Q1 2024 The Home Depot Inc Earnings Call

May 14, 2024

And the conference. Please press Star zero on your telephone keypad.

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Speaker Change: As a reminder, this conference is being recorded.

Speaker Change: It is now my pleasure to introduce your host Isabel Janney. Please go ahead.

Isabel Janney: Thank you Christina and good morning, everyone welcome to LNG growth first quarter 'twenty 'twenty four earnings call joining.

Isabel Janney: Joining us on our call today are Ted Decker chair President and CEO.

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Speaker Change: Ann Marie Campbell Senior Executive Vice President.

Silly Backtick: Silly Backtick executive Vice President of merchandising and Richard Mcphail, Executive Vice President and Chief Financial Officer.

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Silly Backtick: Following our prepared remarks, the call will be open for questions.

Silly Backtick: Questions will be limited to analysts and investors and as a reminder, please limit yourself to one question with one follow up.

Greetings and welcome to the home Depot first quarter 2024 earnings Conference call.

Speaker Change: If we are unable to get to your question during the call. Please call our Investor Relations Department at 7703842387.

At this time all participants are in a listen only mode.

A brief question and answer session will follow the formal presentation.

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Ted Decker: Before 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 1995.

As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host Isabel <unk>. Please go ahead.

Thank you Christina and good morning, everyone welcome to <unk> third quarter 2024 earnings call joining us on our call today are Ken Stecher Chair President and CEO.

Ted: These 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 filings with the Securities and Exchange Commission.

Ann Marie Campbell Senior Executive Vice President.

Daily Bassi Executive Vice President of merchandising and Richard Mcphail, Executive Vice President and Chief Financial Officer.

Ted: Today's presentation will also include certain non-GAAP measures reconciliation of these measures is provided on our website.

Following 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.

Speaker Change: Now, let me turn the call over to Ted.

Speaker Change: Thank you Isabella and good morning, everyone sales for the first quarter was $36 $4 billion down two 3% from the same period last year.

If we are unable to get to your question during the call. Please call our Investor Relations Department at 700 703842387.

Ted: Comp sales declined two 8% from the same period last year, our U S stores had negative comps of three 2%.

Before I turn the call over to Ted Let me remind you that todays press release and the presentations made by our executives include forward looking statements as defined in the private Securities Litigation Reform Act of $19 95.

Speaker Change: Diluted earnings per share were $3.63 in the first quarter compared to $3.82 in the first quarter last year.

Speaker Change: The team executed at a high level in the quarter continued to grow market share.

Speaker Change: While the quarter was impacted by the late start to spring and continued softness in certain larger discretionary projects, we feel great about our store readiness product assortment and associate engagement.

Speaker Change: These statements are subject to risks and uncertainties that could cause actual results to differ materially from our expectations and projections.

Ted: These risks and uncertainties include but are not limited to the factors identified in the release and in our filings with the Securities and Exchange Commission.

Speaker Change: Proceeds are energized and ready to serve our customers as spring breaks across the country.

Speaker Change: As you will hear from Billy where weather was favorable we saw good customer engagement and strengthen outdoor projects.

Ted: Today's presentation will also include certain non-GAAP measures reconciliation of these measures is provided on our website.

Speaker Change: In addition, our focus remains on creating the best interconnected experience growing pro wallet share with a differentiated set of capabilities and building new stores.

Speaker Change: Now, let me turn the call over to Ted.

Ted Decker: Thank you Isabel and good morning, everyone sales for the first quarter was $36 4 billion.

Speaker Change: Driving sales growth with our pro customers remains one of our top focus areas.

Ted Decker: Down two 3% from the same period of last year.

Isabel Janci: Comp sales declined two 8% from the same period last year and our U S stores had negative comps of three 2%.

Speaker Change: Remember we operate in a 45 trillion dollar asset class, which represents the install base of homes in the United States and.

Ted Decker: Diluted earnings per share was $3 63 in the first quarter compared to $3 82 in the first quarter last year.

Speaker Change: And we serve a highly fragmented addressable market of approximately one trillion dollars.

unknown: Within that Tam the greatest opportunity is with the residential pro contractor shops across many categories of home improvement products, while working on complex projects.

Ted Decker: The team executed at a high level in the quarter continued to grow market share.

Ted Decker: While the quarter was impacted by a delayed start to spring and continued softness in certain larger discretionary projects, we feel great about our store readiness product assortment and associate engagement.

Speaker Change: We've defined that specific opportunity as an approximately $250 billion Tam of which we have relatively little share today.

Ted Decker: Associates are energized and ready to serve our customers as spring breaks across the country.

We: We also know that to effectively serve this tam we need an expanded set of capabilities and services that we referred to as our pro ecosystem.

Ted Decker: As you will hear from Billy where weather was favorable we saw good customer engagement and strengthen outdoor projects.

Speaker Change: And while the store remains the center of that ecosystem, we are developing more fulfillment options and a dedicated sales force specific digital assets trade credit in order management capabilities geared at the residential pro two shops across categories.

Speaker Change: In addition, our focus remains on creating the best interconnected experience growing pro wallet share with a differentiated set of capabilities and building new stores.

Ted Decker: Driving sales growth with our pro customers remains one of our top focus areas remember we operate in a 45 trillion dollar asset class, which represents the installed base of homes in the United States.

Speaker Change: As we've shared with you before our more mature markets with this pro ecosystem have seen great success. So we are expanding to other markets.

Ted Decker: And we serve a highly fragmented addressable market of approximately one trillion.

Speaker Change: As you heard last quarter, we'll have the foundational elements of our ecosystem in 17 markets by the end of the fiscal year.

Ted Decker: <unk>.

Ted Decker: Within that Tam the greatest opportunity is with the residential pro contractor shops across many categories of home improvement products, while working on complex projects.

Speaker Change: And while these 17 markets are currently at different maturity levels. They are outperforming our other large pro markets in aggregate.

Ted Decker: We have defined that specific opportunity as an approximately $250 billion Tam.

Speaker Change: Earlier this quarter, we announced our intent to acquire Srs residential specialty trade distributor with a leading position in three large highly fragmented specialty trade verticals, serving the roofer to pool contractor in the landscape professional.

Ted Decker: Which we have relatively little share today.

Ted Decker: We also know that to effectively serve this tam we need an expanded set of capabilities and services that we referred to as our approach ecosystem.

Srs: Srs as complementary to the ecosystem, we've been building, giving us another avenue to more effectively serve the complex project occasion.

Srs: They also give us the right to win with especially trade pro customer.

Forest: Forest doesn't exceptional job, serving the specialty trade pro who typically only shops, one category and need specialized capabilities to complete their project.

Speaker Change: As we've shared with you before our more mature markets with this pro ecosystem has seen great success. So we're expanding to other markets.

Forest Smith: In addition, Srs is an exceptionally well run business with a world class management team as we build out our own ecosystem, we can leverage their expertise and deep product catalog in the verticals in which they operate.

Speaker Change: As you heard last quarter, we'll have the foundational elements of our ecosystem in 17 markets by the end of the fiscal year.

Ted Decker: And while these 17 markets are currently at different maturity levels. They are outperforming our other large pro markets in aggregate.

Srs: We have significant growth opportunities in front of us and we're very happy with the operational execution in our core business.

Speaker Change: Earlier this quarter, we announced our intent to acquire Srs, a residential, especially trade distributor with a leading position in three large highly fragmented specialty trade verticals, serving the roofer to pool contractor in the landscape professional.

Srs: And despite pressure in the markets, we continue to invest in our business.

Srs: We are gaining share of wallet with our customers whether they are shopping in our stores on our digital assets or through our pro ecosystem.

Srs: Srs as complementary to the ecosystem, we've been building, giving us another avenue to more effectively serve the complex project occasion.

Srs: Our merchants store and met teams supplier partners and supply chain teams are always ready to serve in any environment. They did an outstanding job delivering value and service to our customers throughout the quarter and I'd like to close by thanking them for their dedication and hard work.

Speaker Change: Also give us the right to win with the specialty trade pro customer.

Speaker Change: <unk> does an exceptional job serving the specialty trade pro who typically only shops, one category and need specialized capabilities to complete their project.

Ann: With that let me turn the call over to Ann.

Ann: Thanks, Ted and good morning, everyone as we head into our biggest selling season.

Speaker Change: In addition, Srs is an exceptionally well run business with a world class management team as we build out our own ecosystem, we can leverage their expertise and deep product catalog in the verticals in which they operate.

Ann: Our associates continue to be engaged.

Ann: Good and ready to serve our customers.

Ann Smith: As Ted mentioned growing share of wallet with the pro and winning approach working on complex projects continues to be our largest growth opportunity.

Speaker Change: We have significant growth opportunities in front of us and we're very happy with the operational execution in our core business and despite pressure in the market, we continue to invest in our business.

Ann: We know that delivering the best shopping experience any participation is critical to our success.

Ted: That is why we continue to invest in our pro sales teams and capabilities.

Speaker Change: We are gaining share of wallet with our customers whether they are shopping in our stores on our digital assets or through our pro ecosystem.

Ted: We have developed new capabilities within our pro intelligence to which feeds or CRM platform and Leverages data science to bring better insight to our sales teams.

Speaker Change: Our merchants store and met teams supplier partners and supply chain teams are always ready to serve in any environment.

Sales Team: These tools are helping us to bolt assist in identifying the optimal pro targets in our market as well as the highest value cross sell and opportunities to drive action and sales.

Richard Mcphail: They did an outstanding job delivering value and service to our customers throughout the quarter and I'd like to close by thanking them for their dedication and hard work.

Ann: With that let me turn the call over to Ann.

Ted: Another critical component of the shopping experience is being in stock with the right products and ensuring those products are on shelf and available for sale.

Ted Decker: Thanks, Ted and good morning, everyone as we head into our biggest selling season.

Speaker Change: Our associates continue to be engaged excited and ready to serve our customers.

Ted: We've talked to you before about sidekick in computer vision and are thrilled with the results we've seen so far.

Speaker Change: As Ted mentioned growing share of wallet with the pro and winning approach working on complex projects continues to be our largest growth opportunity.

Ted: This year, we will continue to lean in to improve the OSA and drive productivity by creating consistent actionable and directed task for our associates.

Speaker Change: We know that delivering the best shopping experience for any participation is critical to our success.

computer vision: What's really exciting is how we are also now leveraging computer vision for auto applications across the store for example, computer vision helps us maintain the integrity of obeys by ensuring that the products on the shelf meets or quality standards, maintaining high quality damage free products is a key.

Ted Decker: That is why we continue to invest in our pro sales teams and capabilities.

Ted Decker: We have developed new capabilities within our pro intelligence to which feeds or CRM platform and Leverages data science to bring better insight to our sales teams.

