non-U.S. markets for sourcing products. This is expected to be crucial for the company in navigating a complex and evolving trade landscape marked by rising tariffs on imported goods, especially from China. Though more than 50% of HD's products are sourced from within the United States, about half still face varying tariffs, estimated between 10% and 30%. The company is proactively addressing this by diversifying its sourcing base, with a target to ensure that no single non-U.S. country accounts for more than 10% of total purchases within 12 months. Despite this flexibility, management acknowledged that absorbing tariff-related costs without passing them to consumers may compress margins. Home Depot plans to use multiple levers, such as portfolio optimization, vendor partnerships and supply-chain efficiencies, to maintain pricing discipline. HD's supply-chain management is further amplified by the buildout of its One Supply Chain network, focused on strengthening distribution centers, market delivery operations and same-day delivery capabilities. Home Depot is also strengthening its in-store and digital experiences, fulfillment and delivery improvements, interconnected retail strategy expansion and Pro ecosystem enhancements to reignite growth. Its strategic investments in downstream supply chain infrastructure have enhanced product availability at Distribution Fulfillment Centers, enabling quick deliveries. The company's leveraged store network further offers flexible delivery options, enabling faster fulfillment and driving customer engagement. In first-quarter fiscal 2025, supply-chain productivity has helped offset the gross margin decline. While macroeconomic uncertainties persist, Home Depot is making steady progress on its "One Home Depot" investment plan, aimed at supply-chain expansion, technology integration and digital enhancement. Such moves offer the company a competitive edge and position it for long-term success. HD's Competition in Supply Chain Evolution Lowe's Companies, Inc. LOW and Inc. AMZN are the key companies competing with Home Depot in boosting their supply-chain activities. Lowe's has been steadily advancing supply-chain transformation efforts, focused on building efficiency, optimizing inventory flow and offering a superior, reliable customer experience. The company aims to build a robust omnichannel supply chain that ensures product availability in the right quantities, at the right time and in the right locations. This strategy includes enhancing network capacity, improving flow management and driving overall operational efficiency through end-to-end optimization. Lowe's supply chain serves as a crucial aspect of its Total Home strategy, and hence, it makes constant investments in modernizing its network to boost omnichannel capabilities. It also focuses on enhancing the speed of its delivery capabilities to better cater to the customers' needs. Amazon, with aggressive supply-chain upgradation efforts aimed at driving speed, efficiency and scalability to ramp up its e-commerce capabilities, leads the way. The company's supply-chain efforts include regionalization of the fulfillment network, robotics, automation, innovations and technology integration. Amazon heavily focuses on strengthening its same-day and next-day delivery capabilities, thus elevating the overall shoppers' experience. Amazon's supply-chain modernization drives faster and reliable delivery, operational efficiency, lower costs and enhanced customer satisfaction. Continued investment in supply-chain innovation is pivotal to Amazon's success, with quick delivery options and services and adaptability to meet customers' evolving needs. HD's Price Performance, Valuation & Estimates Shares of Home Depot have lost 6.2% year to date compared with the industry 's decline of 9.6%. From a valuation standpoint, HD trades at a forward price-to-earnings ratio of 23.14X compared with the industry's average of 20.38X. Image Source: Zacks Investment Research The Zacks Consensus Estimate for HD's fiscal 2025 earnings implies a year-over-year decline of 1.3%, while that of fiscal 2026 shows growth of 9.1%. The company's EPS estimate for fiscal 2025 and fiscal 2026 has moved down in the past 30 days. Image Source: Zacks Investment Research Home Depot stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here. Only $1 to See All Zacks' Buys and Sells We're not kidding. Several years ago, we shocked our members by offering them 30-day access to all our picks for the total sum of only $1. No obligation to spend another cent. Thousands have taken advantage of this opportunity. Thousands did not - they thought there must be a catch. Yes, we do have a reason. We want you to get acquainted with our portfolio services like Surprise Trader, Stocks Under $10, Technology Innovators, and more, that closed 256 positions with double- and triple-digit gains in 2024 alone. See Stocks Now >> Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. 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Globe and Mail
20-06-2025
- Business
- Globe and Mail
Is Recovery in Big-Ticket Demand the Key to HD's Next Growth Leg?
Although The Home Depot Inc. HD has seen continued strength in its smaller-scale DIY and maintenance projects like appliances, building materials and lumber, the missing catalyst for sustained top-line acceleration lies in the revival of big-ticket remodel and renovation spend. Home Depot continues to see soft engagement for big-ticket discretionary categories (those exceeding $1,000 in ticket value), such as kitchen and bath remodels, as higher interest rates discouraged financing-dependent projects. A revival in these big-ticket home improvement projects is widely seen as the next inflection point for Home Depot's growth. Big-ticket sales, often a barometer of remodeling demand, grew just 0.3% in first-quarter fiscal 2025. Backed by this slowdown, the company's overall comparable sales (comps) declined 0.3%, with U.S. comps up just 0.2%. Given that big-ticket categories like kitchen, bath and major exterior remodels can represent 10-15% of total ticket sales, even a modest rebound can translate into hundreds of millions in incremental revenues. With no major improvement expected in interest rates or housing turnover in 2025, the company anticipates continued pressure on big-ticket renovations, such as kitchen and bath remodels. While Pro sales have been strong, the shift in consumer spending toward smaller-scale repairs and maintenance projects suggests that larger project demand may not rebound meaningfully in the near term, limiting growth potential in high-margin categories. However, Home Depot has been hard at work, positioning itself to capture this spending surge. Through its SRS acquisition and trade-credit rollout, the company offers financing options to thousands of pros, while streamlined digital and in-store lending tools make qualifying for consumer project loans easier. With in-stock rates for building materials and fixtures at record highs, Home Depot is ensuring that when rates soften, it can fulfill large orders without delay. Ultimately, the degree to which big-ticket demand recovers will set the pace for Home Depot's next growth leg. Investors