Q2 2025 The Home Depot Inc Earnings Call

Question and answer session will follow the formal presentation.

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As a reminder, this conference is being recorded.

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

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Thank you Christine and good morning, everyone welcome to home Depot second quarter 2025 earnings call.

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

Billy Bastek: Fast, free delivery from The Home Depot makes your projects hassle-free. Visit homedepot.com or The Home Depot app for free delivery on millions of products, including same-day and next-day options. Get delivery.

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Ann Marie Campbell Senior Executive Vice President, Billy Bathgate, Executive Vice President of merchandising and Richard Mcphail, Executive Vice President and Chief Financial Officer.

Speaker #2: Greetings, and welcome to The Home Depot second quarter 2025 earnings conference call. At this time, all participants are in listen-only mode. A brief question-and-answer session will follow the formal presentation.

Christine: Greetings and welcome to the Home Depot Second Quarter 2025 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.

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 #2: If anyone should require operator assistance during the conference, please press *0 on your telephone keypad. As a reminder, this conference is being recorded.

If we are unable to get to your question during the call. Please call Investor Relations at 7703842387.

Speaker #2: It is now my pleasure to introduce your host, Isabel Janci. Please go ahead.

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 under the federal Securities laws, including as defined in the private Securities Litigation Reform Act of 1995.

Speaker #3: Thank you, Christine, and good morning, everyone. Welcome to The Home Depot's second quarter 2025 earnings call. Joining us on our call today are Ted Decker, Chair, President, and CEO; Ann-Marie Campbell, Senior Executive Vice President; Billy Bastek, Executive Vice President of Merchandising; and Richard McPhail, Executive Vice President and Chief Financial Officer.

Isabel Janci: Thank you, Christine, and good morning, everyone. Welcome to Home Depot's Second Quarter 2025 Earnings Call. Joining us on our call today are Ted Decker, Chair, President and CEO; Ann-Marie Campbell, Senior Executive Vice President; Billy Bastek, Executive Vice President of Merchandising; and Richard McPhail, Executive Vice President and Chief Financial Officer. 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. If we are unable to get to your question during the call, please call Investor Relations 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 under the Federal Securities Laws, including 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.

These risks and uncertainties include but are not limited to the factors identified in the release and in our most recent annual report on Form 10-K and in our other filings with the Securities and Exchange Commission.

Speaker #3: Following our prepared remarks, the call will be open for questions. Questions will be limited to analysts and investors. As a reminder, please limit yourself to one question with one follow-up.

Speaker #3: If we are unable to get to your question during the call, please call investor relations 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 under the Federal Securities Laws, including as defined in the Private Securities Litigation Reform Act of 1995.

Today's presentation will also include certain non-GAAP measures, including but not limited to adjusted operating margin adjusted diluted earnings per share and return on invested capital for a reconciliation of these and other non-GAAP measure so the corresponding GAAP measures. Please refer.

Our earnings press release, and our website.

Now, let me turn the call over to Ted.

Good morning, everyone sales for the second quarter were $45 $3 billion up four 9% from the same period last year.

Speaker #3: 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 most recent annual report on Form 10-K, as well as in our other filings with the Securities and Exchange Commission.

Isabel Janci: 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 most recent annual report on Form 10-K and in our other filings with the Securities and Exchange Commission. Today's presentation will also include certain non-GAAP measures, including, but not limited to, adjusted operating margins, adjusted diluted earnings per share, and return on invested capital. For a reconciliation of these and other non-GAAP measures to the corresponding GAAP measures, please refer to our earnings press release and our website. Now, let me turn the call over to Ted.

Comp sales increased 1% from the same period last year.

In the U S increased one 4%.

Just with diluted earnings per share were $4.68 in the second quarter compared to $4.67 in the second quarter last year.

Speaker #3: Today's presentation will also include certain non-GAAP measures, including but not limited to adjusted operating margins, adjusted diluted earnings per share, and return on invested capital.

Local currency, Canada, and Mexico posted positive comps.

Our second quarter results were in line with our expectations. The momentum that began in the back half of last year continued throughout the first half as we saw our customers engage more broadly and smaller home improvement projects in.

Speaker #3: For a reconciliation of these and other non-GAAP measures to the corresponding GAAP measures, please refer to our earnings press release and our website. Now, let me turn the call over to Ted.

In fact, the performance across the business was the strongest we've seen in over two years.

Speaker #4: Thank you, Isabel, and good morning, everyone. Sales for the second quarter were $45.3 billion, up 4.9% from the same period last year. Comp sales increased 1% from the same period last year, and comps in the U.S. increased 1.4%.

Ted Decker: Thank you, Isabel, and good morning, everyone. Sales for the second quarter were $45.3 billion, up 4.9% from the same period last year. Comp sales increased 1% from the same period last year, and comps in the U.S. increased 1.4%. Adjusted diluted EPS were $4.68 in the second quarter, compared to $4.67 in the second quarter last year. In local currency, Canada and Mexico posted positive comps. Our second quarter results were in line with our expectations. The momentum that began in the back half of last year continued throughout the first half, as we saw our customers engage more broadly in smaller home improvement projects. In fact, the performance across the business was the strongest we've seen in over two years. Our results are a testament to our focus on enhancing the customer satisfaction as we invest in our strategic initiatives.

Our results are a testament to our focus on enhancing the customer experience as we invest in our strategic initiatives.

From technology investments to drive productivity to the capabilities, we are building with their pro ecosystem to better serve complex purchases.