Speaker Change: Component of deliberate on the customer experience. Additionally.

Speaker Change: These tools are helping us to assist in identifying the optimal pro targets in our market as well as the highest value cross sell and opportunities to drive action and sales.

Speaker Change: Additionally, we have also deployed this technology in our self checkout for out to help us mitigate shrink.

Speaker Change: <unk> vision can identify complex carbs or high value cards and signal the cashier to help the customer with their basket to ensure our products are scanned and accounted for.

Speaker Change: Another critical component of the shopping experience is being in stock with the right products and ensuring those products are on shelf and available for sale.

Speaker Change: While we will continue to improve upon all of these technology enabled application. We are thrilled with the early results we've seen.

Speaker Change: We've talked to you before about sidekick and computer vision.

Ted Decker: The results we've seen so far.

Speaker Change: This year, we will continue to lean in to improve OSA and drive productivity by creating consistent actionable and directed task for our associates.

unknown: Last quarter, we talked with you about one of our areas of opportunity within our post sale experience specifically within our returns process I'm excited to update you that over 70% of online orders are now able to be self service to turn from the my account profile on our website.

computer vision: What's really exciting is how we are also now leveraging computer vision for auto applications across the store for example, computer vision helps us maintain the integrity of obeys by ensuring that the products on the shelf meet all quality standards maintain and high quality damage free products is a key.

Speaker Change: Now our customers can create their own return of an online order and drop it off at a UBS with a scan a barcode.

Speaker Change: Later this year, we will enable job site pickup for returns back to our FTC, which will be a game changer for pro shopping experience.

Speaker Change: Component of deliberate on the customer experience. Additionally.

Ted Decker: Additionally, we have also deployed this technology self checkout corral to help us mitigate shrink.

UBS representative: This enhancement will allow our customers primarily the residential pro initiated returned from their job site versus having to return big and bulky items to the store. This is a massive win not only for growth, but also for associates <unk> stores and will drive better customer satisfaction and.

Speaker Change: <unk> vision can identify complex carbs for high value cards and signal the cashier to help the customer with their basket to ensure our products are scanned and accounted for.

Adam: While we will continue to improve upon all of these technology enabled application. We are thrilled with the early results we've seen.

Speaker Change: Greater store productivity.

Speaker Change: These initiatives are just a few examples of the different ways, we're improving the shopping experience for customers and <unk>.

Ted Decker: Last quarter, we talked with you about one of our areas of opportunity within our post sale experience specifically within our returns process I'm excited to update you that over 70% of online orders are now able to be self service returned from their my account profile on our website.

Speaker Change: I am so excited about all we're doing to drive sales in our stores and I look forward to the opportunity that's ahead of us.

Billy: None of this would be possible without our amazing associates and I want to thank them for all they do to take care of our customers with that let me turn the call over to Billy.

Speaker Change: Now our customers can create their own return of an online order and drop it off at <unk> with a scan a barcode.

Billy: Thank you Anne and good morning, everyone.

Billy Smith: I want to start by also thanking all of our associates and supplier partners for their ongoing commitment to serving our customers and communities.

Ted Decker: Later this year, we will enable job site pickup for returns back to our SEC, which will be a game changer for pro shopping experience.

Ted: As you heard from Ted during the first quarter, our sales were impacted by a delayed start to spring and continued softness in certain larger discretionary projects.

Speaker Change: This enhancement will allow our customers primarily the residential pro initiated returned from their job site versus having to return big and bulky items to the store. This is a massive win not only for pros, but also for associates <unk> stores and will drive better customer satisfaction and.

Ted: However, where weather was favorable we saw good customer engagement and strengthen outdoor projects.

Ted: Yes.

Ted: Before providing commentary on our comp performance. It's important to note that we made some merchandising department changes to more closely reflect how our customers shop, our categories and better align with our merchandising growth efforts.

Ted Decker: Greater store productivity.

Ted Decker: These initiatives are just a few examples of the different ways, we're improving the shopping experience for our customers and our associates.

Speaker Change: We now have 16 departments of some 14 previously and have separated electrical and lighting and kitchen and Bath. Additionally.

Speaker Change: Additionally, we have renamed our tools department to power and included outdoor power equipment to capture synergies and maximize the strength of our battery powered platforms.

Ted Decker: I am so excited about all we're doing to drive sales in our stores and I look forward to the opportunity that's ahead of us.

Billy: None of this would be possible without our amazing associates and I want to thank them for all they do to take care of our customers with that let me turn the call over to Billy.

Speaker Change: Turning to our department comp performance for the first quarter, our building materials and power departments posted positive comps while outdoor garden.

Ted Decker: Thank you Anne and good morning, everyone.

Speaker Change: Tank <unk>.

Ted Decker: I want to start by also thanking all of our associates and supplier partners for their ongoing commitment to serving our customers and communities.

Speaker Change: Lumber plumbing and hardware were all above the company average.

Speaker Change: During the first quarter, our comp transactions decreased one 5% and comp average ticket decreased one 3%.

Speaker Change: As you heard from Ted during the first quarter, our sales were impacted by a delayed start to spring and continued softness in certain larger discretionary projects.

Speaker Change: However, we continue to see our customers trading up for new and innovative products.

Ted Decker: However, weather was favorable we saw good customer engagement and strengthen outdoor projects.

Speaker Change: Big ticket comp transactions or those over $1000 were down six 5% compared to the first quarter of last year.

Speaker Change: Before providing commentary on our comp performance. It is important to note that we made some merchandising department changes to more closely reflect how our customers shop, our categories and better align with our merchandising growth efforts.

Speaker Change: We continue to see softer engagement and larger discretionary product projects, where customers typically use financing to fund the projects such as kitchen and Bath Remodels.

Speaker Change: We now have 16 departments up from 14, previously and have separated electrical and lighting kitchen and Bath. Additionally.

Speaker Change: Turning to total company online sales sales leveraging our digital platforms increased three 3% compared to the first quarter of last year.

Speaker Change: Additionally, we have renamed our tools department to power and included outdoor power equipment to capture synergies and maximize the strength of our battery powered platforms.

Speaker Change: So those customers that chose to transact with us online during the first quarter nearly half of our online orders were fulfilled through our stores.

Ted Decker: Turning to our department comp performance for the first quarter, our building materials and power departments posted positive comps, while outdoor garden paint.

Speaker Change: We are incredibly focused on removing friction for our customers to create an excellent interconnected shopping experience.

Ted Decker: <unk> plumbing and hardware were all above the company average.

Speaker Change: We continue to work on improving our online search functionality and serving the most relevant product offerings to our customers.

Ted Decker: During the first quarter, our comp transactions decreased one 5% and comp average ticket decreased one 3%.

Speaker Change: To do this we rolled out an intent based search engine at combines keywords behaviors and intend to deliver more targeted results.

Speaker Change: However, we continue to see our customers trading up for new and innovative products.

Speaker Change: And we enhanced our filtering capabilities, improving the customers' ability to find exactly what they're looking for.

Ted Decker: Big ticket comp transactions or those over $1000 were down six 5% compared to the first quarter of last year.

Speaker Change: All of these initiatives work together to drive strong results in our online business.

Speaker Change: We continue to see softer engagement and larger discretionary project projects, where customers typically use financing to fund the projects such as kitchen and Bath Remodels.

Speaker Change: Pro and DIY customers performance was relatively in line with one another but both were negative for the quarter.

Speaker Change: While pro backlogs remain relatively stable, we hear from our pros and homeowners continue to take on smaller projects.

Speaker Change: Turning to total company online sales sales leveraging our digital platforms increased three 3% compared to the first quarter of last year.

Speaker Change: The investments we are making are resonating with our pros as we see increased engagement.

Speaker Change: For those customers that chose to transact with us online during the first quarter nearly half of our online orders were fulfilled through our stores.

Speaker Change: For example, we have made significant progress with the pro who paints and continue to see share gains with this customer.

Ted Decker: We are incredibly focused on removing friction for our customers to create an excellent interconnected shopping experience.

Speaker Change: Our partnerships with Behr, and PPG as well as enhanced capabilities around our in store service and job site delivery capabilities are helping to remove friction from their experience.

Speaker Change: We continue to work on improving our online search functionality and serving the most relevant product offerings to our customers.

Speaker Change: During the end of the first quarter, we hosted our annual spring Black Friday in 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 event.

Speaker Change: To do this we rolled out an intent based search engine that combines keywords behaviors and intend to deliver more targeted results.

Ted Decker: And we enhanced our filtering capabilities, improving the customers' ability to find exactly what they're looking for.

Speaker Change: We are pleased with the results, we saw particularly in categories like riding lawnmowers and outdoor power equipment, where we had experienced some discretionary pull forward over the last couple of years.

Ted Decker: All of these initiatives work together to drive strong results in our online business.

Scott: Pro and DIY customers performance was relatively in line with one another but both were negative for the quarter.

Speaker Change: The trend away from gas to battery powered products is continuing and we are well positioned with our assortment.

Ted Decker: While pro backlogs remain relatively stable, we hear from our pros that homeowners continue to take on smaller projects.

Speaker Change: The brands are customers are looking for whether it's ryobi, Milwaukee dewalt makita or rigid.

Ted Decker: The investments we are making are resonating with our pros as we see increased engagement.

Speaker Change: We estimate that there are nearly 500 million batteries in the market today and our assortment covers the vast majority of these batteries in fact more than 70% of batteries with brands that are exclusive to the home depot in the big box channel.

Ted Decker: For example, we have made significant progress with the pro who paints and continue to see share gains with this customer.

Ted Decker: Our partnerships with Behr, and PPG as well as enhanced capabilities around our in store service and job site delivery capabilities are helping to remove friction from their experience.

Speaker Change: With hundreds of products across each of these platforms. This is one of the best loyalty programs that keeps customers coming back to the home depot.

Speaker Change: And our live goods category looks incredible we are ready for spring with everything from shrubs to a variety of flowers herbs and vegetables for every type of Gardner.

Speaker Change: We're 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.

Richard Mcphail: In the first quarter total sales were $36 4 billion a decrease of approximately two 3% from last year.

Ted Decker: The trend away from gas to battery powered products is continuing and we are well positioned with our assortment. We have the brands our customers are looking for whether it's ryobi, Milwaukee Dewalt makita or rich.

Richard Mcphail: During the first quarter, our total company comps were negative two 8%.

Richard Mcphail: Comps of negative 4% in February negative <unk>, 8% in March and negative three 3% in April comps.

Billy Smith: Comps in the U S were negative three 2% for the quarter with comps of negative four 8% in February negative one 3% in March and negative three 6% in April.

Speaker Change: With hundreds of products across each of these platforms. This is one of the best loyalty programs that keeps customers coming back to the home depot.