should monitor interest-rate trends, especially any drop below the current 7% mortgage norms, and early signs of increased financed project activity. Sustained acceleration in large-scale remodels can unlock a significant multiplier effect, driving both comp transactions and average ticket size well above the recent levels. Home Depot's Key Competitiors D's primary competitors, Lowe's Companies Inc. LOW and Walmart Inc. WMT, are also grappling with headwinds from muted demand in big-ticket categories. Like Home Depot, both retailers are seeing cautious consumer behavior, particularly in discretionary, high-value purchases such as appliances and home upgrades. Lowe's big-ticket sales, those above $500, also remained soft in first-quarter fiscal 2025, particularly in appliances and outdoor living, reflecting continued consumer caution on large discretionary purchases. These high-value transactions are significant drivers of Lowe's overall revenues, especially in project-based categories like kitchens, flooring and bathroom remodels. Like Home Depot, Lowe's big-ticket business is closely tied to broader housing trends and interest rate movements. Both retailers rely on a mix of DIY and Pro customers, and are positioned to benefit from a rebound in financed renovation activity. A recovery in big-ticket demand would be a critical tailwind for Lowe's, potentially reigniting comps and supporting its Total Home strategy. Walmart's big-ticket discretionary sales have been soft, particularly in electronics, appliances and home goods, as inflation-sensitive consumers prioritize essentials over discretionary spending. Unlike Home Depot, Walmart's overall business is less dependent on big-ticket items, with a larger portion of its revenues driven by groceries and everyday essentials. However, both companies face similar challenges in the big-ticket space, including cautious consumer sentiment and deferred purchases due to high interest rates. Walmart has responded by sharpening price points and emphasizing value, a strategy that mirrors Home Depot's efforts to maintain competitiveness in large-scale project categories. While big-ticket items make up a smaller share of Walmart's total sales, a rebound in this segment can still provide meaningful upside, particularly for its general merchandise division. The Zacks Rundown for Home Depot HD shares have lost 10.8% year to date compared with the industry 's decline of 13.9%. Image Source: Zacks Investment Research From a valuation standpoint, Home Depot trades at a forward price-to-earnings ratio of 22.31X, significantly higher than the industry's 19.68X. It has a VGM Score of B. The Zacks Consensus Estimate for HD's fiscal 2025 earnings implies a year-over-year decline of 1.3%, whereas its fiscal 2026 earnings estimates indicate year-over-year growth of 9.2%. The estimate for fiscal 2025 has been northbound in the past 30 days, while that for fiscal 2026 EPS has moved south in the same period. Home Depot currently carries a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here. Zacks Names #1 Semiconductor Stock It's only 1/9,000th the size of NVIDIA which skyrocketed more than +800% since we recommended it. NVIDIA is still strong, but our new top chip stock has much more room to boom. 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Fashion Network
21-05-2025
- Business
- Fashion Network
Target cuts outlook on shopper pullback, hit to retailer's sales
Cornell attributed the results to weakness in discretionary spending, declining consumer confidence, uncertainty over tariffs and shopper backlash against the company's decision to halt diversity initiatives. He listed growth in e-commerce as a bright spot. The Minneapolis-based company has struggled to return to steady growth for about two years as consumers spend less on clothes, home goods and other non-necessities following years of rising inflation. Demand for discretionary items has yet to rebound. While that trend has hit retailers broadly, Target has been more vulnerable than some of its peers. That's because apparel, home goods and non-consumable items make up about 65% of its sales, while competitors such as Walmart Inc. rely on groceries for a larger percentage of revenue. Target has also had trouble with inventory management in recent years amid fluctuations in demand. In a sign that pressure to improve performance is rising, Target announced a series of management reshuffles and said its Chief Strategy and Growth Officer Christina Hennington, a Target veteran of more than 20 years and once seen as a potential successor to Cornell, will leave the company. Stepping in will be Chief Operating Officer Michael Fiddelke, who will lead a newly formed group called the 'multiyear acceleration office,' aimed at positioning Target 'to deliver faster progress on its roadmap for growth.' Target shares were down 1% in premarket trading in New York. So far this year, the company's stock is down 27% compared to a 1% increase in the S&P 500. The big-box chain has also faced boycotts by some shoppers following a pullback from diversity initiatives earlier this year. While Target is one of many companies that have dialed back such programs following pressure from the Trump administration, the company has experienced a bigger backlash than others. That's due to the brand's efforts in past years to promote diversity as central to its corporate identity. This ranged from partnering with Black-owned suppliers to offering a wider range of apparel sizes. Tariffs represent the latest obstacle. Higher levies on imported goods are expected to raise prices of goods in the near term, resulting in a decline in consumer sentiment and cautious shoppers. In remarks to reporters, executives signaled that Target's current sales outlook is conservative, but challenges are expected to persist in the coming months. The company is adjusting prices in response to the volatile environment, executives said, without directly linking changes to tariffs — a departure from the company's more direct comments about the levies' impact in March. Home Depot Inc. on Tuesday also struck a more conservative tone about tariffs after Walmart last week said that price increases are coming. Those remarks drew the ire of Trump over the weekend. Target executives said they're negotiating with suppliers while examining their inventory assortment and changing some sourcing countries. Despite general weakness, consumers are still spending when they find new, trendy products at good value, said Rick Gomez, Target's chief commercial officer. The company's recent collaboration with Kate Spade was its biggest sales success in years for designer partnerships, while holidays such as Valentine 's Day and Easter outperformed non-holiday days. Target lost market share in 20 out of 35 categories during the last quarter, Gomez said. It gained or held market share in areas like essentials, produce, flowers and women's swimwear. Target will focus on growing share in more areas this year, executives said, as it looks to offer new items and key products at a good value. The company has sharpened its focus on deals and plans to offer more than 10,000 new items this summer, with some costing as little as $1.