Speaker #4: Adjusted diluted earnings per share were $4.68 in the second quarter, compared to $4.67 in the second quarter last year. In local currency, Canada and Mexico posted positive comps.

Esther delivery options for all of our customers, we are growing market share with these initiatives.

Just over a year ago, we completed the acquisition of Srs. This strategic acquisition was important for several reasons, which gave us a right to win with especially trade pro enhance development of our pro ecosystem and provided a number of cross selling opportunities.

Speaker #4: Our second-quarter results were in line with our expectations. The momentum that began in the back half of last year continued throughout the first half as we saw our customers engage more broadly in smaller home improvement projects.

Over the past year, Srs has exceeded our expectations driving market, leading growth accelerating our organic ecosystem efforts and driving revenue synergies, we could not be more pleased with their performance.

Speaker #4: In fact, the performance across the business was the strongest we've seen in over two years. Our results are a testament to our focus on enhancing the customer experience as we invest in our strategic initiatives.

As we announced in June we are excited about the pending acquisition G. M. S. A leading distributor of specialty building products, including drywall ceilings and steel framing related to remodeling and construction projects.

Speaker #4: From technology investments to drive productivity, to the capabilities we are building with our Pro Ecosystem to better serve complex purchases, to faster delivery options for all of our customers, we are growing market share with these initiatives.

Ted Decker: From technology investments that drive productivity to the capabilities we are building with our Pro ecosystem to better serve complex purchases to faster delivery options for all of our customers, we are growing incremental market share with these initiatives. Just over a year ago, we completed the acquisition of SRS Distribution. This strategic acquisition was important for several reasons. It gave us a right to win with especially TradePro, enhanced development of our Pro ecosystem, and provided a number of cross-selling opportunities. Over the past year, SRS Distribution has exceeded our expectations, driving market-leading growth, accelerating our organic ecosystem efforts, and driving revenue synergies. We could not be more pleased with their performance. As we announced in June, we are excited about the pending acquisition of GMS, Inc., a leading distributor of specialty building products, including drywall, ceilings, and steel framing related to remodeling and construction projects.

This acquisition will add a highly complementary adjacent vertical two srs's business with differentiated capabilities product categories and customer relationships.

Speaker #4: Just over a year ago, we completed the acquisition of SRS. This strategic acquisition was important for several reasons. It gave us a right to win with a specialty trade pro, enhanced the development of our Pro Ecosystem, and provided a number of cross-selling opportunities.

It will also broaden srs as distribution footprint across the U S and Canada.

In fact, Srs will now have a network of more than 1200 locations a sales operation of over 3500 associates and a fleet of nearly 8000 trucks capable of making tens of thousands of job sites deliveries per day.

Speaker #4: Over the past year, SRS has exceeded our expectations, driving market-leading growth, accelerating our organic ecosystem efforts, and driving revenue synergies. We could not be more pleased with their performance.

Speaker #4: As we announced in June, we are excited about the pending acquisition of GMS, a leading distributor of specialty building products, including drywall, ceilings, and steel framing, related to remodeling and construction projects.

Additionally, GFS will be additive to our organic efforts to better serve pros working on complex projects, enabling us to offer a deeper and broader assortment of interior building products and services as well as additional fulfillment options.

Speaker #4: This acquisition will add a highly complementary adjacent vertical to SRS's business, with differentiated capabilities, product categories, and customer relationships. It will also broaden SRS's distribution footprint across the U.S. and Canada.

Ted Decker: This acquisition will add a highly complementary adjacent vertical to SRS Distribution's business with differentiated capabilities, product categories, and customer relationships. It will also broaden SRS Distribution's specialty distribution footprint across the U.S. and Canada. In fact, SRS Distribution will now have a network of more than 1,200 locations, a sales operation of over 3,500 associates, and a fleet of nearly 8,000 trucks capable of making tens of thousands of job site deliveries per day. Additionally, GMS will be additive to our organic efforts to better serve pros working on complex projects, enabling us to offer a deeper and broader assortment of interior building products and services, as well as additional fulfillment options. Despite the uncertainty and volatility in the market, we are confident that we can effectively navigate this environment.

Despite the uncertainty and volatility in the market. We are confident that we can effectively navigate this environment.

For the last several years, our teams have done an incredible job partnering with our vendors to diversified products sourcing, which gives us unique flexibility in our supply chain.

Speaker #4: In fact, SRS will now have a network of more than 1,200 locations, a sales operation of over 3,500 associates, and a fleet of nearly 8,000 trucks.

We will continue to work with our vendors to ensure that we have the right products at the right value in stock and on shelf for our customers to purchase.

Speaker #4: Capable of making tens of thousands of job site deliveries per day. Additionally, GMS will be additive to our organic efforts to better serve pros working on complex projects.

I could not be more excited about the incredible opportunities in front of us to continue growing share with all our customers are.

Our store associates merchants supply chain teams and vendor partners are executing at a high level and I would like to thank them for all that they do.

Speaker #4: Enabling us to offer a deeper and broader assortment of interior building products and services, as well as additional fulfillment options. Despite the uncertainty and volatility in the market, we are confident that we can effectively navigate this environment.

With that let me turn the call over to Ann.

Thanks, Ted and good morning, everyone. Our associates did an incredible job delivering exceptional customer service and I'd also like to thank them for all that they do we.

Speaker #4: Over the last several years, our teams have done an incredible job partnering with our vendors to diversify product sourcing, which gives us unique flexibility in our supply chain.