Ted Decker: And our live goods category looks incredible we are ready for spring with everything from shrubs to a variety of flowers herbs and vegetables for every type of Gardner.

Mexico: For the quarter, Mexico posted positive comps, whereas Canada was slightly below the company average.

Speaker Change: In the first quarter, our gross margin was 34, 1% an increase of approximately 45 basis points from the first quarter of last year, primarily.

Speaker Change: We're excited about spring breaking across the country and we remain ready to help our customers with all of their outdoor project and outdoor living needs with that I'd like to turn the call over to Richard.

Richard Mcphail: Primarily driven by benefits from lower transportation costs and shrink.

Billy: Thank you Billy and good morning, everyone.

Speaker Change: In the first quarter total sales were $36 4 billion a decrease of approximately two 3% from last year.

Speaker Change: During the first quarter operating expense as a percent of sales increased approximately 140 basis points to 22% compared to the first quarter of 2023.

Speaker Change: During the first quarter, our total company comps were negative two 8%.

Speaker Change: With comps of negative 4% in February negative <unk>, 8% in March and negative three 3% in April comp.

Speaker Change: The increase was primarily driven by a benefit from a legal settlement that we are overlapping from the first quarter of fiscal 2023.

Speaker Change: Comps in the U S were negative three 2% for the quarter with comps of negative.

Speaker Change: As well as deleverage from our topline results our operating expense performance was in line with our expectations.

Speaker Change: Our operating margin for the first quarter was 13, 9% compared to 14, 9% in the first quarter of 2023.

Speaker Change: Interest and other expense for the first quarter decreased by $13 million to $428 million.

Speaker Change: In the first quarter, our effective tax rate was 22, 6% compared to 24, 2% in the first quarter of fiscal 2023.

Speaker Change: Our diluted earnings per share for the first quarter were $3 63.

Speaker Change: A decrease of 5% compared to the first quarter of 2023.

Richard Mcphail: During the first quarter, we opened two new stores, bringing our total store count to 2000 and 337.

Richard Mcphail: Retail selling square footage was approximately 242 million square feet.

Richard Mcphail: At the end of the quarter merchandise inventories were $22 4 billion down.

Speaker Change: Down approximately $3 billion or 12% compared to the first quarter of 2023 and inventory turns were four five times up from three nine times last year.

Richard Mcphail: Turning to capital allocation during the first quarter, we invested approximately $850 million back into our business in the form of capital expenditures.

Speaker Change: During the quarter, we paid approximately $2 $2 billion in dividends to our shareholders.

Speaker Change: And we returned approximately $600 million to shareholders in the form of share repurchases.

Srs distribution: As a reminder, in March we announced our intent to acquire Srs distribution and as a result, we paused share repurchases.

Richard Mcphail: As you've heard US say many times, we maintain a disciplined approach to capital allocation and that is not changing.

Richard Mcphail: First and foremost we will invest in the business and expect capital expenditures of approximately 2% of sales on an annual basis.

Richard Mcphail: After investing in the business, we plan to pay the dividend and it is our intent to return any excess cash to shareholders in the form of share repurchases.

Richard Mcphail: From time to time, we will also invest in the business through acquisitions to enhance our capabilities and to accelerate our strategic objectives.

Richard Mcphail: Computed on the average of beginning and ending long term debt and equity for the trailing 12 months return on invested capital was 37, 1%.

Richard Mcphail: Down from 443, 6% excuse me down from 43, 6% in the first quarter of fiscal 2023.

Richard Mcphail: Now I will comment on our guidance for fiscal 2024.

Richard Mcphail: Today, we are reaffirming our guidance for 2024.

Richard Mcphail: As a reminder, our guidance does not currently reflect any impact from the announced acquisition of Srs.

Richard Mcphail: The acquisition is currently under regulatory review and we expect it to close by the end of fiscal 2024.

Richard Mcphail: We expect total sales growth to outpace sales comp with sales growth of approximately positive, 1% and comp sales of approximately negative 1%.

Richard Mcphail: Total sales growth will benefit from a 50 <unk> week, and we expect the 50 <unk> week will contribute approximately $2 $3 billion in sales.

Speaker Change: Our gross margin is expected to be approximately 33, 9% an increase of approximately 50 basis points compared to fiscal 2023.

Speaker Change: We expect operating margin of approximately 14, 1%.

Speaker Change: Our effective tax rate is targeted at approximately 24, 5%.

Speaker Change: We expect net interest expense of approximately $1 8 billion.

Speaker Change: And our diluted earnings per share percent growth is targeted to be approximately 1% compared to fiscal 2023.

Srs: It is our intent to update guidance as appropriate once the Srs transaction closes.

Srs: We believe that we have positioned ourselves to meet the needs of our customers in any environment.

Srs: The investments we've made in our business have enabled agility in our operating model.

Srs: As we look forward, we will continue to invest to strengthen our position with our customers leverage our scale and low cost position to drive growth faster than the market and deliver shareholder value.

Christine: Thank you for your participation in today's call and Christine we are now ready for questions.

Srs: Thank you.

Christine: We will now be conducting a question and answer session I.

Christine: I would like to ask a question. Please press star one on your telephone keypad.

Christine: A confirmation tone will indicate your line is in the question queue you.

Christine: You May press star two if he would like to remove your question from the queue.

Speaker Change: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the darkies one moment. Please while we poll for questions.

Speaker Change: Thank you. Our first question comes from the line of Chris <unk> with Jpmorgan. Please proceed with your question.

Chris <unk>: Thanks. Good morning, everybody can you talk about how the how you think the bathtub effect could play out do you have a sense of how much maybe the weather was a net headwind year over year understanding that last spring was was also wonky and related to that Billy mentioned being pleased with spring, where the weather was good and some <unk>.

We believe that we have positioned ourselves to meet the needs of our customers in any environment.

Investments we've made in our business have enabled agility in our operating model.

As we look forward, we will continue to invest to strengthen our position with our customers leverage our scale and low cost position to drive growth faster than the market and deliver shareholder value.

Ziv: Ziv commentary on some early COVID-19 winning categories. So where there was normal weather did you see comps, maybe get flat or even or maybe up around the around the spring business. Thanks.

Thank you for your participation in today's call and Christine we are now ready for questions.

Chris <unk>: Hey, good morning, Chris.

Thank you.

Ziv: <unk> is a great word to describe this spring.

We will now be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad.

Chris <unk>: We can't really point to one geography that has had consistently good weather, but but yes search certain markets, particularly in some of the northern most markets, where we've had some good weekend business.

A confirmation tone will indicate your line is in the question queue.

You May press star two if he would like to remove your question from the queue.

For participants using speaker equipment, it may be necessary to pick up your handset before pressing the darkies one moment. Please while we poll for questions.

Speaker Change: Business was just incredible.

Chris <unk>: That's really what would power the positive comp in our power business a lot of that is driven by outdoor power equipment. We've talked a lot about the battery platforms and the brands, we have and customers are really responding to that category, but we just haven't had the consistent.

Thank you. Our first question comes from the line of Chris Whoever's with J P. Morgan. Please proceed with your question.

Thanks. Good morning, everybody can you talk about how the how you think the bathtub effect could play out do you have a sense of how much maybe the weather was a net headwind year over year understanding that you know last spring was was also wonky and related to that Billy mentioned being pleased with spring, where the weather was good and some <unk>.

Speaker Change: Weather across the country, we were looking for a much improved western division. This year, given how bad weather was last year in the west that really really didn't happen. So the bathtub is in effect.

Positive commentary on some early COVID-19 winning categories. So where there was normal weather did you see comps, maybe get flat or even or maybe up around the around the spring business. Thanks.

Speaker Change: But we still have a long way to go our biggest selling weeks are ahead of us.

Hey, good morning, Chris Wonky as a great word to describe this spring.

Bill: And certainly hope for some some drier weather in Sunnier days, but bill maybe you can add some commentary yes no. Thanks. Thanks for the question, Chris and as Ted mentioned I mean, if you go back and we knew that there was pull forward in a lot of discretionary category single item purchases. If you will and we're really pleased to see.

We can't really point to one geography that has had consistently good weather, but yes search certain markets, particularly in some of the northern most markets, where we've had some good weekend business.

Ted: Some of those businesses more normalized to the cyclical cycle of what you would typically see there is no question that that that was it.

Business was just incredible.

That's really what powers the positive comp in our power business a lot of that is driven by outdoor power equipment, you've talked a lot about the battery platforms and the brands, we have and customers are really responding to that category, but we just haven't had the.

Ted: Been an impact certainly last year, and so really pleased with seeing some of that yes, where the weather has been a great which hasnt been our consistent I should say.

Ted: We've seen great customer engagement I mentioned, our spring Black Friday event, our spring gift center events, we've seen great consumer customer engagement, there and Theres still to continued pressures that we see in financed big projects as they called out and kitchen and Bath, specifically in the kind of remodeling remodeling finance finance projects, but really.

The consistent weather across the country, we were looking for.

Much improved Western Division this year, given how bad weather was last year in the west that really.

Really didn't happen so the bathtub is in effect.

Ted: Please with some of their customer engagement some of those pulled forward category so far.

But we still have a long way to go our biggest selling weeks are ahead of us and certainly hope for some some drier weather in Sunnier days facility, maybe you can add some commentary yes no. Thanks. Thanks for the question, Chris and as Ted mentioned I mean, if you can.

Ted: And just just to dig in on that a little bit on the big ticket sort of two sides of the coin is the big tickets Finance project business.

Ted: Did it get worse because.

Richard Mcphail: Rates spiked and on the other side categories like garden equipment, and grills and patio are you seeing any emergence of replacement cycle, where you could see maybe those categories start to get back to flat if not up Chris. This is Richard so just from a year over year.

Go back and we knew that there was pull forward.

A lot of discretionary category single item purchases, if you will and we're really pleased to see some of those businesses more normalized to the cyclical cycle of what you would typically see there is no question that that had been an impact certainly last year and so really pleased with seeing some of that yes, where the weather has been great.

Richard Mcphail: <unk>, we saw big ticket pressure last Q1, which was more of the item purchase.

It hasn't been our consistent I should say.

Richard Mcphail: As as customers deferred those sort of item purchases.

We've seen great customer engagement I mentioned, our spring Black Friday event, our spring gift center events, we've seen great consumer customer engagement, there and there's still the continued pressure that we see in financed big projects as they called out.

Billy: Saw big ticket pressure this Q1, as well and yet the dynamic has changed in the dynamic really that we began to see towards the back half of last year was this deferral of large projects like Billy called out so the pressure in those categories has actually increased.

Unknown Executive: It's a fact of life in the service. Military families have to move a lot. The Home Depot is here to help.