Yahoo
21-05-2025
- Business
- Yahoo
Q1 2025 Home Depot Inc Earnings Call
Isabel Janci; Vice President, Investor Relations & Treasurer; Home Depot Inc Edward Decker; Chairman of the Board, President, Chief Executive Officer; Home Depot Inc Ann-Marie Campbell; Senior Executive Vice President; Home Depot Inc William Bastek; Executive Vice President - Merchandising; Home Depot Inc Richard McPhail; Chief Financial Officer, Executive Vice President; Home Depot Inc Christopher Horvers; Analyst; J.P. Morgan Simeon Gutman; Analyst; Morgan Stanley Michael Lasser; Analyst; UBS Scot Ciccarelli; Analyst; Truist Securities Zhihan Ma; Analyst; Bernstein Zach Fadem; Analyst; Wells Fargo Seth Sigman; Analyst; Barclays Chuck Grom; Analyst; Gordon Haskett Steven Zaccone; Analyst; Citi Operator Greetings and welcome to the Home Depot first quarter 2025 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. Welcome to Home Depot's first quarter 2025 earnings call. Joining us on our call today are Ted Decker, Chair, President, and CEO; Ann-Marie Campbell, Senior Executive Vice President; Billy Bastek, Executive Vice President of Merchandizing; and Richard McPhail, Executive Vice President and Chief Financial our prepared remarks, the call will be open for questions. Questions will be limited to analysts and investors. And as a reminder, please limit yourself to one question with one follow-up. If we are unable to get to your question during the call, please call investor relations at I turn the call over to Ted, let me remind you that today's press release and the presentations made by our executives include forward-looking statements as defined in the Private Securities Litigation Reform Act of statements are subject to risks and uncertainties that could cause actual results to differ materially from our expectations and projections. These risks and uncertainties include, but are not limited to the factors identified in the release and in our most recent annual report on Form 10-K and other filings with the presentation will also include certain non-GAAP measures, including but not limited to adjusted operating margin, adjusted diluted earnings per share, and return on invested capital. For a reconciliation of these and other non-GAAP measures to the corresponding GAAP measures, please refer to our earnings press release on our website. Now let me turn the call over to Ted. Edward Decker Thank you, Isabel, and good morning everyone. Sales for the first quarter were $39.9 billion, up 9.4% from the same period last year. Comp sales declined 0.3% from the same period last year, and comps in the US increased 0.2%. Adjusted diluted earnings per share were $3.56 in the first quarter compared to $3.67 in the first quarter last first quarter results were in line with our expectations, despite unfavorable weather in February and unplanned pressure from foreign exchange rates. In local currency, Canada posted comps below the company average, while Mexico posted positive momentum in the business during the back half of fiscal 2024 continued into the first quarter. Our customers engaged across smaller projects and in our spring events. Our associates remain focused in the quarter, and we feel great about our store readiness and product assortment as spring continues to break across the me take a moment to comment on our global sourcing strategy. Today, more than 50% of our purchases are sourced in the United States. Over the last several years, we have worked diligently with our vendors to further diversify our global supply that period, the vast majority of our supplier partners developed diversified sourcing strategies across several countries, including the United a result, we now have tremendous sourcing flexibility. We are already taking action and anticipate that 12 months from now no single country outside of the United States will represent more than 10% of our team has effectively navigated many economic cycles. We believe we have the best merchants, supply chain, and finance teams with exceptional tools to help us understand cost impacts by country at the SKU also have robust product and project elasticity models at the market level. We have strategic vendor partners who understand the need to deliver the right value proposition to our customers. We remain bullish on the fundamentals of home improvement and are confident that we are best positioned to operate in a highly fragmented addressable market of approximately $1 trillion and our consumer, the homeowner, remains most people, their home is their biggest asset, and home prices continue to rise. This has led to record levels of home equity, giving our customers confidence to invest in their housing stock is aging and 55% of homes are 40 years or older. And we know that as homes get older, they require more maintenance and updates. We will continue investing in our business to ensure we are best-positioned to gain market share, particularly in periods of associates have never been more engaged and ready to serve our customers. You'll hear more from Ann in a moment, but we remain focused on our associates because we know that if we take care of our associates, they will take care of the customer, and everything else will take care of also focused on maturing our Pro ecosystem to better serve Pros working on large, complex projects. SRS is now managing our trade credit program, and we are seeing tremendous results as we onboard Pros to the program. And SRS continues to perform above our expectations as our teams work together to gain the continued pressure and volatility across the market, our merchants, store and met teams, and supplier partners and supply chain teams did an outstanding job serving our customers. I'd like to close by thanking them for their dedication and hard work and also our thoughts are with those impacted by the severe storms and tornadoes yesterday. With that, let me turn the call over to Ann. Ann-Marie Campbell Thanks, Ted, and good morning everyone. As you heard from Ted, we continue to invest in our business with a focus on taking care of our associates and customers. We know that having the best customer shopping experience in home improvement makes a significant difference and drive stores are at the heart of the Home Depot experience and our associates' deep product and project knowledge differentiates us from our competitors. Customers come to the Home Depot to solve their home improvement problems and build their dreams, and it is our job to consistently deliver the best interconnected shopping do that, we must be laser focused on our associates and showing that we are providing the tools they need to continue to be engaged, knowledgeable, and ready to serve our business isn't unique in that it provides our customers with what we refer to as a three-legged stool, having the best assortment, value, and exceptional customer service, and we are continuously reinforcing that with our teams. One way we do this is at a store managers meeting which we held in where we celebrate the hard work and dedication of our 2,300-plus store leaders and 200 distribution center general managers, among others. It is a fantastic event that reminds all leaders of what really matters, delivering a high level of we do this by creating a learning environment that empowers our associates with the knowledge and tools to have the confidence to sell. To do this, we are continuing to leverage existing tools like PocketGuide, an application on the HD phone that provides extensive product knowledge, including tutorials and how to are also investing in additional training opportunities. This quarter, we launched a certification for live good associates, providing them a deeper level of localized product knowledge to drive incremental sales in our biggest selling we are introducing new tools using generative AI that leverages our internal data and deep knowledge base to provide store