Ted Decker: Over the last several years, our teams have done an incredible job partnering with our vendors to diversify product sourcing, which gives us unique flexibility in our supply chain. We will continue to work with our vendors to ensure that we have the right products at the right value in stock and on shelf for our customers to purchase. I could not be more excited about the incredible opportunities in front of us to continue growing share with all our customers. Our store associates, merchants, supply chain teams, and vendor partners are executing at a high level, and I would like to thank them for all that they do. With that, let me turn the call over to Ann.

We know that when we enable our associates to focus on serving the customer we grow sales and over the last several years, we've been investing in a multitude of initiatives across our operations that not only allow or so six to more effectively serve our customers, but also drive.

Speaker #4: We will continue to work with our vendors to ensure that we have the right products, at the right value, in stock, and on shelf for our customers to purchase.

Speaker #4: I could not be more excited about the incredible opportunities in front of us. To continue growing share with all our customers, our store associates, merchants, supply chain teams, and vendor partners are executing at a high level, and I would like to thank them for all that they do.

Activity in our operations.

Well optimizing freight flow through a proprietary flow great flow application to ensuring we have the right products in stock and under show for customers.

Hence in how we pick and stage online orders. We are excited about the progress, we're making and the results we're seeing.

Speaker #4: With that, let me turn the call over to Ann.

Speaker #3: Thanks, Ted, and good morning, everyone. Our associates did an incredible job delivering exceptional customer service, and I'd also like to thank them for all that they do.

Ann-Marie Campbell: Thanks, Ted, and good morning, everyone. Our associates did an incredible job delivering exceptional customer service. I would also like to thank them for all that they do. We know that when we enable our associates to focus on serving the customer, we grow sales. Over the last several years, we have been investing in a multitude of initiatives across our operations that not only allow our associates to more effectively serve customers, but also drive productivity in our operations. From optimizing freight flow through a proprietary freight flow application to ensuring we have the right products in stock and on the shelf for customers to enhancing how we pick and stage online orders, we are excited about the progress we are making and the results we are seeing. Our stores continue to be the center of the ecosystem and critical hubs for customers' shopping experience.

Our stores continue to be the center of the ecosystem and critical hubs for customers shopping experience.

Speaker #3: We know that when we enable our associates to focus on serving the customer, we grow sales. Over the last several years, we've been investing in a multitude of initiatives across our operations that not only allow our associates to more effectively serve customers, but also drive productivity in our operations.

And last year, we made technology improvements across all stores and <unk> to better leverage all of our assets, enabling faster delivery of online orders.

We have continued to improve delivery times and we now have the fastest delivery speeds across our greatest number of products in company history, both same day and next day.

Speaker #3: From optimizing freight flow through our proprietary Float Freight Flow application to ensuring we have the right products in stock and on the shelf for our customers, to enhancing how we pick and stage online orders, we are excited about the progress we're making and the results we are seeing.

We're seeing a double digit lift in spend with customers, who utilized for faster delivery options as they return more frequently to shop in stores and online.

This is all a result of board ethics to ship from best location, which uses machine learning models to determine the optimal delivery mode to maximize speed and efficiency.

Speaker #3: Our stores continue to be the center of the ecosystem and critical hubs for customers' shopping experience. Last year, we made technology improvements across our stores and DFCs to better leverage all of our assets, enabling faster delivery of online orders.

Ann-Marie Campbell: Last year, we made technology improvements across our stores and DFCs to better leverage all of our assets, enabling faster delivery of online orders. We have continued to improve delivery times, and we now have the fastest delivery speeds across the greatest number of products in company history, both same-day and next-day. We are seeing a double-digit lift in spend with customers who utilize our faster delivery options as they return more frequently to shop in stores and online. This is all a result of our efforts to shift from best location, which uses machine learning models to determine the optimal delivery mode to maximize speed and efficiency. To support this incremental demand, we have added more order fulfillment associates or OFAs in our stores. Through enhancements to our HD phones, we are now able to strategically direct them to more effectively manage online orders.

To support this incremental demand we've added more order fulfillment associates for OA phase in our stores and through enhancements towards <unk> phone. We are now able to strategically direct them to more effectively manage online orders for.

Speaker #3: We have continued to improve delivery times, and we now have the fastest delivery speeds across a greater number of products in company history, both same-day and next-day.

For example, this quarter, we rolled out enhancements to always be at that prioritizes orders and enables the best thinking of several orders at once.

Speaker #3: We are seeing a double-digit lift in spend with customers who utilize our faster delivery options, as they return more frequently to shop in stores and online.

Have any dedicated associates, but these orders coupled with powerful technology in there and ensures that orders more efficiently and accurately it driving fastest faster fulfillment times and higher customer satisfaction.

Speaker #3: This is all a result of our efforts to shift from best location, which uses machine learning models to determine the optimal delivery mode to maximize speed and efficiency.

Yes.

As we've mentioned in the past we continue to focus on our pro ecosystem mature and the new capabilities. We have built propose working on complex projects we.

Speaker #3: To support this incremental demand, we have added more order fulfillment associates for our phase in our stores. In addition to enhancements to our HC phones, we are now able to strategically direct them to more effectively manage online orders.

We are thrilled with the progress we've made across expanded assortments.

Film adoption, our sales teams account management and more recently trade credit and order management.

Speaker #3: For example, this quarter we rolled out enhancements to our OFA app that prioritizes orders and enables batch picking of several orders at once. Having dedicated associates for these orders, coupled with powerful technology in their hands, ensures that orders are efficiently and accurately picked, driving faster fulfillment times and higher customer satisfaction.