Kitchen, and Bath, specifically in those kind of remodeling remodeling finance finance projects, but really pleased with some of the customer engagement some of those pull forward category so far.

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Billy: It's a different story of Q1, 'twenty three versus 24, and maybe Bill you talked about particular categories, Yes, again, the kitchen and Bath remodel project cabinets and so forth I mean.

And just just to dig in on that a little bit on the big ticket sort of two sides of the coin is the big ticket Finance project business.

Chris: Anything Thats finance, we continue to see even a little bit more pressure Conversely, and you just mentioned, Chris some of the categories more item buying I mean, the category like riding mower is well over $1000 purchase and we're seeing just in a few categories like that terrific customer engagement again, we had pulled forward.

Did it get worse because rates spiked and on the other side categories like garden equipment, and grills and patio are you seeing any emergence of replacement cycle, where you could see maybe those categories start to get back to flat if not up Chris This.

Chris: But we're really pleased with some of those specific item.

Operator: Greetings and welcome to the Home Depot First Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Isabel Janci. Please go ahead.

Chris: Purchases, even the ones that are over $1000 as I mentioned riding mowers and some other categories, where we've seen really back to that cyclical customer engagements. We are really pleased with some of those pieces of work.

Richard So just from a year over year perspective, we saw big ticket pressure last Q1, which was more of the item purchase.

As as customers deferred those sort of item purchases.

Billy: We're seeing in the business.

We saw big ticket pressure this Q1, as well and yet the dynamic has changed in the dynamic really that we began to see towards the back half of last year was this deferral of large projects like Billy called out so the pressure in those categories has actually increased.

Billy: Thanks, very much have a great rest of the spring.

Billy: Thanks, Chris.

Billy: Our.

Billy: Next question comes from the line of Simeon Gutman with Morgan Stanley. Please proceed with your question.

Isabel Janci: Thank you, Christina, and good morning everyone. Welcome to Home Depot's first quarter 2024 earnings call. Joining us on our call today are Ted Decker, Chairman, President, and CEO; Anne-Marie Campbell, Senior Executive Vice President; Billy Bastek, Executive Vice President of Merchandising; and Richard McPhail, Executive Vice President and Chief Financial Officer. Following our prepared remarks, the call will be open to questions. Questions will be limited to analysts and investors, and as a reminder, please limit yourself to one question with one follow-up.

Simeon Gutman: Hi, Good morning, everyone My first.

It's a different story of Q1, 'twenty three versus 24, and maybe Bill you talked about particular categories, Yeah, again, the kitchen, and Bath remodel projects cabinets and so forth I mean.

Simeon Gutman: Macro and I'm going to follow up on the micro I wanted to ask your opinion on lock in effect versus turnover is if it's clear that we need turnover now for stronger demand and if you can talk about demand in regions of the country, where pricing is more noticeably going up than others seeing if there is a real lock in effect that can happen.

Anything Thats finance, we continue to see even a little bit more pressure Conversely, and you just mentioned, Chris some of the categories more item buying I mean, the category like riding mower is well over a thousand dollars purchase we're seeing just in a few categories like that terrific customer engagement again, we had pulled forward.

Simeon Gutman: And the contingency is if we don't get rate decreases you know what.

Simeon Gutman: What sort of normal could look like.

Simeon Gutman: So Simeon I think you have to think about this short term and longer term.

But we're really pleased with some of those specific item.

Simeon Gutman: So if we think about lock in effect and the impact of housing turnover.

Purchases, even the ones that are over $1000 as I mentioned riding mowers and some other categories, where we've seen really back to that cyclical customer engagements. We are really pleased with some of those pieces of work.

Simeon Gutman: Nearly we've seen two years of.

Simeon Gutman: Significant decrease in housing turnover to the point, where were really sort of a historical lows and most folks think that that can't get much lower.

Isabel Janci: If we are unable to get to your question during the call, please call our Investor Relations Department at 770-384-2387. Before 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 1995. These statements are subject to risks and uncertainties that could cause actual results to differ materially from our expectations and projections.

We're seeing in the business.

Thanks, very much have a great rest of the spring.

Speaker Change: When youre thinking about current performance, obviously that puts pressure on our business win.

Thanks, Chris.

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

Simeon Gutman: When a customer buys ourselves on whom they spend more in that year than any year when they don't.

Hi, Good morning, everyone. My first is a macro and I'm going to follow up with a micro I wanted to ask your opinion on lock in effect versus turnover is it if it is clear that we need turnover now for stronger demand and if you can talk about demand in regions of the country, where pricing is more noticeably going up then.

Speaker Change: And so there is no doubt that we're missing some of that project demand and that's what's weighing on R. R.

Speaker Change: Our sales as we had anticipated.

Isabel Janci: These risks and uncertainties include but are not limited to the factors identified in the release and in our filings with the Securities and Exchange Commission. Today's presentation will also include certain non-GAAP measures. Reconciliation of these measures is provided on our website. Now, I turn the call over to Ted.

Speaker Change: Then you have to ask yourself, though the lock in effect the interest rate environment.

Speaker Change: At this point.

Ted: They're seeing if there is a real lock in effect that can happen in the contingency is if we don't get rate decreases you know what.

Speaker Change: A lot of subject to the macro I think the question is at what point current interest rates become sort of the new normal. This is not something that we're making a prediction on is just thinking about behavior at some point spend on housing shifts from discretionary it is something that you simply move.

Ted: What sort of normal could look like.

Ted Decker: Thank you Isabel and good morning everyone. Sales for the first quarter were $36.4 billion, down 2.3% from the same period last year. Consales declined 2.8% from the same period last year, and our U.S. stores had negative comparables of 3.2%. Diluted earnings per share were $3.63 in the first quarter compared to $3.82 in the first quarter last year.

Speaker Change: So Simeon I think you have to think about this short term and longer term.

Ted Decker: So if we think about lock in effect and the impact of housing turnover clear.

Speaker Change: Do we know that there is pent up demand for household formation.

Ted Decker: Clearly we've seen two years of.

Ted Decker: The significant decrease in housing turnover at the point, where were really sort of a historical lows and most folks think that that can't get much lower.

Speaker Change: And so.

Billy: Again, I would say short term it is having an impact on our customers mindset and it's not just housing turnover related spend its really all large project as Billy said sort of debt finance spend where we are seeing interest rates sort of weigh on the mind of customers and look we're not immune to this if you look at the national.

Ted Decker: When youre thinking about current performance, obviously that puts pressure on our business win.

Ted Decker: The team executed at a high level in the quarter and continued to grow market share. While the quarter was impacted by a delayed start to spring and continued softness in certain larger discretionary projects, we feel great about our store readiness, product assortment, and associate engagement. Our associates are energized and ready to serve our customers as spring breaks across the country.

Ted Decker: When a customer buys or sells a home they spend more in that year than any year when they don't.

Billy: Figures on what's really driving the consumer right now its services.

Ted Decker: And so there is no doubt that we're missing some of that project demand and that's what's weighing on R. R.

Billy: Goods are underperforming services and durable goods are seeing the most pressure and in particular home related categories.

Ted Decker: Our sales as we had anticipated.

Ted Decker: Then you have to ask yourself, though lock in effect the interest rate environment.

Ted Decker: As you will hear from Billy, where weather was favorable, we saw good customer engagement and strength in outdoor projects. In addition, our focus remains on creating the best interconnected experience. Growing pro-wallet share with a differentiated set of capabilities in building new stores. Driving sales growth with our pro customers remains one of our top focus areas. Remember, we operate in a $45 trillion asset class, which represents the installed base of homes in the United States, and we serve a highly fragmented addressable market of approximately one trillion dollars.

Billy: Not a surprise and this is baked into our expectations for the year. The question will be how it evolves over time.

Ted Decker: At this point.

Billy: Thanks, that's helpful. Richard My follow up the transaction is still negative but on a stacked that looks like they're getting a little better if we're not over reading it.

Billy: And that's despite the spring weather not breaking it. So if you look at your transactions.

Richard: On an improving trend line is that industry bottoming getting better or is that home depot taking share.

Ted Decker: Do we know that there is pent up demand for household formation.

Ted Decker: So.

Richard: Well those are those are challenging to tease out I would I would say our senses, we are taking share thats from third party.

Ted Decker: Again, I would say short term it is having an impact on our customers mindset and it's not just housing turnover related spend its really all large project as Billy said sort of debt finance spend where we are seeing interest rates sort of weigh on the mind of customers and look we're not immune to this if you look at the national.

Speaker Change: Reporting on 4441.

Billy: But you know transactions to get to.

Billy: You have two dynamics going on and they relate to your prior question Simeon.

Simeon Gutman: <unk> talked about the Covid and the lap of the Covid is sort of like the giant store and the hurricane.

Ted Decker: Figures on what's really driving the consumer right now its services.

Speaker Change: For a couple of years after you pulled so much.

Ted Decker: Goods are underperforming services and durable goods are seeing the most pressure and in particular home related categories.

Speaker Change: Demand forward.

Speaker Change: You suffer from from lower sales in those categories and that's what we were talking about.

Ted Decker: Not a surprise this is baked into our expectations for the year. The question will be how it evolves over time.

Simeon Gutman: Last year in mobility was just reviewing this item by and there was no doubt grilles in riders and patio sets. These big ticket items were pulled forward. We're seeing now that sort of naturally labs sort of like that hurricane affect lapping what is newer.

Speaker Change: Thanks, that's helpful. Richard My follow up the transaction is still negative but on a stacked it looks like they're getting a little better if we're not overreaching and thats. Despite the spring weather not breaking it. So if you look at your transactions.

Speaker Change: On an improving trend line is that industry bottoming getting better or is that home depot taking share.

Speaker Change: Chatted about this before is the housing turnover, which.

Speaker Change: While historically not a huge driver of demand steady state demand as housing turnover is fairly steady but in the last 18 odd months as that has dropped from over 6 million units a year I think some run rates in certain months it was even.

Speaker Change: Well those are those are challenging to tease out I would I would say our sense is we are taking share of that is from third party.

Speaker Change: Reporting on 4441.

Speaker Change: But transactions.

Speaker Change: You have two dynamics going on and they relate to your prior question Simeon we've talked about the Covid and the lap of the Covid is sort of like the giant storm and hurricane and for a couple of years.

Speaker Change: Under $4 million that dramatic.

Speaker Change: Decrease in housing activity is sort of the newer hurricane if you will and we don't see that going much lower and it's hard to predict but but as Richard said.

Speaker Change: So much.

Speaker Change: Demand forward.

Speaker Change: You suffer from from lower sales in those categories and that's what we were talking about.

Richard Mcphail: Tough to tough to call the macro but at some point people will start to lap the interest rates in the walk in effect, we've already seen percentages of houses with mortgages and all the various interest rates strata the percentage that were in that under three five.