associates quick access to operational and product knowledge via their HD phone. These tools, coupled with a multitude of other investments to drive better service, on-shelf availability and better insights into our customers' projects, help us win with all of our customers, DIYs, and we conducted our annual Voice of the Associate survey, which show improvement score, particularly in development. It is clear that as we invest more broadly in our associates, including through tools and education, we continue to see record retention rates, better engagement, and improved customer service.I am so excited about all we are doing for our associates to help them better serve customers and ultimately drive increased customer satisfaction and sales. Our main associates continue to go above and beyond to serve our customers regardless of the external environment, and I want to thank them for all that they do. With that, let me turn the call over to Billy. William Bastek Thank you, Ann, and good morning, everyone. I want to start by also thanking all of our associates and supplier partners for their ongoing commitment to serving our customers and communities. In particular and as you heard from Ted, we are well-positioned to navigate the current macroeconomic best-in-class merchants, supply chain, and finance teams provide us with a competitive advantage and continue to position us for success. Their knowledge base and the tools that they have developed over the years provide us with visibility at the SKU level to help inform our global sourcing strategy. And this deep business understanding, coupled with the strong collaboration with our vendor partners, is what enables us to move quickly to accelerate sourcing to our first quarter results. As you heard from Ted, our performance during the first quarter was in line with our expectations despite unfavorable weather that impacted February. As the weather improved throughout the quarter, we experienced similar engagement compared to what we saw in the back half of fiscal 2024, with customers taking on smaller home improvement-related projects. However, the higher interest rate environment continues to pressure larger remodeling the first quarter, 6 of our 16 merchandising departments posted positive comps, including appliances, plumbing, indoor garden, electrical, outdoor garden, and building materials. During the first quarter, our comp average ticket was essentially flat, and comp transactions decreased 0.5%.Inflation from core commodity categories positively impacted our average ticket by approximately 30 basis points, driven by inflation in lumber and copper. Additionally, during the quarter, we continued to see our customers trading up for new and innovative products. Big ticket comp transactions for those over $1,000, were positive 0.3% compared to the first quarter of last were pleased with the performance we saw in categories such as building materials, lumber and hardware. However, we continue to see softer engagement in larger discretionary projects where customers typically use financing to fund the project, such as kitchen and bath remodels. During the first quarter, ProCom sales were positive and outpaced the DIY customer. In the first quarter, we saw strength across many pro-heavy categories like gypsum, decking, concrete, and to total company online comp sales. Sales leveraging our digital platforms increased approximately 8% compared to the first quarter of last year. We continue to invest in enhancing our interconnected experience, and this quarter we continued to lean into marketing our speed of delivery, and that is resonating with our customers benefiting from faster delivery are engaging more and spending more with us across our categories. Additionally, during the back half of last year, we began rolling out a new feature on our website called Magic Apron, a generative AI tool that helps customers find the answers they need related to their home improvement summarizing product reviews or answering live questions with our proprietary expertise, Magic Apron has seen strong customer engagement contributing to growth in online customers have always relied on the expertise of our associates and our stores to answer questions and help them solve problems. Magic Apron is designed to bring that same expertise to the digital world, leveraging our proprietary knowledge base to support our customers and give them the confidence to tackle their home improvement projects anytime, the first quarter, we were extremely pleased to announce an expanded relationship with BEHR to exclusively offer KILZ branded prime products in the United our new exclusive agreement, The Home Depot will become the only home improvement big-box retailer to offer KILZ branded primer products, including KILZ Original, All Purpose, Premium, Restoration and more problem-solving primer products and aerosols. This new exclusive agreement will deepen our relationship with our Pro customers, allowing us to continue to gain share in this important the first quarter, we also hosted our annual Spring Black Friday and Spring Gift Center events and saw strong performance across both events. Our merchants did a fantastic job curating the best products, and we saw strong engagement with our customers throughout the pleased with the results we saw, particularly in categories like appliances, power tools, grills, and paint. As we look forward to the second quarter, we are ready for spring across all our product categories. Our live goods look incredible with everything from shrubs to a variety of flowers, herbs and vegetables for every type of merchants partner each year with global, regional, and local readers to make sure we have the right plans with the right attributes to ensure that our customers will have success in their gardens. The innovation we continue to bring in this space helps bring gardening confidence, creating brand loyalty, while also putting our customers in a position to succeed in their excited about spring breaking across the country, and we remain ready to help our customers with all of their outdoor projects and outdoor living needs. With that, I'd like to turn the call over to Richard. Richard McPhail Thank you, Billy, and good morning, everyone. In the first quarter, total sales were $39.9 billion, an increase of $3.4 billion, or approximately 9.4% from last year. During the first quarter, our total company comps were negative 0.3% with comps of negative 3.6% in February, positive 0.6% in March, and positive 1.1% in April. Comps in the US were positive 0.2% for the quarter, with comps of negative 3.3% in February, positive 1.3% in March, and positive 1.8% in the quarter and in local currency, Mexico posted positive comps, whereas Canada was below the company average. Additionally, foreign exchange rates negatively impacted total company comps by approximately 70 basis points for the the first quarter, our gross margin was 33.8%, a decrease of approximately 35 basis points from the first quarter of last year, reflecting a change in mix as a result of the SRS acquisition, partially offset by benefits from lower shrink and supply chain the first quarter, operating expense as a percent of sales increased approximately 70 basis points to 20.9% compared to the first quarter of 2024. Our operating expense performance was in line with our operating margin for the first quarter was 12.9% compared to 13.9% in the first quarter of 2024. In the quarter, pretax intangible asset amortization was $139 million. Excluding the intangible asset amortization in the quarter, our adjusted operating margin for the first quarter was 13.2% compared to 14.1% in the first quarter of and other expense for the first quarter increased by $163 million to $591 million due primarily to higher debt balances than a year ago. In the first quarter, our effective tax rate was 24.4% compared to 22.6% in the first