Ann-Marie Campbell: For example, this quarter, we rolled out enhancements to our OFA app that prioritizes orders and enables batch picking of several orders at once. Having dedicated associates for these orders, coupled with powerful technology in their hands, ensures that orders are efficiently and accurately picked, driving faster fulfillment times and higher customer satisfaction. As we have mentioned in the past, we continue to focus on our Pro ecosystem, maturing the new capabilities we have built for pros working on complex projects. We are thrilled with the progress we have made across expanded assortments, fulfillment options, our sales teams, account management, and more recently, trade credit and order management. As you know, we have been leveraging SRS Distribution to continue to ramp up our trade credit capabilities.

As you know we have been leveraging srs to continue to ramp up or trade credit capabilities today.

Today, we have several thousand pros with a trade credit account and we've seen a double digit lift in their spend across channels. Once these pros started using their trade credit.

And while we continue to roll this out more broadly we're also focused on ensuring connectivity through a different sales channels, including <unk> website and <unk> stores.

Speaker #3: As we've mentioned in the past, we continue to focus on our Pro Ecosystem, maturing the new capabilities we have built for pros working on complex projects.

For example, we want to approach to be able to transact with those stores seamlessly.

Including checking and using the available credit on their count while they're shopping in those stores.

Speaker #3: We are thrilled with the progress we've made across expanded assortments, fulfillment options, our sales teams, account management, and, more recently, trade credit and order management.

And later this year, we anticipate that all three credit customers will be able to seamlessly used free credit for in store purchases.

Our order management system, it's another important capability that enables us to more easily manage probe product deliveries throughout the life of the project.

Speaker #3: As you know, we've been leveraging SRS to continue to ramp up our trade credit capabilities. Today, we have several thousand pros with a trade credit account, and we've seen a double-digit lift in their spend across channels once these pros started using their trade credit.

Ann-Marie Campbell: Today, we have several thousand pros with a trade credit account, and we have seen a double-digit lift in their spend across channels once these pros started using their trade credit. While we continue to roll this out more broadly, we are also focused on ensuring connectivity through our different sales channels, including our B2B website and our stores. For example, we want our pros to be able to transact with our stores seamlessly, including checking and using the available credit tied to account while they are shopping in our stores. Later this year, we anticipate that all trade credit customers will be able to seamlessly use trade credit for in-store purchases. Our order management system is another important capability that enables us to more easily manage pro product deliveries throughout the life of their project.

Order management brings together systems and processes that enable us to effectively capture modest by deliver and offer post sales support for pro orders.

Speaker #3: And while we continue to roll this out more broadly, we are also focused on ensuring connectivity through our different sales channels, including our B2B website and our stores.

And while there's still work to do we have already deployed a number of benefits in some markets. We can now reserve inventory.

I ordered before fulfillment and invoice upon delivery.

Speaker #3: For example, we want our pros to be able to transact with our stores seamlessly, including checking and using the available credit on their account while they're shopping in our stores.

Ample today, we can quickly and easily change in order from we'll call in a store to delivery to the job site.

These are a few of the critical features and benefits. We are working on that will deliver exceptional value to approach.

Speaker #3: And later this year, we anticipate that all trade credit customers will be able to seamlessly use trade credit for in-store purchases. Our order management system is another important capability that enables us to more easily manage product deliveries throughout the life of their project.

With that let me turn the call over to Bill.

Thank you Anne and good morning, everyone.

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

Speaker #3: Order management brings together systems and processes that enable us to effectively capture, modify, deliver, and offer pro sales support for pro orders. While there's still work to do, we have already deployed a number of benefits.

As you heard from Ted during the second quarter, we saw continued momentum in the underlying demand across home improvement related projects.

Ann-Marie Campbell: Order management brings together systems and processes that enable us to effectively capture, modify, deliver, and offer post-sale support for pro orders. While there is still work to do, we have already deployed a number of benefits. In some markets, we can now reserve inventory, modify orders before fulfillment, and invoice upon delivery. For example, today, we can quickly and easily change an order from what we will call in-store to delivery to the job site. These are a few of the critical features and benefits we are working on that will deliver exceptional value to our pros. With that, let me turn the call over to Billy Bastek.

And our performance was the strongest it has been in over two years.

Turning to our merchandising department comp performance for the second quarter 12 of our 16 merchandising departments posted positive comps, including <unk>.

Speaker #3: In some markets, we can now reserve inventory, modify orders before fulfillment, and invoice upon delivery. For example, today we can quickly and easily change an order from will call in a store to delivery to the job site.

Storage that hardware building materials indoor garden, electrical kitchen, outdoor garden, millwork power plumbing and appliances.

Speaker #3: These are a few of the critical features and benefits we're working on that will deliver exceptional value to our pros. With that, let me turn the call over to Billy.

During the second quarter, our comp average ticket increased one 4% and comp transactions decreased 4%.

Speaker #5: Thank you, Ann. Good morning, everyone. I want to start by also thanking all of our associates and supplier partners for their ongoing commitment to serving our customers and communities.

Billy Bastek: Thank you, Ann, and good morning, everyone. I want to start by also thanking all of our associates and supplier partners for their ongoing commitment to serving our customers and communities. As you heard from Ted, during the second quarter, we saw continued momentum in the underlying demand across home improvement-related projects, and our performance was the strongest it has been in over two years. Turning to our merchandising department comp performance for the second quarter, 12 of our 16 merchandising departments posted positive comps, including storage, bath, hardware, building materials, indoor garden, electrical, kitchen, outdoor garden, millwork, power, plumbing, and appliances. During the second quarter, our comp average ticket increased 1.4%, and comp transactions decreased 0.4%.