Speaker Change: Last year in mobility was just reviewing this item by and there was no doubt grills.

Speaker Change: Riders and how do you assess these big ticket items were pulled forward.

Speaker Change: Seeing now that sort of naturally labs sort of like that hurricane affect lapping what is newer chat.

Richard: Percent is past peaks, so you're already starting to see a bit of an unlock there but all of that then leads to that your transaction question. So we are starting to see some increase in transaction as we're lapping more of the COVID-19 pull forward.

Speaker Change: Chatted about this before is the housing turnover, which.

Speaker Change: While historically not a huge driver of.

Speaker Change: Demand.

Speaker Change: Steady state demand as housing turnover is fairly steady, but in the last 18 odd months as that has dropped from over 6 million units a year I think some run rates in certain months it was even under $4 million that dramatic.

Speaker Change: Some newer pressure with the housing turnover dynamic, but net net we like the trend of transactions and units per basket were also up and we like seeing that trend as well so.

Speaker Change: Decrease in housing activity.

Speaker Change: The newer hurricane if you will.

Richard: Not unexpected as Richard said in all baked in into our guidance for 2024 and <unk>.

Speaker Change: And we don't see that going much lower and it's hard to predict but but as Richard said.

Richard Mcphail: Just to add to that.

Richard Mcphail: You think about.

Richard Mcphail: Tough to tough to call the macro but at some point people will start to lap the interest rates in the walk in effect, we've already seen percentages of houses with mortgages and all the various interest rate strata the percentage that were in that under three.

Richard Mcphail: Yes.

Speaker Change: How we're performing in spite of.

Speaker Change: Large projects.

Speaker Change: Having seen the pressure if you just look at debt financing and you look at some of the statistics.

Speaker Change: Statistics around where we're sitting.

Speaker Change: HELOC.

Speaker Change: Withdrawals or HELOC borrowings down 23% year over year, that's a Q4 statistic, but I think we are in.

Speaker Change: 5% is past peaks, so you're already starting to see a bit of an unlock there but all of that then leads to that your transaction questions. So we are starting to see some increase in transaction as we're lapping more of the COVID-19 pull forward.

Speaker Change: In the same territory in Q1 in dollars, that's dropping somewhere from $70 billion ish, a quarter to $50 billion ish a quarter and you look at cash out refinancing is down 14% year over year in dollars.

Speaker Change: Some newer pressure with the housing turnover dynamic, but net net we like the trend of transactions and units per basket were also up.

Speaker Change: S peaked around $80 billion and they were 17 billion last quarter and so you've got a significant drop more than 75% from peak to where we are today and so that's.

Speaker Change: And we like seeing that trend as well so.

Speaker Change: To us interesting context for the fact that transactions have actually.

Speaker Change: Not unexpected as Richard said in all baked in into our guidance for 2024, and just to add to that.

Speaker Change: <unk> begun to recover on a sequential basis so.

Speaker Change: We're punching through the environment.

Speaker Change: Do you think about.

Ted: But in some respects as Ted said, the macro has been against us for a little while now and you could almost say.

Speaker Change: How we're performing in spite of.

Speaker Change: Large projects.

Speaker Change: Having seen the pressure if you just look at debt financing and you look at some of the.

Speaker Change: Those statistics are stabilizing at least on the bottom.

Speaker Change: Thanks, and good luck.

Speaker Change: Statistics around where we're sitting.

Speaker Change: Yeah.

Speaker Change: HELOC.

Zack <unk>: Our next question comes from the line of Zack <unk> with Wells Fargo. Please proceed with your question.

Speaker Change: Withdrawals or HELOC borrowings down 23% year over year, that's a Q4 statistic, but I think we are.

Zack <unk>: Hey, good morning, and thank you I want to start with a clarification on the outlook you have got 1% EPS growth I just wanted to confirm that this incorporates the buyback pause post Q1, and then second transaction growth stepping in the right direction curious if this was more pro or <unk>.

Speaker Change: In the same territory in Q1 in dollars, that's dropping somewhere from 70 billion ish a quarter to $50 billion ish, a quarter and you look at cash out refinancing down 14% year over year in dollars.

Speaker Change: Peaked around $80 billion and they were 17 billion last quarter and say you've got a significant drop more than 75% from peak to where we are today and so that's.

Zack <unk>: <unk>, driven or or both and any color on the health of small and midsized pros versus larger pros.

Richard: Great. So Zach I'll take the first part it's Richard.

Speaker Change: Yes.

Speaker Change: To us interesting context for the fact that transactions have actually.

Speaker Change: We have.

Speaker Change: Reiterated guidance and see no reason to.

Speaker Change: <unk> begun to recover on a sequential basis so.

Zach Richard: To to do anything, but that and when you think about the pause in share repurchases think about the fact that we're also accumulating cash as we accumulate cash we earn interest on that cash youll see on our balance sheet, we have over $4 billion in cash right now.

Speaker Change: We're punching through the environment.

Speaker Change: But in some respects as Ted said, the macro has been against us for a little while now and you could almost say.

Speaker Change: Those statistics are stabilizing at least on the bottom.

Speaker Change: Thanks, Good luck.

Speaker Change: Which is around $3 billion higher than last year, So given where short term interest rates are that interest income is a really strong offset to the impact from Paul share repurchases and therefore, the net of it wouldn't change our guidance.

Speaker Change: Our next question comes from the line of Zacks, Adam with Wells Fargo. Please proceed with your question.

Adam: Hey, good morning, and thank you I want to start with a clarification on the outlook you have got 1% EPS growth I just want to confirm that this incorporates the buyback pause post Q1, and then second transaction growth stepping in the right direction curious if this was more pro or <unk>.

Speaker Change: And on the pro DIY.

Speaker Change: Each were negative for the quarter more or less the same rate and within pro the larger pro continues to outperform particularly those engaging in the ecosystem I'll, let chip comment some more about our <unk>.

Speaker Change: <unk> driven or.

Speaker Change: Our boat and any color on the health of small and midsized pros versus larger pros.

Richard: Great. So Zach I'll take the first part it's Richard.

Chip: Performance there, yes, thanks, Zach where we've expanded our capabilities around our supply chain capabilities and the expansion of our outside sales teams.

Speaker Change: As we have.

Speaker Change: Reentered.

Speaker Change: Reiterated guidance and see no reason to.

Zach Richard: We've seen a noticeable outperformance in those markets and positive comps. So very pleased with with that March of expansion as we move into this next.

Speaker Change: To do anything but that and when you think about the pause in share repurchases I think about the fact that we're also accumulating cash as we accumulate cash we earn interest on that cash youll see on our balance sheet, we have over $4 billion in cash right now.

Zach Richard: Nine months, we'll expand it in another three FTC markets that we've we've mentioned one in la one in Detroit and one in San Antonio So we're very pleased with their progress.

Speaker Change: It is around $3 billion higher than last year.

Richard: Got it appreciate the color and then Richard quickly it looks like your SG&A on a per store basis was about flat year over year. When you exclude the legal impact and I'm curious if this is the right way to think about productivity. This year or if you have any other levers at your disposal through the year.

Speaker Change: Given where short term interest rates are that interest income is a really strong offset to the impact from Paul share repurchases and therefore, the net of it wouldn't change our guidance.

Speaker Change: And on the pro DIY each were negative for the quarter more or less the same rate and within pro the larger pro continues to outperform particularly those engaging in the ecosystem.

Zach Richard: Well look.

Richard: Again, we would encourage you to look at our full year guidance, because operating expense management can vary quarter to quarter. Obviously, we wanted to make sure that we were fully staffed in our stores.

Speaker Change: Let chip comments more about R.

Richard: And as we said we had a little bit later start to spring than we would've liked and so.

Speaker Change: Performance there thanks.

Zach: Thanks, Zach where we've expanded our capabilities around our supply chain capabilities and the expansion of our outside sales teams we've.

Speaker Change: But we wanted to make sure that we were right there in front of our customer we had other favorability I mean hats off to.

Speaker Change: We've seen a noticeable outperformance in those markets and positive comps. So very pleased with with that March of expansion as we move into this next <unk>.

operations team: All our teams driving productivity throughout the portfolio a little bit in that particular point operating expenses controlled by our operations team.

operations team: Just did a fantastic job in the quarter and.

Speaker Change: Nine months, we'll expand it in another three FTC markets that we've we've mentioned one in L. A one in Detroit and one in San Antonio So we're very pleased with their progress.

operations team: That's all baked into the reaffirmation of guidance.

Speaker Change: Thanks, so much for the time.

Speaker Change: Thanks.

Speaker Change: Got it appreciate the color and then Richard quickly it looks like your SG&A on a per store basis was about flat year over year. When you exclude the legal impact and I'm curious if this is the right way to think about productivity. This year or if you have any other levers at your disposal through the year.

Speaker Change: Our next question comes from the line of Scot Ciccarelli with Truest. Please proceed with your question.

Scot Ciccarelli: Good morning, guys and the scope of the answer here might be a little beyond this conversation, but in general can you talk about how you plan to utilize Srs and they are discrete set of pro relationships to potentially leverage your broader complex CRO initiative.

Speaker Change: Well look.

Speaker Change: Again, we would encourage you to look at our full year guidance, because operating expense management can vary quarter to quarter. Obviously, we wanted to make sure that we were fully staffed in our stores.

Scott: Sure Scott.

Srs: First and foremost Srs as just a great company operating in three large highly fragmented markets. So we talked about our Tam being $950 billion at the Investor Conference.

Speaker Change: And as we said we had a little bit later start spring than we would have liked and so.

Speaker Change: But we wanted to make sure that we were right there in front of our customer we had other favorability I mean hats off to.

Scott: With Srs and their market of roofing specialty trade pool and landscape.

Speaker Change: All our teams driving productivity throughout the portfolio a little bit in that particular point operating expense is controlled by our operations team.

Scott: That opens up 50 billion increase Tam.

Scott: They're a strong number two in each of those segments. So just a well run company and three great growth markets, where they have strong share positions.

Speaker Change: Just did a fantastic job in the quarter and.

Speaker Change: That's all baked into the reaffirmation of guidance.

Speaker Change: Thanks, so much for the time.

Speaker Change: Thanks.

Speaker Change: Our next question comes from the line of Scot Ciccarelli with Truest. Please proceed with your question.

Scott: So first and foremost.

Scott: Got capability that lets you.

Scott: Gage and win.

Scot Ciccarelli: Good morning, guys and the scope of the answer here might be a little beyond this conversation, but in general can you talk about how you plan to utilize Srs and they're discrete set of pro relationships to potentially leverage your broader complex CRO initiative.