quarter of fiscal diluted earnings per share for the first quarter were $3.45 compared to $3.63 in the first quarter of 2024. Excluding intangible asset amortization, our adjusted diluted earnings per share for the first quarter were $3.56, a decrease of approximately 3% compared to the first quarter of the first quarter, we opened three new stores, bringing our total store count to 2,350. At the end of the quarter, merchandise inventories were $25.8 billion, up approximately $3.3 billion compared to the first quarter of 2024, and inventory turns were 4.3 times, down from 4.5 times last to capital allocation. During the first quarter, we invested approximately $800 million back into our business in the form of capital expenditures. And during the quarter, we paid approximately $2.3 billion in dividends to our shareholders. Computed on the average of beginning and ending long-term debt and equity for the trailing 12 months, return on invested capital was 31.3%, down from 37.1% in the first quarter of fiscal I will comment on our outlook for fiscal 2025. Excluding the unplanned FX rate pressure, our performance during the first quarter was in line with our expectations. The customer engagement we saw in the back half of 2024 continued into the first quarter and through the first two weeks of the second quarter. In addition, we are confident that we will be able to effectively navigate the environment as it stands a result, we are reaffirming our fiscal 2025 guidance. We expect total sales growth to outpace sales comp with sales growth of approximately 2.8% and comp sales growth of approximately positive 1% compared to fiscal gross margin is expected to be approximately 33.4%, essentially flat compared to fiscal 2024. Further, we expect operating margin of approximately 13% and adjusted operating margin of approximately 13.4%. This primarily reflects natural deleverage from sales and continued investments across the business, as well as reflecting the mix impact from the SRS acquisition. Our effective tax rate is targeted at approximately 24.5%. We expect net interest expense of approximately $2.2 expect our diluted earnings per share to decline approximately 3% compared to fiscal 2024 when comparing the 52 weeks in fiscal 2025 to the 53 weeks in fiscal 2024. And we expect our adjusted diluted earnings per share to decline approximately 2% compared to fiscal a 52-week basis, adjusted diluted earnings per share would be essentially flat compared to fiscal 2024. We plan to continue investing in our business with capital expenditures of approximately 2.5% of sales for fiscal believe that we will grow market share in any environment by strengthening our competitive position with our customers and delivering the best customer experience and home improvement. Thank you for your participation in today's call. Christine, we are now ready for questions. Operator (Operator Instructions)Christopher Horvers, J.P. Morgan. Christopher Horvers Thanks. So there's a lot of noise out there with the weather, which you called out, perhaps some CNN effect given the new cycle. So I want to get more insights on how you would characterize the overall demand environment. Do you think there was any uncertainty impact of sales trends in 1Q that could actually be understating the actual momentum in the business?And then more broadly, with respect to the momentum that emerged in the back half of last year, as we think about an environment where existing home sales is flat, wouldn't replacement cycles portend acceleration from the trends that you exited 2024 with, especially if there's a pickup in inflation? Edward Decker Chris, thanks for that question. Let me just raise up a bit as how we see overall consumer and then drill down a little bit into that specific question. I think from the macro, the worst concerns, I think, have passed. We've gone from a dynamic of where we were -- kind of have a near certain recession and stock market correction in early April to where today, stock markets fully recovered. Recession expectations are way down in the past Consult just came out with their daily consumer sentiment tracking that showed significant improvement just in the last two weeks. We know unemployment remains low. TCE grew nicely in April after a very strong March print, and inflation is trending down towards 2% in April. Home prices also continue to increase as you said, with interest rates and mortgage rates remaining stubbornly high, housing turnover has remained at decades long lows. And starts are flat. So you would think you've heard us talk before with so much home equity built up, our consumer has a job increasing wages, increases of home equity are up as much as 50% since the end of '19, why haven't we seen the larger remodeling cycle, particularly as people stay in their homes. And again, we've cited the increased engagement in Q4 of 2024 and how that continued into the first quarter of we've yet to see that large project. The large project generally requires some sort of financing. And while there are literally trillions of dollars of equity available to be tapped in the homes, I think there's still enough macro uncertainty. And again, those stubbornly high interest rates that people are painting again and working in their yards and doing smaller projects but just have not engaged in the larger obviously, we think that will increase. We cited last quarter that we're now a net cumulative shortfall of about $50 billion of home improvement spend on housing. So we're very much looking forward to it as much as you are when people tap their equity, gain the stronger macro confidence and engage in those bigger projects. Christopher Horvers And then my follow-up on the SG&A line. SG&A, I think, grew 12% year over year this quarter. There's a pretty sizable step-up from the underlying growth rate of the past few quarters. Can you talk about -- was there anything one-time in that, that maybe the Street missed? And how are you thinking about SG&A growth as the year progresses? Richard McPhail Yeah. Thanks, Chris. So we did -- as we've said, operating expenses can show a little bit of variability from quarter to quarter. In this case, we're overlapping a legal settlement of some size in Q1 of last year. So that did have an impact. You also have to remember, we're adding the SRS expenses to our expense base. That didn't exist in Q1 of last so when you take that noise out, we levered expenses exactly how we would have expected to in a comp environment like this. Our operators are managing their portfolios exactly how we would hope. And frankly, kicking up to the cost of goods sold, if I may, just for a moment, call out our incredible merchants and supply chain and operations teams who again show us great results in supply chain productivity and in shrink for the remainder of the year, just kind of zooming back out, we've reaffirmed guidance. And let me just kind of reorient you to the year-over-year expectation. So year over year, '24 to '25, operating margin will decline from 13.8% to 13.4%. About 20 basis points of that is from what you would expect, natural deleverage, right? We typically lever at around 3 points of if you say -- at 1 point of comp, we've got kind of 2 points of deleverage headwind. 