The growth in our comp average ticket primarily reflects a greater mix of higher ticket items inflation from core commodity categories, including lumber and copper and a modest decrease in promotional activity relative to prior years.

Speaker #5: As you heard from Ted, during the second quarter, we saw continued momentum in the underlying demand across home improvement-related projects. Our performance was the strongest it has been in over two years.

Big ticket comp transactions or those over $1000 were positive two 6% compared to the second quarter of last year.

Speaker #5: Turning to our merchandising department comp performance for the second quarter, 12 of our 16 merchandising departments posted positive comps, including storage, bath, hardware, building materials, indoor garden, electrical, kitchen, outdoor garden, millwork, power, plumbing, and appliances.

We were pleased with the performance we saw in categories, such as building materials lumber and hardware.

We continued to see softer engagement and larger discretionary projects, where customers typically use financing to fund the renovation project.

Yeah.

During the second quarter, both pro and DIY comp sales were positive and relatively in line with one another.

Speaker #5: During the second quarter, our comp average ticket increased 1.4%, and comp transactions decreased 0.4%. The growth in our comp average ticket primarily reflects a greater mix of higher-ticket items, inflation from core commodity categories including lumber and copper, and a modest decrease in promotional activity relative to prior years.

In the second quarter, we saw strength across many pro heavy categories like dimensional lumber concrete and decking.

Billy Bastek: The growth in our comp average ticket primarily reflects a greater mix of higher ticket items, inflation from core commodity categories, including lumber and copper, and a modest decrease in promotional activity relative to prior years. Big ticket comp transactions or those over $1,000 were positive 2.6% compared to the second quarter of last year. We were pleased with the performance we saw in categories such as building materials, lumber, and hardware. However, we continued to see softer engagement in larger discretionary projects where customers typically use financing to fund the renovation project. During the second quarter, both Pro and DIY comp sales were positive and relatively in line with one another. In the second quarter, we saw strength across many Pro-heavy categories like dimensional lumber, concrete, and decking. In DIY, we saw strength across our seasonal product categories, including patio, grills, and live goods.

And in DIY, we saw strength across our seasonal product categories, including patio grills and live goods.

Turning to total company online comp sales sales leveraging our digital platforms increased approximately 12% compared to the second quarter of last year.

Speaker #5: Big ticket comp transactions are those over $1,000, which showed a positive 2.6% increase compared to the second quarter of last year. We were pleased with the performance we saw in categories such as building materials, lumber, and hardware.

We're excited about the continued success, we are seeing across our interconnected platforms.

As Dan mentioned, our faster delivery speeds are resonating with customers and driving greater engagement and sales.

Speaker #5: However, we continue to see softer engagement and larger discretionary projects where customers typically use financing to fund the renovation project. During the second quarter, both pro and DIY comp sales were positive and relatively in line with one another.

We know that as we remove friction from the experience, we see incremental customer engagement.

We also continued to invest in improving search functionality leveraging AI.

And enhanced our buy it again capabilities, allowing customers to easily and conveniently reorder products, regardless of where the original purchase occurred.

Speaker #5: In the second quarter, we saw strength across many pro-heavy categories like dimensional lumber, concrete, and decking. In DIY, we saw strength across our seasonal product categories, including patio, grills, and live goods.

During the second quarter, we leaned into products and projects that are resonating with our customers and we continue to focus on innovation to deliver the best value proposition for home improvement projects, while enhancing the customer experience for.

Speaker #5: Turning to total company online comp sales, sales leveraging our digital platforms increased approximately 12% compared to the second quarter of last year. We're excited about the continued success we are seeing across our interconnected platforms.

Billy Bastek: Turning to total company online comp sales, sales leveraging our digital platforms increased approximately 12% compared to the second quarter of last year. We are excited about the continued success we are seeing across our interconnected platforms. As Ann mentioned, our faster delivery speeds are resonating with customers and driving greater engagement in sales. We know that as we remove friction from the experience, we see incremental customer engagement. We also continue to invest in improving search functionality, leveraging AI, and enhanced our buy-it-again capabilities, allowing customers to easily and conveniently reorder products regardless of where the original purchase occurred. During the second quarter, we leaned into products and projects that are resonating with our customers, and we continued to focus on innovation to deliver the best value proposition for Home Depot projects while enhancing the customer experience.

For example in pain, we continue to see the benefits of the investments, we're making with product delivery and loyalty.

You might recall that we are the only home improvement big box retailer offer kills branded primer.

Speaker #5: As Ann mentioned, our faster delivery speeds are resonating with customers and driving greater engagement and sales. We know that as we remove friction from the experience, we see incremental customer engagement. We also continue to invest in improving search functionality, leveraging AI.

We also enhanced our fulfillment options, including our in store service and job site delivery capabilities with the pro who paints.

All of these initiatives have driven continued share gains in the quarter.

Across our power department the strong competitive advantage that we have built with our extensive lineup of battery powered platforms continues to drive share growth in these categories. In fact, we achieved a company sales record for battery powered tools during the second quarter.

Speaker #5: And enhanced our buy-it-again capabilities, allowing customers to easily and conveniently reorder products regardless of where the original purchase occurred. During the second quarter, we leaned into products and projects that are resonating with our customers.

And in our storage Department. The team continues to bring new innovation to the market, whether it's our many codes the large mega tone for our improved storage systems.