Scott: In a completely new Tam how it's complementary to what we're doing all the things that we are building.

unknown: They have as a distributor we've been a retailer for 45 years, and we're building wholesale capability things like trade credit things like much more robust on time and complete delivery to job sites things like order management things like incentivize.

Speaker Change: Sure Scott.

Speaker Change: First and foremost Srs as just a great company operating in three large highly fragmented markets. So we talked about our Tam being $950 billion at the Investor Conference with with Srs.

unknown: <unk> field sales forces. So these are all things that they've done for years, and we look forward to being able to engage with them and learn from them. But then they can also serve our customers I mean, our customers will benefit from their deep.

Speaker Change: The market of <unk>.

Scott: Roofing specialty trade pool and landscape that opens up 50 billion increase Tam where they're a strong number two in each of those segments. So.

Speaker Change: Rod catalogs.

Speaker Change #104: Those verticals and we can cross sell their product into our.

Scott: Just a well run company and three great growth markets, where they have strong share positions.

unknown: Residential focused pro customers. So we look at this as just a great opportunity to expand market to expand capabilities and to better service our customers.

Scott: First and foremost.

Scott: Get capability that lets you engage and win in a.

Scott: <unk>, new Tam, how it's complementary to what we're doing all the things that we are building.

Speaker Change #103: Very helpful and then just hopefully a quickie.

Speaker Change #100: You talked about being in 17 markets by end of year for the complex pro capabilities. How many markets do you ultimately see that capability rolled out to 17 going to X.

Scott: They have as a distributor we've been a retailer for 45 years, and we're building wholesale capability things like trade credit things like much more robust on time and complete delivery to job sites things like order management things like incentivized.

Speaker Change #102: I mean, we would expect to over time to be in we often talk about the top 40 kind of 80 20 rule of of demand in our space and that would be the expectation.

Scott: Field sales forces. So these are all things that they've done for years, and we look forward to being able to engage with them and learn from them. But then they can also serve our customers.

Speaker Change #100: Awesome. Thanks, a lot guys.

Speaker Change #100: Our next question comes from the line of Michael Lasser with UBS. Please proceed with your question.

Michael Lasser: Good morning. Thank you so much for taking my question in light of.

Scott: Our customers will benefit from their deep broad catalogs in those verticals and we can cross sell their product into our <unk>.

Speaker Change #100: Let's start to the year.

Michael Lasser: Could you given the internal.

Michael Lasser: Discussion to moderating your expectation around the way the rest of the year could unfold, especially in light of what's likely to be now fewer rate cuts.

Scott: Residential focused pro customers. So we look at this as just a great opportunity to expand market to expand capabilities and to better service our customers.

Speaker Change #105: Effected 90 days ago, which may mean that the overall rate of home improvement.

Speaker Change: Very helpful and then just hopefully a quickie.

Michael Lasser: The market.

Speaker Change #106: <unk> seen less of an acceleration from here.

Speaker Change: You talked about being in 17 markets by ended the year for the complex pro capabilities.

Michael Lasser: Yes, Michael.

Michael Lasser: We're not fed watches here necessarily and we said at the beginning of this year that we had a neutral stance on housing we werent, we werent going to take a bet on.

Scott: It gets you ultimately see that capability rolled out to its 17 going to X.

Speaker Change: We would expect to over time to be in we often talk about the top 40 kind of 80 20 rule of of demand in our space and that would be the expectation.

Michael Lasser: Cuts or how many cuts.

Speaker Change #107: That hasnt changed what we are focused on and what our internal discussions do evolve around is our level of execution in the core business and as I said, we couldnt be happier with how engaged the team is and how well we executed during the <unk>.

Speaker Change: Thanks, a lot guys.

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

Michael Lasser: Good morning. Thank you so much for taking my question.

Scott: No.

Speaker Change: Let's start to the year.

Michael Lasser: Quarter, and if I can just take a minute to rattle off.

Speaker Change: Given the internal.

Speaker Change: Discussion to moderating your expectation around the way the rest of the year could unfold, especially in light of what's likely to be now you were rate cuts.

Michael Lasser: A few of these tell tales when you think would Hector has done in the stores in terms of shrink.

Hector: Leveraging our wage investments to getting attrition way down which is helping with safety instances, what we're doing with technology and process in the store that and mentioned in her remarks about not just the better in stock with the supply chain is delivering but the actual on shelf availability.

Speaker Change: Did 90 days ago, which may mean that the overall rate of home improvement.

Speaker Change: The market.

Speaker Change: See less of an acceleration from here.

Michael Lasser: Yes, Michael.

Speaker Change: We're not fed watches here necessarily and we said at the beginning of this year that we had a neutral stance on housing we werent, we werent going to take a bet on.

Speaker Change #113: But all our tools are delivering our supply chain and merchant teams, what an incredible job in the face negative comps they took out $3 billion of inventory at cost.

Speaker Change: Cuts or how many cuts.

Speaker Change: That hasnt changed what we are focused on and what our internal discussions do evolve around is our level of execution in the core business and as I said, we couldnt be happier with how engaged the team is and how well we executed during the <unk>.

Speaker Change #111: Increased our turnover 60 basis points to four five times and increased in stock on shelf availability levels. I mean that is just incredible performance.

Michael Lasser: Then add our price position, we talked about prices having settled in the marketplace.

Speaker Change: Quarter, and if I can just take a minute to rattle off.

Michael Lasser: We're not any more promotional this year, but our overall price position with that roller coaster that we experienced during the COVID-19 years, whereas well positioned on price and value and innovative products as we've been in some time.

Speaker Change: A few of these tell tales when you think would would Hector has done in the stores in terms of shrink.

Speaker Change: Leveraging our wage investments to getting attrition way down which is helping with safety instances, what we're doing with technology and process in the store that and mentioned in her remarks about not just the better in stock with the supply chain delivering but the actual on shelf availability.

Speaker Change #115: Then productivity in general is remains a flywheel the home depot and a lot of that.

Michael Lasser: SG&A leverage that you noticed and we delivered was the efficiency in the model and having executed that 500 million and cost out that we signaled at the end of last year. So Michael that's what we focus on internally is controlling what we can control.

Speaker Change: At all our tools are delivering our supply chain and merchant teams, what an incredible job in the face negative comps they took out $3 billion of inventory at cost increased our turnover 60 basis points to four five times and incur.

Michael Lasser: And that's why I'm, just so pleased with this team and their high level of execution in the quarter.

Michael Lasser: And my follow up is there is a school of thought out there that the Srs acquisition could be assigned at.

Speaker Change: Creased in stock on shelf availability levels I mean that is just incredible performance and then add our price position, we talked about prices having settled in the marketplace.

Michael Lasser: Home depot's effort to address the complex pro segment of the market is just proved to be a little bit more difficult than what was originally expected how would you respond to that.

Speaker Change:

Speaker Change: We're not any more promotional this year, but our overall price position with that roller coaster that we experienced during the COVID-19 years, whereas well positioned on price and value and innovative products as we've been in some time and then <unk>.

Speaker Change #108: Well I would respond to say.

Speaker Change #117: What we are doing to capture.

Speaker Change #109: <unk> share of wallet.

Speaker Change #112: With wholesale distribution capabilities.

Speaker Change: <unk> in general is remains as a flywheel the home depot.

Speaker Change #112: Is is challenging which is why Cowen has done it before but we are doing it and we are succeeding in it and we like what we see and that's why we continue to rollout to additional markets. We also know it's a journey this isn't.

Speaker Change: Lot of that.

Michael Lasser: SG&A leverage that you noticed and we delivered was the efficiency in the model, having executed that $500 million and cost out that we signaled at the end of last year. So Michael that's what we focus on internally is controlling what we can control.

Cowen: Open up a DC business building the physical DC is about the simplest thing for us to do in our whole ecosystem that we're building, but it is putting together all the pieces of the ecosystem and introducing our customers to those capabilities and as we've said before as we introduce.

Speaker Change: And that's why I'm, just so pleased with this team and their high level of execution in the quarter.

Michael: Thank you and my follow up is there is a school of thought out there that the Srs acquisition could be assigned at.

Speaker Change #118: <unk> customers to the capabilities. It is a it is a linear relationship between increased comp and increased engagement with those capabilities. So we're still.

Michael: Home depot's effort to address the complex pro segment of the market is just proved to be a little bit more difficult than what was originally expected how would you respond to that.

Speaker Change: Well I would respond to say.

Speaker Change #119: Optimistic in green and progressing on our organic efforts.

Speaker Change: What we are doing to capture.

Management team: <unk> really is a completely different discussion in a terrific asset in management team was brought to our attention that opened up a specialty distribution Tam that they have just a terrific position and so at the end of the day.

Speaker Change: <unk> share of wallet.

Speaker Change: With wholesale distribution capabilities.

Speaker Change: Is is challenging which is why Cowen has done it before but we are doing it and we are succeeding in it and we like what we see and that's why we continue to rollout to additional markets. We also know it's a journey this isn't.

Management team: I keep reminding ourselves that we service a 45 trillion dollar asset class with a one trillion dollar Tam with the home depot at only about $150 billion in sales, we have so much share to gain with our consumers in store online shop.

Speaker Change #127: <unk> with our existing <unk>.

Management team: Pros, who largely shop, our stores with this complex purchase occasion with larger pros that we're building out the ecosystem and now Srs gives us.

Speaker Change: <unk> customers to have the capabilities. It is a it is a linear relationship between increased Kong increased engagement with those capabilities. So we're still.

Srs: Whole, new white space to go play in three other verticals to take even more share so.

Speaker Change: Optimistic in green and progressing on our organic efforts.

Srs: Very very different propositions.

Srs: Thank you very much and good luck.

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

Chuck Grom: Hey, good morning, Thanks, a lot I'm curious on the on the DIY side have you seen any changes in spending between income cohorts and then as a follow up you spoke to the delayed start to spring curious a few weeks here into the month of May maybe you could frame out how business is tracking relative to the first quarter or April.

Management team: We keep reminding ourselves that we service a 45 trillion dollar asset class with a one trillion dollar Tam with the home depot at only about $150 billion in sales, we have so much share to gain with our consumers in store online shop.

Cowen: So on the on the income cohorts, it's actually really more about project size.

Speaker Change #128: Then it is about income cohort right now and as I said the.

Management team: <unk> with our existing <unk>.

Cowen: As we said the.

Cowen: The majority of the demand pressure is in those larger projects and that really sort of spreads itself across cohorts you could even say that that almost <unk> two to two <unk>.

Management team: Pros, who largely shop, our stores with this complex purchase occasion with larger pros that we're building out the ecosystem and now Srs gives us.

Srs: Whole, new white space to go play in three other verticals to take even more share so.

Speaker Change #122: <unk> pressure and higher income cohorts.