2x, about 10 basis points each gives you about 20 basis points of deleverage. So that's 20 of the 40. Then 15 of the 40 is the partial year-over-year impact of SRS. We will own SRS 12 months this year, we owned them for about 7 months last that 15 is the year-over-year impact. Think of the fully annualized impact of SRS, just mix impact being around 40 basis points to adjusted operating margin, but the year over year is 15. So that's 20 from deleverage, 15 from SRS and the remaining 5 is caused by going from a 53rd week year to a 52-week all that, we are generating fantastic productivity which we are reinvesting in the business to put ourselves in a position to take share in any environment. Christopher Horvers Thank you. Have a great rest of the spring. Operator Simeon Gutman, Morgan Stanley. Simeon Gutman I want to follow up on the comp guidance for the year, the April exit and then May commentary sounds good, close to 2. SRS will kick up, I think, at some point in the second quarter. And I also think the back half was always expected to be a little bit better than the first half. So curious what -- if there's any added caution or just prudence in how you're setting it up. You could get to 1.5 to 2.I'm not trying to get you on that. But if trends that you're seeing today hold, you should do a little bit better maybe than the guidance? Or is there some extra caution you're putting in with housing? Richard McPhail Simeon, thank you for the question. We're one quarter in. The team did an awesome job of hitting our expectations. But for the FX pressure, which was $270 million -- sorry, $275 million on the top line, without that FX pressure, we would have exceeded our own expectations. But we're at quarter end. We feel good about the business heading into Q2. But right now, we feel good about reaffirming our guidance where it is. Simeon Gutman Okay. A follow-up on sales related to SRS. Can you talk about how much of a catalyst either order management or trade credits have been or starting to be? And then within that if you're willing to share the relative strength of SRS businesses between roofing, pool and landscape. Edward Decker Hey, Simeon. We're super pleased with SRS performance. If you just look at their growth by the three verticals they operate in, we exceeded our expectation. We believe they're taking share in each of those three verticals. So could be happier with are operating per their playbook of organic growth made up of comp branch growth and opening new branches as well as tuck-in acquisitions, and that is active in all three in terms of how they're helping us on our Pro ecosystem, the main thing they're working on right now is the trade credit program. So as we talked about the six broad capabilities of delivery and sales force and pricing and order management, et cetera, credit is a key component of that as we started to build out that capability in-house, we said, well, geez, SRS, that's their business model. They have 90,000-plus accounts on trade credit. They have an extraordinarily capable set of managers and team members running that program for we just said rather than build it ourselves here in Atlanta, let's let SRS build that for us and run our credit out of Dallas, which they're we're still very early days. We're in the thousands of accounts onboarded to a credit program with our Home Depot Core Pro. And like every bit of our capabilities, as our Pros engage in the new capabilities, whether it's be assigned a sales representative, engage in delivery, and now in this case, attaining a line of credit, we see accelerating really happy with how this is going and look forward to increase growth as we onboard more customers. Remember, we have millions of Pro customers. Not saying we're going to have millions of accounts anytime soon, but we're in the low single-digit thousands of onboarded accounts on our way to millions. Richard McPhail And just one thing on the specific verticals, we feel great about performance across all three. Simeon Gutman Okay. Thanks. Have a great spring. Operator Michael Lasser, UBS. Michael Lasser My first question is on tariffs. So a little less than 50% of your sales are coming from outside of the US. They're currently anywhere from a 10% to 30% tariff on those goods. So we assume a blended rate of 20%, and The Home Depot is absorbing half of that, it would mean, on average, that's going to be about a 5% tariff on your cost of goods. How is The Home Depot approaching that from a pricing standpoint?And if we assume you generally see pricing steady, does that offset or absorb some of the productivity, supply chain and shrink benefits that would potentially accrue to shareholders over the next few years that it potentially would not materialize? Now given they'll need to be used to offset the pricing -- the cost increases. William Bastek Well, Michael, thanks for the question. So listen, you hit on a couple of the things that Ted mentioned in his prepared remarks, over 50 -- it's important, but over 50% of our purchases are sourced in the US, as you've mentioned, and we've been working with our suppliers for years. I mean, one of the hallmarks of Home Depot has always been diversification and diversifying with their supply during that time, a majority of our suppliers have diversified their sourcing strategies across several countries. We've got tremendous flexibility here. I can't emphasize that enough. We're already taking action, moving quickly, and we anticipate 12 months from now that no single country outside of the US will actually represent more than 10% of our so if you think about our scale, the great tremendous partnerships, I can't reiterate those enough that we have with our suppliers. And we mentioned productivity, a hallmark at The Home Depot we see in our intend to generally maintain pricing across our portfolio. We'll continue to use the portfolio approach that we've talked a lot about in the past. But we don't see broad-based price increases for our customers at all going forward. It's a great opportunity for us to take share, and it's a great opportunity for our suppliers to take share as well. Michael Lasser And just to clarify, Billy, does that mean you will have to subsidize what would have been price increases with some of the other benefits that would have accrued to the gross margin otherwise? William Bastek Listen, we have a number of different levers that we have in the portfolio. Michael, you mentioned a few of those. We have a number of different levers, including productivity. And the other thing I would keep in mind is that if you think about our line structure today, there's items that we have that could potentially be impacted from a tariff that candidly, we won't have going forward if it doesn't make sense inside the line it's a little bit less about the item in the percentages that you mentioned and more about the line structure and how we'll manage that going forward. And there'll be some things that don't make sense that just end up going if you think about it that way, really a limited impact from that standpoint. And our suppliers, along with our teams, have done a terrific job diversifying their global supply chains, and this is not new to The Home Depot. It's always been something that we've worked closely with our suppliers we feel good about all the productivity and the other things that we have in our arsenal to manage that accordingly for our customers. Michael Lasser Got you. My follow-up question is on Ted's comment that there could be $50 billion of deferred demand in home improvement. If we just simply apply Home Depot's market share of around 25% to that number, that would be $10 billion to $15 billion of deferred demand that Home Depot could experience over the next few years, either as rates come down or as the consumer just comes in off the sidelines because of a matter of time shouldn't we think about that as providing an outsized benefit to the Home Depot sales growth over the next few years above and beyond the 3% to 4% top line growth that is inherent in your algorithm? Edward Decker Well, that's certainly our expectation, that that's exactly the type of share opportunity as we continue to dial in the core orange box business servicing the DIY and the Pro. And then all the capabilities that we're building to capture more share of wallet with the larger Pro, that would absolutely be the outside case where we're taking more share, Michael, and that's exactly what we hope to do. And we'll talk more about that in December at our investor conference. Michael