Speaker #5: And we continue to focus on innovation to deliver the best value proposition for home improvement projects while enhancing the customer experience. For example, in paint, we continue to see the benefits of the investments we are making with products, delivery, and loyalty.

Billy Bastek: For example, in paint, we continue to see the benefits of the investments we're making with products, delivery, and loyalty. You might recall that we are the only Home Depot big-box retailer to offer Kills branded primer. We also enhanced our fulfillment options, including our in-store service and job site delivery capabilities with the Pro who paints. All of these initiatives have driven continued share gains in the quarter. Across our power department, the strong competitive advantage that we have built with our extensive lineup of battery-powered platforms continues to drive share growth in these categories. In fact, we achieved a company sales record for battery-powered tools during the second quarter. In our storage department, the team continues to bring new innovation to the market, whether it's our mini totes, the large mega tote for our improved storage systems.

All of these projects helped drive positive sales and unit comps in the category for the quarter.

Finally, we continue to see great success across our appliance business.

Speaker #5: You might recall that we are the only home improvement big box retailer to offer Kilns branded primer. We also enhanced our fulfillment options, including our in-store service and job site delivery capabilities with the Pro who paints.

As we've mentioned before the improvements we've made to the shopping experience are resonating with our customers.

As we look ahead to the third quarter, our merchandising organization remains focused on being our customers' advocate for value.

Speaker #5: All of these initiatives have driven continued share gains in the quarter. Across our power department, the strong competitive advantage that we have built with our extensive lineup of battery-powered platforms continues to drive share growth in these categories.

This means continuing to try to provide a broad assortment of best in class products that are in stock and available for our customers when they need it.

As we prepare for the holiday season in the back half of the year, we are committed to providing our customers with new and innovative products at a great value.

Speaker #5: In fact, we achieved a company sales record for battery-powered tools during the second quarter. In our storage department, the team continues to bring new innovations to the market, whether it's our mini totes, the large mega tote, or our improved storage systems.

This quarter, we are extremely excited about our lineup for Halloween as the products bring excitement to our stores and helped drive traffic.

Our merchants have worked with our supplier partners to put together a compelling assortment of product offerings for this Halloween season.

Speaker #5: All of these products help drive positive sales and unit comps in the category for the quarter. Finally, we continue to see great success across our appliance business.

Billy Bastek: All of these products help drive positive sales and unit comps in the category for the quarter. Finally, we continue to see great success across our appliance business. As we've mentioned before, the improvements we've made to the shopping experience are resonating with our customers. As we look ahead to the third quarter, our merchandising organization remains focused on being our customer's advocate for value. This means continuing to provide a bright assortment of best-in-class products that are in stock and available for our customers when they need it. As we prepare for the holiday season in the back half of the year, we are committed to providing our customers with new and innovative products at a great value. This quarter, we are extremely excited about our lineup for Halloween, as the products bring excitement to our stores and help drive traffic.

Including the return of many fan favorites, such as scaling and Barkley as well as the new collections for the Halloween enthusiasts.

Speaker #5: As we've mentioned before, the improvements we've made to the shopping experience are resonating with our customers. As we look ahead to the third quarter, our merchandising organization remains focused on being our customers' advocate for value.

Our sneak preview of our Halloween lineup was a huge success and we look forward to the full rollout in the coming weeks with.

With that I'd like to turn the call over to Richard.

You Billy and good morning, everyone in the second quarter total sales were $45 3 billion, an increase of $2 1 billion.

Speaker #5: This means continuing to provide a bright assortment of best-in-class products that are in stock and available for our customers when they need it. As we prepare for the holiday season in the back half of the year, we are committed to providing our customers with new and innovative products at a great value.

Or approximately four 9% from last year.

As a reminder, Srs entered our total company comp base in late June.

Speaker #5: This quarter, we are extremely excited about our lineup for Halloween as the products bring excitement to our stores and help drive traffic. Our merchants have worked with our supplier partners to put together a compelling assortment of product offerings for this Halloween season, including the return of many fan favorites such as Skelly and Barkley, as well as new collections for the Halloween enthusiasts.

During the second quarter, our total company comps were positive 1% with comps of negative <unk>, 3% in May and flat in June and positive three 1% in July.

Billy Bastek: Our merchants have worked with our supplier partners to put together a compelling assortment of product offerings for this Halloween season, including the return of many fan favorites such as Skelly and Barkley, as well as the new collections for the Halloween enthusiasts. Our sneak preview of our Halloween lineup was a huge success, and we look forward to the full rollout in the coming weeks. With that, I'd like to turn the call over to Richard.

Comps in the U S were positive one 4% for the quarter with comps of positive 3% in May positive <unk>, 5% in June and positive three 3% in July.

Speaker #5: Our sneak preview of our Halloween lineup was a huge success, and we look forward to the full rollout in the coming weeks. With that, I'd like to turn the call over to Richard.

For the quarter, and then local currency, Canada, and Mexico posted positive comps.

Speaker #6: Thank you, Billy, and good morning, everyone. In the second quarter, total sales were $45.3 billion, an increase of $2.1 billion, or approximately 4.9% from last year.