Speaker Change #122: As we've said before though.

Srs: Very very different propositions.

Speaker Change #121: This seems to be as its not the inability to fund projects. It's a deferral mindset you have this odd irony of.

Srs: Thank you very much and good luck.

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

Speaker Change #129: Every sound bite you read while interest rates are going they are coming down soon our customers tell us hey.

Charles P. Grom: Hey, good morning, Thanks, a lot I'm curious on the on the DIY side have you seen any changes in spending between income cohorts and then as a follow up you spoke to the delayed start to spring curious a few weeks here into the month of May maybe you could frame out how business is tracking relative to the first quarter or April.

Speaker Change #123: With that in mind with that on the horizon, we're just going to wait.

Speaker Change #123: So that's really the most important dynamic.

Speaker Change #123: From an income perspective.

Speaker Change #123: And then Chuck just on the first couple of weeks of May I mean, it really has been the same story, where weather has been favorable we seen great customer engagement strengthened outdoor projects really pleased with what we've seen where the weather has been favorable which is my prepared remarks, the same kind of dynamic we saw through especially later in the <unk>.

Charles P. Grom: So on the on the income cohorts, it's actually really more about project size.

Charles P. Grom: Then it is about income cohort right now and as I said.

Charles P. Grom: As we said the <unk>.

Speaker Change #120: Orders weather got a little bit better.

Speaker Change: The majority of the demand pressure is in those larger projects and that really sort of spreads itself across cohorts you could even say that that almost <unk> two to two <unk>.

Speaker Change #120: Certain parts of the country.

Richard: Okay. Thanks, very much and then Richard can you just you spoke to confirming the third of three 9% gross margin rate for the year is there anything today that makes you feel better or maybe worse about the underlying assumptions like option. There 90 days ago in terms of shrink transportation mix.

Charles P. Grom: <unk> pressure and higher income to awards.

Charles P. Grom: As we've said before though.

Speaker Change: This seems to be as its not the inability to fund projects. It's a deferral mindset you have this odd irony of.

Richard: I think we're so we're executing on all cylinders.

Richard: And from a transportation perspective from the merchants managing retail on costs through one of the most vulnerable periods last year in our history.

Speaker Change: Every sound bite you read while interest rates are going they are coming down soon our customers tell us hey.

Richard: Fantastic results and then just to add to it and look with respect to shrink.

Speaker Change: With that in mind with that on the horizon, we're just going to wait.

Charles P. Grom: So that's really the most important dynamic.

Richard: Shrink is a problem for retail organized retail crime is not going away. It's a problem for all of us the external environment is only getting tougher.

Charles P. Grom: From an income perspective.

Charles P. Grom: And then Chuck just on the first couple of weeks of May I mean, it really has been the same story, where weather has been favorable we seen great customer engagement strengthened outdoor projects really pleased with what we've seen where the weather has been favorable with my prepared remarks that the same kind of dynamic we saw through especially later in the <unk>.

Richard: As a result.

Richard: We've done a tremendous amount of work it is amazing the effort put forth by our teams and making investments that pay off with significant return on investment.

Speaker Change: As weather got a little bit better in certain parts of the country.

Speaker Change #132: And so when we look at our shrink performance.

Richard: Okay. Thanks, very much and then Richard Im wondering just you spoke to confirming the third of three 9% gross margin rate for the year is there anything today that makes you feel better or maybe worse about the underlying assumptions like option. There 90 days ago in terms of shrink transportation mix.

Speaker Change #125: Hate to say this but the external environment is not helping.

Speaker Change #126: Our teams are succeeding in blunting the impact it's still a problem, it's still a pressure in our P&L, we want to keep attacking it but we know that we've got the best in the business facing it and it's not only a return on investment in terms of.

Speaker Change: I think we're so we're executing on all cylinders.

Richard: And from a transportation perspective from the merchants managing retail and cost you one of the most volatile periods last year in our history.

unknown: Financial performance, it's a return on investment from a customer and associate safety perspective, and so we're really happy about that I.

Richard: Fantastic results and then just to add to it and look with respect to shrink.

Speaker Change #126: I think that there is one dynamic you asked about margin, there's a dynamic here that.

Speaker Change: Shrink is a problem for retail organized retail crime is not going away. It's a problem for all of us the external environment is only getting tougher.

Speaker Change #126: I think it's worth calling out when you think about the shape of the year and so I'll just go there.

unknown: It is not insignificant when you think about the price dynamic last year and how we saw retail settle in the market. During the first half of 2023, and then essentially become what we would call settled during the second half of 2023, which is continued into.

Speaker Change: As a result.

Speaker Change: We've done a tremendous amount of work it is amazing the effort put forth by our teams and making investments that pay off with significant return on investment.

unknown: Two into Q1 and Q2 of this year. So when you think about.

Speaker Change: And so when we look at our shrink performance.

unknown: The AUR pressure within ticket.

Speaker Change: Hate to say this but the external environment is not helping.

unknown: We reported ticket in spite of AUR pressure that is in essence about two percentage points this quarter year over year, and what I want to remind you of is that as the year over year comparison. So we had kind of the height of.

Speaker Change: Our teams are succeeding in blunting the impact it's still a problem, it's still a pressure in our P&L, we want to keep attacking it but we know that we've got the best in the business facing it and it's not only a return on investment in terms of.

Speaker Change #138: Well, let's put it a different way we had a lot of retail on cost settling during the first half of the year. So that 2% pressure there was an artifact of a year over year measurement. It is not.

unknown: Financial performance, it's a return on investment from a customer and associate safety perspective, and so we're really happy about that I.

unknown: I think that there is one dynamic you know you asked about margin, there's a dynamic here that.

unknown: An observation on where what prices are doing today and they're relatively steady as we move through the year.

unknown: I think it's worth calling out when you think about the shape of the year and so I'll just go there.

Speaker Change: It is not insignificant when you think about the price dynamic last year and how we saw retail settle in the market. During the first half of 2023, and then essentially become what we would call settled during the second half of 2023, which is continued into.

Speaker Change #126: That.

Speaker Change #126: Pressure.

Speaker Change #140: <unk> from Q1 to Q2, so you'll have about one percentage point of pressure in Q2. It will have again in Q3 and then in essence be gone in Q4. So you asked the question about margin, but I think that is a point with respect to shape of the year that is important to put out there.

Speaker Change #126: Great. Thanks very much.

Speaker Change: Two into Q1 and Q2 of this year. So when you think about the AUR pressure within ticket.

Speaker Change #126: Thanks.

Stephen: Our next question comes from the line of Stephen to come with Citi. Please proceed with your question.

Speaker Change: We reported ticket in spite of AUR pressure that is in essence about two percentage points this quarter year over year, and what I want to remind you of is that's a year over year comparison, so we had kind of a height of.

Stephen: Great. Good morning, Thanks, very much for taking my question I wanted to follow up on Michael <unk> question can you just help us understand what drives the second half improvement in same store sales.

Stephen: Just given the fact that the first half has been a little bit softer here with this delayed start to spring.

Speaker Change: Well, let's put it a different way we had a lot of retail on cost settling during the first half of the year. So that 2% pressure is an artifact of a year over year measurement.

Stephen: Well the primary factor is actually AUR, which which we just outlined so if you think about pressure going from the beginning of the year in Q1 of two percentage points to sort of falling zero by the end of the year. That's really the majority of the arithmetic with respect to the year.

Speaker Change: It is not.

Speaker Change: An observation on where what prices are doing today and they're relatively steady as we move through the year that.

Speaker Change #126: Okay, and then to follow up on gross margin, maybe it's a question for Billy Spring Black Friday did well we did notice there was a new spring sale from an online only competitor do you think the promotional environment is changing at all I guess, especially on the DIY side of the business as you try to compete for.

Speaker Change: Pressure.

Speaker Change: Halves from Q1 to Q2, so you'll have about one percentage point of pressure in Q2.

Speaker Change: Again in Q3, and then in essence be gone in Q4. So you asked the question about margin, but I think that is a point with respect to shape of the year that is important to put out there.

Billy Spring: That customer.

Speaker Change: Great. Thanks, very much Rick.

Billy Spring: Yes, so I'll speak to.

Speaker Change: Thanks.

Speaker Change #130: The promotional piece and thanks for the question.

Speaker Change: Our next question comes from the line of Stephen to come with Citi. Please proceed with your question.

Billy Spring: Listen it's we're in a very rational market and it is important to note that when we do events, we do events to drive excitement to drive foot traffic in certain times of the year no different than.

Stephen: Great. Good morning, Thanks, very much for taking my question I wanted to follow up on Michael asked her question can you just help us understand what drives the second half improvement in same store sales.

Speaker Change #131: Most folks to a black Friday event, but we're doing that to drive excitement bring value to the marketplace.

Speaker Change: Given the fact that the first half has been a little bit softer here with this delayed start to spring.

Speaker Change #131: We're not putting stuff pulsing stuff on sale of promotional business as it stands today in 2024 looks exactly like it did pre.

Speaker Change: Well the primary factor is actually AUR, which which we just outlined so if you think about pressure going from the beginning of the year in Q1 of two percentage points to sort of falling zero by the end of the year. That's really the majority of the arithmetic with respect to the year.

Speaker Change #131: Pre COVID-19.

Speaker Change #131: And before.

Speaker Change #131: No different in fact.

Speaker Change #131: We've talked about appliances, a little bit, but the environment really is is normalized to what it was pre COVID-19 and I.

Speaker Change: Okay, and then to follow up on gross margin, maybe it's a question for Billy Spring Black Friday did well we did notice there was a new spring sale from an online only competitor do you think the promotional environment is changing at all I guess, especially on the DIY side of the business as you try to compete.

Speaker Change #133: Think it's again important to note that we do that to drive excitement footsteps.

Speaker Change #143: And absolutely try to bring value to our customers at these key done selling year.

Speaker Change #143: Okay. Thanks for the detail.

Speaker Change #143: Our next question comes from the line of Brian Nagel with Oppenheimer. Please proceed with your question.

Speaker Change: For that customer.

Speaker Change: Yes, so I'll speak to.

Speaker Change #143: Hi, good morning.

Speaker Change #143: Thanks for taking my questions.

Speaker Change: To the promotional piece thanks for the question.

Brian Nagel: First question I apologize I know this can be a bit repetitive to used a couple of prior questions but.

Speaker Change: Listen it's we're in a very rational market and it's important to note that when we do events, we do events to drive excitement to drive foot traffic in certain times of the year no different than.

Brian William Nagel: Maybe asking a little bit different way.

Brian William Nagel: Look at your reader today, you reiterated guidance for 'twenty four.

Brian Nagel: Would you think about.