Lasser Understood. Thank you so much, and good luck. Operator Scot Ciccarelli, Truist. Scot Ciccarelli Last quarter, you provided some extra comments on the 17 markets where you have extra capabilities rolled out for the complex Pro. Can we get an update on what capabilities are kind of rolled out where? And then any more color on the relative performance of those markets? Edward Decker So there's -- Scot, there are no additional markets. So we're in 17 markets with our -- in the distinction of the 17 markets, again, is where we have a flatbed distribution center. Now we're delivering in all markets as we've done for years, but again, to distinguish there is that we have a separate just continued to make progress. So the sales team continues to mature. Our pricing schemes continue to mature. Delivery, our on-time and complete scale delivery has never been better. And by the way, that is with the consumer DIY parcel business to the big and bulky deliveries out of our stores, as well as out of our multiple distribution facilities, our MDOs, market delivery operations, our DFCs, and our never been in a better in-stock and on-time and complete delivery with the fastest speed of all time in our delivery last and maybe the longest pole in the tent is finishing up the IT work on order management and account management. As I said, the credit program is built, and we're onboarding. Just early days there, and we'll be finishing up throughout 2025, the last initial build of the technology work to build more agile order management. And then that should only improve our on-time and complete in speed metrics. Scot Ciccarelli Got it. And then, Richard, can you just comment on the expectations regarding SRS getting layered into the comp kind of mid-2Q, kind of how you guys are thinking about that for the balance of the year? Richard McPhail Yes. So we acquired -- we closed on the acquisition of SRS mid-June last year. So they will enter our comp base shortly, and we'll own them for a little more than seven months this year. Once they enter the comp base, we will report them as part of total company our US comp that we report is principally our retail operations and reflects those. We have historically reported HD Supply, for instance, not in US comp, but in total company comp to give you that clean look of the US retail business. So SRS will be treated will not be reported as part of the US comp. They will be reported as part of total company comp. We expect them -- so look, for the quarter, SRS actually exceeded our expectations. They delivered $2.6 billion in sales, and we expect them to meet our expectations of mid-single-digit growth for the year, and we're looking forward to continued growth with them. That acquisition is one to be proud of, and we're making, as Ted said, a lot of progress with SRS. Scot Ciccarelli Great. Thanks a lot guys. Good luck. Operator Zhihan Ma, Bernstein. Zhihan Ma So first one on the inventory, which looks to be up about 15% this quarter, can you just help us understand how much of that was driven by SRS in the base? And has there been any pull forward of inventory? And more broadly speaking, how do you feel about your inventory positioning ahead of the summer and more forward looking into the holidays? Richard McPhail Thank you. We feel great about our inventory position. We are, at in-stock levels, as good as they've ever been. But a little bit behind the numbers. First, recall, SRS was not reflected in our Q1 balance sheet last year. So the majority of the increase year-over-year in inventory is simply from adding the SRS inventory into our also made investments, though, as we saw gains from our speed initiative online and in our supply chain, we saw momentum in that part of our business and that customer experience. We began heavier load ends in our DCs to take advantage of that customer momentum. And so that -- the inventory position is right where we want to be, really no pull forward here. And if you think about -- Billy, maybe you want to talk a little bit about spring and how that works? William Bastek Yeah. I mean this is our Super Bowl season, Q2 specifically. And so as Richard mentioned, we did not pull forward any inventory. Having said that, all of our goods for really, the seasonal think of the first half of our business depending on where it breaks across the country has been in our DCs, in our network. So a little bit slower as we mentioned in February, that's caught back all of that inventory has landed well before the fiscal year started. And so we feel great about our position. We mentioned our in-stock rates have never been better, really thrilled with that. Thanks to our suppliers again for great work we feel we're in a great position as it relates to the biggest part of our year coming up. And then we talked about speed and how that's working for us with our customers. Really pleased with the performance there. We've continued to invest in our DFC network. As we know speed is the key metric to conversion, and we're really pleased with the productivity we're getting out of that inventory as well. Zhihan Ma Great. A quick follow-up in terms of the accelerating comps in -- over the course of Q1. Was there any Easter timing shift impacted there? And are you seeing the exit rate continuing in May? Richard McPhail There absolutely was an Easter timing shift that if you add to April, it benefited March to the detriment of April. And so if you adjust for that Easter week shift, April would have been closer to 2.5% comp in the US than our reported comp. Operator Zach Fadem, Wells Fargo. Zach Fadem Following up on pricing, as it sounds like you've got the levers at your disposal to hold pricing and margins relatively consistent. But when you think about the industry and your competitors, is it fair to say in that scenario that your price spreads versus your peers would widen? And then when you look at your elasticity models, is there a specific level of tariff that would preclude you or the industry from being able to hold price constant? William Bastek Yeah. Thanks, Zach. I'm not going to speak to our competitive set and what they're going to do with retail. As I mentioned a few minutes ago, we feel very good about our position in terms of where we are, diversification, and all the things that I mentioned are always testing elasticity models in this environment, in every environment. We have a great team with our merchants and obviously, with our finance partners, and we're always testing those elasticity models in any environment. We'll do the same here as we've done every other as it relates to our price positioning versus the market, I wouldn't speculate on that. We just feel great about our position. We've got the best merchants, supply chain and finance teams. We've got tremendous models down to the SKU level and where all of our assortments are and where they're going from a diversification standpoint. So I'd say that we feel very confident about our price position, as I mentioned. Zach Fadem Got it. And then, Richard, from an accounting perspective, you're under the retail inventory method. So just want to make sure that there's no change in the way we should think about your gross margin? And if there's any puts and takes we should keep in mind as the tariff-driven cost flow through your P&L and how that will get recognized as you match that with sales? Richard McPhail We are on the retail inventory method. Look, you will see a little bit of variability reflecting changes in retail. Where that happens, mark us, where that happens. But there's really not anything significant to call out quarter to quarter for us. Zach Fadem Got it. Thanks. Richard McPhail Remember, our retail has moved in ordinary course. So in any quarter, you're going to see the effect of price changes right in that retail map method. Operator Seth Sigman, Barclays. Seth Sigman I wanted to ask