Richard Mcphail: Thank you, Billy, and good morning, everyone. In the second quarter, total sales were $45.3 billion, an increase of $2.1 billion, or approximately 4.9% from last year. As a reminder, SRS Distribution entered our total company comp base in late June. During the second quarter, our total company comps were positive 1%, with comps of negative 0.3% in May, flat in June, and positive 3.1% in July. Comps in the U.S. were positive 1.4% for the quarter, with comps of positive 0.3% in May, positive 0.5% in June, and positive 3.3% in July. For the quarter, and in local currency, Canada and Mexico posted positive comps. Additionally, foreign exchange rates negatively impacted total company comps by approximately 40 basis points for the quarter. In the second quarter, our gross margins were 33.4%, a slight increase compared to the second quarter of 2024, which was in line with our expectations.

Additionally, foreign exchange rates negatively impacted total company comps by approximately 40 basis points for the quarter.

In the second quarter, our gross margin was 33, 4% a slight increase compared to the second quarter of 2024, which was in line with our expectations.

Speaker #6: As a reminder, SRS entered our total company comp base in late June. During the second quarter, our total company comps were positive 1%, with comps of negative 0.3% in May, flat in June, and positive 3.1% in July.

During the second quarter operating expense as a percent of sales increased approximately 65 basis points to 18, 9% compared to the second quarter of 2024 are.

Speaker #6: Comps in the U.S. were positive 1.4% for the quarter, with comps of positive 0.3% in May, positive 0.5% in June, and positive 3.3% in July.

Our operating expense performance was in line with our expectations.

Our operating margin for the second quarter was 14, 5% compared to 15, 1% in the second quarter of 2024 and.

Speaker #6: For the quarter, NN Local Currency Canada and Mexico posted positive comps. Additionally, foreign exchange rates negatively impacted total company comps by approximately 40 basis points for the quarter.

In the quarter pre tax intangible asset amortization was $139 million.

Excluding the intangible asset amortization in the quarter, our adjusted operating margin for the second quarter was 14, 8% compared to 15, 3% in the second quarter of 2024.

Speaker #6: In the second quarter, our gross margin was 33.4%, a slight increase compared to the second quarter of 2024, which was in line with our expectations.

Interest and other expense for the second quarter increased by $61 million to $550 million, which was in line with our expectations.

Speaker #6: During the second quarter, operating expense as a percent of sales increased approximately 65 basis points to 18.9% compared to the second quarter of 2024.

Richard Mcphail: During the second quarter, operating expense as a percent of sales increased approximately 65 basis points to 18.9% compared to the second quarter of 2024. Our operating expense performance was in line with our expectations. Our operating margin for the second quarter was 14.5% compared to 15.1% in the second quarter of 2024. In the quarter, pre-tax intangible asset amortization was $139 million. Excluding the intangible asset amortization in the quarter, our adjusted operating margin for the second quarter was 14.8% compared to 15.3% in the second quarter of 2024. Interest and other expense for the second quarter increased by $61 million to $550 million, which was in line with our expectations. In the second quarter, our effective tax rate was 24.2% compared to 24.5% in the second quarter of fiscal 2024.

In the second quarter, our effective tax rate was 24, 2% compared to 24, 5% in the second quarter of fiscal 2024.

Speaker #6: Our operating expense performance was in line with our expectations. Our operating margin for the second quarter was 14.5%, compared to 15.1% in the second quarter of 2024.

Our diluted earnings per share for the second quarter.

Or $4 58, compared to $4 60 and.

Speaker #6: In the quarter, pre-tax intangible asset amortization was $139 million. Excluding the intangible asset amortization in the quarter, our adjusted operating margin for the second quarter was 14.8%, compared to 15.3% in the second quarter of 2024.

In the second quarter of 2024.

Excluding intangible asset amortization, our adjusted diluted earnings per share for the second quarter were $4 68.

A slight increase compared to the second quarter of 2024.

During the second quarter, we opened three new stores, bringing our total store count to 2353.

Speaker #6: Interest and other expenses for the second quarter increased by $61 million, to $550 million, which was in line with our expectations. In the second quarter, our effective tax rate was 24.2%, compared to 24.5% in the second quarter of fiscal 2024.

At the end of the quarter merchandise inventories were $24 8 billion up approximately $1 8 billion compared to the second quarter of 2024 and inventory turns were four six times down from four nine times last year.

Speaker #6: Our diluted earnings per share for the second quarter were $4.58, compared to $4.60 in the second quarter of 2024. Excluding intangible asset amortization, our adjusted diluted earnings per share for the second quarter were $4.68, a slight increase compared to the second quarter of 2024.

Richard Mcphail: Our diluted earnings per share for the second quarter were $4.58 compared to $4.60 in the second quarter of 2024. Excluding intangible asset amortization, our adjusted diluted earnings per share for the second quarter were $4.68, a slight increase compared to the second quarter of 2024. During the second quarter, we opened three new stores, bringing our total store count to 2,353. At the end of the quarter, merchandise inventories were $24.8 billion, up approximately $1.8 billion compared to the second quarter of 2024, and inventory turns were 4.6 times, down from 4.9 times last year. Turning to capital allocation, during the second quarter, we invested approximately $915 million back into our business in the form of CapEx. During the quarter, we paid approximately $2.3 billion in dividends to our shareholders.

Turning to capital allocation.

During the second quarter, we invested approximately $915 million back into our business in the form of capital expenditures and during the quarter, we paid approximately $2 $3 billion in dividends to our shareholders.

Computed on the average of beginning and ending long term debt and equity for the trailing 12 months return on invested capital was 27, 2% down from 31, 9% in the second quarter of fiscal 2024.

Speaker #6: During the second quarter, we opened three new stores, bringing our total store count to 2,343. At the end of the quarter, merchandise inventories were $24.8 billion, up approximately $1.8 billion compared to the second quarter of 2024.