Speaker Change: Most folks to a black Friday event, but we're doing that to drive excitement bring value to the marketplace.

Speaker Change #147: So what we see what would transpire sort of say in Q1.

Speaker Change #147: We talk a lot through.

Speaker Change: We're not putting stuff all seeing stuff on sale of promotional business as it stands today in 2024 looks exactly like it did pre.

Speaker Change #142: Through the call about the macro crushers, where macro disruption still impacted home depot. So the question I have to get to that guidance. The guidance you reiterated today do you need some type of change.

Speaker Change: Pre COVID-19.

Speaker Change: And before.

Speaker Change #150: Some type of political station.

Speaker Change: No different in fact.

Speaker Change #135: Macro environment from what you see today.

Speaker Change: We've talked about appliances, a little bit, but the environment really is is normalized to what it was pre COVID-19.

Brian: This is Brian.

Brian William Nagel: Really the only impact here was a delayed spring and we manage this business in halves and.

Speaker Change: Think it's again important to note that we do that to drive excitement footsteps.

Speaker Change: And absolutely try to bring value to our customers at these key selling year.

Brian: No matter when spring comes it always comes and it never impacts our annual results our guidance. So that's why we.

Speaker Change: Okay. Thanks for the detail.

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

Brian: We reaffirmed today.

Brian: Got it that's helpful and then my second question.

Brian William Nagel: Hi, good morning.

Brian: This would some of the macro data and there is more chatter out there about a potential reemergence of you will have inflationary pressures. So I guess the question I have for years I mean within your business, particularly maybe more the commodity side of this are you starting to see this a and then b as you think about to the extent that we are seeing some type of potential.

Brian William Nagel: Thanks for taking my questions.

Brian William Nagel: That's my first question and I apologize I know this can be a bit repetitive we used a couple of the prior questions but.

Brian William Nagel: Maybe asking a little bit different way.

Speaker Change: As you look at your reader can you reiterated guidance for 'twenty four.

Speaker Change: As you think about that.

Speaker Change: What we see what would transpire sort of say in Q1.

Brian: Some type of a reemergence of inflation, how do you view it at this juncture.

Speaker Change: Can we talk a lot.

Speaker Change: Through the call about the macro crushers, where macro disruption still impacting home depot. So the question I have to get to that guidance. The guidance you reiterated today do you need some type of change.

Brian: Ability of a home depot to pass some of those type of costs along to consumers doesn't has in the past.

Brian: Yeah.

Brian: Okay.

Brian: If you look at the National Statistics, and you actually parse inflation inflation is being driven into goods and good space sorry, the services space not in a good space.

Speaker Change: Some type of political <unk> the.

Speaker Change: The macro environment from what you're seeing today.

Brian: This is Brian.

Speaker Change #153: And particularly not in home related categories or fill in maybe just talk about observations yes.

Speaker Change: The only impact here was a delayed spring and we manage this business in halves and.

Brian: And from a commodity standpoint, Brian we've had we've seen no impact obviously, we talked a lot in the last year about not only lumber, but but copper and we're pleased with the fact that there is no impact on commodities at this point and see a very stable environment.

Speaker Change: No matter when spring comes it always comes and it never impacts our annual results or guidance. So that's why we.

Brian: We reaffirmed today.

Speaker Change: Yes.

Speaker Change: Got it that's helpful and then my second question.

Brian: Okay very helpful. I appreciate it thank you.

Speaker Change: This would some of the macro data and there is more chatter out there about a potential reemergence of you will have inflationary pressures.

Brian: Christine we have time for one more question.

Brian: Thank you our final question will come from the line of Steven Forbes with Guggenheim. Please proceed with your question.

Speaker Change: The question for you is I mean.

Steven Paul Forbes: Good morning, everyone.

Speaker Change: In your business, particularly maybe more the commodity side of this are you starting to see this.

Steven Paul Forbes: I was hoping maybe just expand on the weakness in certain discretionary projects, such as kitchen and Bath.

Speaker Change: And then B as you.

Speaker Change: Think about to the extent that we are seeing some type of potentially some type of a reemergence of inflation. How do you view it at this juncture the ability of a home depot to pass some of those type of costs along to consumers doesn't has in the past.

Steven Paul Forbes: Way to help us better understand if there's line of sight to stabilization in the project size headwind this year and our pressure rolling off meaning is it if it's cycling compare still are you still seeing project size.

Speaker Change: Okay.

Steven Paul Forbes: Moderate right relative to some baseline.

Speaker Change: If you look at the National Statistics, and you actually parse inflation inflation is being driven in the goods I think good state as far as the services space not in a good space.

Steven Paul Forbes: Whether it's a year ago or sort of from peak levels.

Steven Paul Forbes: Yeah.

Speaker Change: And particularly not in home related categories, one Bill and maybe just talk about observations, yes and.

Speaker Change #155: I mean for sure the single biggest pressure outside of the AUR there Richard one through was from.

Speaker Change: And from a commodity standpoint, Brian.

Speaker Change: We've seen no impact obviously, we talked a lot in the last year about.

Brian: Not only lumber, but copper and we're pleased with the fact that there is no impact on commodities at this point you can see a very stable environment.

Steven Paul Forbes: Discretionary larger decor oriented projects and as we've said last year. It was more of an items story. This year, it's more of a discretionary generally financed story.

Speaker Change: Okay very helpful. I appreciate it thank you.

Speaker Change: Christine we have time for one more question.

Steven Paul Forbes: If you take something like kitchen cabinets and countertops windows those.

Speaker Change: Thank you our final question will come from the line of Steven Forbes with Guggenheim. Please proceed with your question.

Speaker Change #154: Probably the only categories, where we've seen.

Speaker Change: Good morning, everyone.

Steven Paul Forbes: I was hoping maybe you can just expand on the weakness in certain discretionary projects, such as kitchen and Bath.

Richard: Not just some some falloff in projects and size of projects, but actually a little bit of trading down.

Speaker Change: Way to help us better understand if there's line of sight to stabilization in the project size headwind this year and our pressure rolling off meaning is it if it's cycling compare still are you still seeing project size.

Speaker Change #144: So it's focused on those categories. It's the only place we've seen it.

Speaker Change #144: And are seeing it.

Speaker Change: Moderate right.

Speaker Change #144: Sure.

Speaker Change #144: That that too will pass I mean, I think that is now going through.

Speaker Change: And then some baseline.

Speaker Change: Whether it's a year ago or sort of from peak levels.

Speaker Change #144: We've always had the idea that if turnover drop people would improve in place.

Speaker Change: Yeah. It's.

Speaker Change: I mean for sure.

Speaker Change: The single biggest pressure outside of the AUR that Richard went through was from.

Speaker Change #146: We're still seeing the fallout from the turnover.

Speaker Change: Discretionary larger decor oriented projects and as we've said last year. It was more of an items story.

Speaker Change #152: Being down so dramatically I mean, it was just six months ago that interest rates at their peak in October of 'twenty three mortgage rates. So those are the type of projects as we move into a new house.

Speaker Change: This year, it's more of a discretionary generally financed story.

Speaker Change #152: Date, your kitchen, you update a master bathroom etsy.

Speaker Change: If you take something like.

Speaker Change #151: Et cetera, and then if you are going to stay in place.

Speaker Change: Kitchen cabinets and countertops windows those are probably the only categories, where we've seen.

Speaker Change #151: And take on those type of projects.

Speaker Change #156: Outside of a move you're generally going to finance.

Speaker Change: Not just some some falloff in projects and size of projects, but actually a little bit of trading down.

Speaker Change #157: As we've seen the rates tick up and the impact of rates ticking up that's impacting that demand. So.

Speaker Change: So it's focused on those categories. It's the only place we've seen it.

Speaker Change #159: Right now you would you would see a lap of that dynamic we don't see housing turnover going lower and then the question is interest rates.

Speaker Change: And are seeing it.

Speaker Change: <unk>.

Speaker Change: That that too will pass I mean, I think that is now going through.

Speaker Change #158: What does happen to interest rates.

Speaker Change #148: In higher for longer what does that mean, you guys know as much as we do on that score.

Speaker Change: We've always had the idea that if turnover would drop people would improve in place I think we're still seeing the fallout from the turnover.

chicken chips: And then maybe just a quick follow up I think it was chicken chips comments earlier.

chicken chips: About the pro comp being positive I believe you said within those markets that are servicing the complex pro so maybe just clarifying if that's what you said and does that imply that you've seen a widening in the performance gap.

Speaker Change: Being down so dramatically I mean, it was just six months ago that interest rates hit their peak in October of 'twenty three mortgage rates. So those are the type of projects move into a new house.

chicken chips: Between those markets, where you're servicing the complex pro versus the company average and maybe relative to what you guys stated at the analyst day.

Speaker Change: Update your kitchen update a master bathroom etsy.

Speaker Change: Et cetera.

Speaker Change: And then if you are going to stay in place.

chicken chips: Last year.

chicken chips: Yes, just reaffirming what I said, we have seen positive comps in those markets, where we've invested in sales professionals and our FTC markets.

Speaker Change: And take on those type of projects.

Speaker Change: Outside of a move you are generally going to finance.

Speaker Change: As we've seen the rates tick up and the impact of <unk>.

chicken chips: Alright, thank you.

Speaker Change: Sticking up that's impacting that demand so.

chicken chips: Yes.

chicken chips: Thanks, Steve.

chicken chips: J&J I would now like to hand, the floor back over to you for closing comments.

Speaker Change #100: Right now you would you would see a lap of that dynamic we don't see housing turnover going lower and then the question is interest rates.

chicken chips: Thank you for joining us today, we look forward to speaking with you on our second quarter earnings call in August.

Speaker Change #100: What does happen to interest rates.

chicken chips: Yes.

Speaker Change #160: 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.

Speaker Change #100: And higher for longer what does that mean, you guys know as much as we do on that score.

chicken chips: And then maybe just a quick follow up I think it was chicken chips comments earlier.

Speaker Change #101: The pro comp being positive I believe you said within those markets that are servicing the complex pro so maybe just clarifying if that's what you said and does that imply that you've seen a widening in the performance gap.

Speaker Change #101: Between those markets, where you're servicing the complex pro versus the company average and maybe relative to what you guys stated at the analyst day.

Speaker Change #101: Last year.

Speaker Change #102: Yes, just reaffirming what I said, we have seen positive comps in those markets, where we've invested in sales professionals and our FTC markets.

Speaker Change #103: Great. Thank you.

Yes.

Speaker Change #103: Thanks.

Speaker Change #106: I would now like to hand, the floor back over to you for closing comments.

Speaker Change #103: Thank you for joining us today, we look forward to speaking with you on our second quarter earnings call in August.

Speaker Change #104: 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.

Speaker Change #104: Yes.

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