about the housing backdrop and if you could elaborate on regional performance in the period. I'm curious what you're seeing in markets where maybe housing activity has softened a bit, where home prices have softened? I guess if we do see home prices weaken, does that matter as much as maybe in the past just given where home equity is versus history? Edward Decker Yeah. Tough to prescribe, Seth, the exact dynamic there. But there are a couple of markets that we saw a slight softening, but we've not seen any change in sales associated with that. This time of year, as you can imagine, weather is the dominant determinant of a particular region's performance. So nothing yet on any price changes in housing impacting the business. Seth Sigman Okay. Got it. And then as you think about the demand outlook, your business has been improving modestly in Q4 and then again in the last several months. If you look out, even as you're not raising prices, it seems like a lot of other companies are going to be raising prices even outside of the home improvement category. There's a growing concern that that's going to weigh on the consumer, it's going to weigh on spending power. How do you think about that? Do you see that as a risk to the outlook that you've laid out here? Edward Decker Well, I think there's a lot of talk of demand destruction, what I mentioned earlier in an earlier question that if there was a significant shock to the economy, an expectation of recession and overall demand destruction, I think we're well past if there is some share of wallet dynamic due to raising prices in other sectors of the economy, we'll be watching that very closely. But again, the thing to keep in mind is we have a very different customer and a very different sort of use case for expenditure in home improvement. So our customer, from a broad basis, is one of the strongest in the economy. The average income is $110,000.80% of our customers own their homes. We've talked about how much home price appreciation they've seen over the past year. Stock markets have recovered, job and wage growth are our customer is in a good spot right now. I mentioned Morning Consult. If you look at their views of different income levels and expectations of the economy and most recent impact on wage growth, that $100,000-plus customer is, by far, in the best shape in the economy. So it's something we're watching, something like -- energy pricing is broad-based and obviously impacts everyone. Gas prices are going that's a help, but food prices have remained high. So something we obviously watch. But I think we're well past the dialogue of overall demand destruction. Operator Chuck Grom, Gordon Haskett. Chuck Grom On the consumer, just curious if you saw any pull forward in demand in the quarter or a change in project sizes, if there's any sense of urgency to get projects done sooner before prices rise? And I might have missed it, but did you guys comment on how May has trended so far relative to the first quarter? William Bastek Yeah, Chuck, thanks for the question. In terms of pull forward, we didn't see a lot of that. We may have seen a little bit of that in appliances, but across our broader business, we really didn't see any pull forward at all. We'll wait and see on some of the appliance pieces. But across our business, we haven't seen terms of engagement with projects, as I mentioned in my prepared remarks, we're seeing customers engage as they did in the back half of 2024, smaller projects. We know that finance projects are still feeling pressured, but we're really thrilled with the engagement that we saw in our customers where the weather was. And as Richard mentioned in his remarks, the first two weeks of May, we're very pleased with the performance so far. Chuck Grom Okay. Great. And then one, Richard, just four consecutive quarters now of shrink, roughly -- probably, call it 30 basis points to 40 basis points of the tailwind. Can you just remind us where the accrual sits today, maybe relative to 2019? I'm just trying to assess how much longer that benefit can continue to help you?And then zooming out on SRS, we talked a lot about the sales benefit, but as you said, 40 basis points of a headwind to the margin profile this year on an annualized basis. How do we think about SRS in 2026 from a margin perspective? Richard McPhail Well, I'll take those maybe in reverse order. First of all, we're not in a position right now where we're going to talk about 2026, but we know SRS has a track record of growing faster than their competition and taking share in any environment. So we expect they will be an engine for growth for the your shrink question, I think the most important point -- because the world is a lot different now than it was in 2019 -- is that we're not where we want to be, but we're making great headway. And we know that the external environment is not getting any easier, but our operators are getting better. And they are delivering results. We -- we're not where we want to be yet, but we've bent that curve down actually six quarters in a row on a VOY then we'll see you -- just to clarify something, you asked -- you said 40 basis points of SRS, I think you got it right. That's the annualized impact. For 2025 versus '24, it's 15 basis points. Isabel Janci Christine, we have time for one more question. Operator Steven Zaccone, Citi. Steven Zaccone Great. First one was just on the first quarter. When you look at performance by region, can you just help us understand how that played out? Because obviously, there was a good amount of weather volatility. And then did the hurricane recovery efforts provide a benefit at all in the first quarter? Richard McPhail Well, we saw the majority of the tough weather kind of play out in the north and in Canada. And with respect to hurricanes, there was some benefit in Q1 right around where we would have expected. And that benefit is baked into our annual guidance because on a year-over-year basis, the benefit seen in '24 is largely matched by the benefit in 2025. Steven Zaccone Great. And then the follow-up I had is on pricing. I know it's been asked a good amount, but what are you seeing right now in terms of the competitive environment when it comes to pricing? Because presumably, some of the smaller players have probably needed to take up price sooner than others, just they have less negotiating power. So what have you seen in the competitive environment? William Bastek Yeah. I mean, so far, Steven, we've seen pretty consistent pricing. I mean, we obviously we're very focused on our price position and what we look at in the CPI that we look at. But we haven't seen a lot so far in terms of price modifications in the marketplace. Again, it's somewhat early days still, and I would just reiterate our position, as I mentioned, about not seeing broad-based price increases at The Home Depot. Operator Ms. Janci, I'd like to turn the floor back over to you for closing comments. Isabel Janci Thanks, Christine, and thanks, everybody, for joining us today. We look forward to speaking with you on our second quarter earnings call in August. Operator 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. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
San Francisco Chronicle
20-05-2025
- Business
- San Francisco Chronicle
Home Depot: Fiscal Q1 Earnings Snapshot
ATLANTA (AP) — ATLANTA (AP) — The Home Depot Inc. (HD) on Tuesday reported fiscal first-quarter profit of $3.43 billion. The Atlanta-based company said it had net income of $3.45 per share. Earnings, adjusted for amortization costs, came to $3.56 per share. The results missed Wall Street expectations. The average estimate of 12 analysts surveyed by Zacks Investment Research was for earnings of $3.59 per share. The home-improvement retailer posted revenue of $39.86 billion in the period, beating Street forecasts. Nine analysts surveyed by Zacks expected $39.4 billion.