Now I will comment on our outlook for fiscal 2025.

As you heard from Ted our performance during the second quarter was in line with our expectations.

The customer engagement, we saw in the back half of 2024 continued into the first half of 2025 with notable improvements in underlying demand during the second quarter.

Speaker #6: And inventory turns were 4.6 times, down from 4.9 times last year. Turning to capital allocation, during the second quarter, we invested approximately $915 million back into our business in the form of capital expenditures (CapEx), and during the quarter, we paid approximately $2.3 billion in dividends to our shareholders.

As we look to the remainder of the year, we're confident in our ability to manage through the macro economic environment as it stands today.

As a result, we are reaffirming our fiscal 2025 guidance.

As a reminder, our guidance does not include any assumptions on impacts from the pending Gms acquisition.

Speaker #6: Computed on the average of beginning and ending long-term debt and equity for the trailing 12 months, return on invested capital was 27.2%, down from 31.9% in the second quarter of fiscal 2024.

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 27.2%, down from 31.9% in the second quarter of fiscal 2024. Now, I will comment on our outlook for fiscal 2025. As you heard from Ted Decker, our performance during the second quarter was in line with our expectations. The customer engagement we saw in the back half of 2024 continued into the first half of 2025, with notable improvements in underlying demand during the second quarter. As we look to the remainder of the year, we are confident in our ability to manage through the macroeconomic environment as it stands today. As a result, we are reaffirming our fiscal 2025 guidance. As a reminder, our guidance does not include any assumptions on impacts from the pending GMS, Inc.

<unk> and foreign exchange rates changes in the interest rate environment.

Or a recovery in demand for larger remodeling projects.

Speaker #6: Now I will comment on our outlook for fiscal 2025. As you heard from Ted, our performance during the second quarter was in line with our expectations.

We expect total sales growth to outpace sales comp with sales growth of approximately positive two 8% and comp sales growth of approximately positive 1% compared to fiscal 2024.

Speaker #6: The customer engagement we saw in the back half of 2024 continued into the first half of 2025, with notable improvements in underlying demand during the second quarter.

Our gross margin is expected to be approximately 33, 4% essentially flat compared to fiscal 2024.

Speaker #6: As we look to the remainder of the year, we are confident in our ability to manage through the macroeconomic environment as it stands today.

Further we expect operating margin of approximately 13% and adjusted operating margin of approximately 13, 4%.

Speaker #6: As a result, we are reaffirming our fiscal 2025 guidance. As a reminder, our guidance does not include any assumptions on impacts from the pending GMS acquisition, fluctuations in foreign exchange rates, changes in the interest rate environment, or a recovery in demand for larger remodeling projects.

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

We expect net interest expense of approximately $2 2 billion.

Richard Mcphail: acquisition, fluctuations in foreign exchange rates, changes in the interest rate environment, or a recovery in demand for larger remodeling projects. We expect total sales growth to outpace sales comp, with sales growth of approximately positive 2.8% and comp sales growth of approximately positive 1% compared to fiscal 2024. Our gross margin is expected to be approximately 33.4%, essentially flat compared to fiscal 2024. Further, we expect an operating margin of approximately 13% and an adjusted operating margin of approximately 13.4%. Our effective tax rate is targeted at approximately 24.5%. We expect net interest expense of approximately $2.2 billion. We expect our diluted earnings per share to decline approximately 3% compared to fiscal 2024 when comparing the 52 weeks in fiscal 2025 to the 53 weeks in fiscal 2024. We expect our adjusted diluted earnings per share to decline approximately 2% compared to fiscal 2024.

We expect our diluted earnings per share to decline approximately 3% compared to fiscal 2024, when comparing the 52 weeks in fiscal 2025 to 53 weeks in fiscal 2024.

Speaker #6: We expect total sales growth to outpace sales comp, with sales growth of approximately positive 2.8% and comp sales growth of approximately positive 1% compared to fiscal 2024.

And we expect our adjusted diluted earnings per share to decline approximately 2% compared to fiscal 2024.

Speaker #6: Our gross margin is expected to be approximately 33.4%, essentially flat compared to fiscal 2024. Further, we expect an operating margin of approximately 13% and an adjusted operating margin of approximately 13.4%.

On a 52 week basis adjusted diluted earnings per share would be essentially flat compared to fiscal 2024.

We plan to continue investing in our business with capital expenditures of approximately two 5% of sales for fiscal 2025.

We believe that we will grow market share in any environment by strengthening our competitive position with our customers and delivering the best customer experience in home improvement.

Speaker #6: Our effective tax rate is targeted at approximately 24.5%. We expect net interest expense of approximately $2.2 billion. We expect our diluted earnings per share to decline approximately 3% compared to fiscal 2024 when comparing the 52 weeks in fiscal 2025 to the 53 weeks in fiscal 2024.

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

Thank you we will now be conducting a question and answer session.

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

Speaker #6: And we expect our adjusted diluted earnings per share to decline approximately 2% compared to fiscal 2024. On a 52-week basis, adjusted diluted earnings per share would be essentially flat compared to fiscal 2024.

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Richard Mcphail: On a 52-week basis, adjusted diluted earnings per share would be essentially flat compared to fiscal 2024. We plan to continue investing in our business with CapEx of approximately 2.5% of sales for fiscal 2025. We believe that we will grow market share in any environment by strengthening our competitive position with our customers and delivering the best customer experience in home improvements. Thank you for your participation in today's call. Christine, we are now ready for questions.

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

Speaker #6: We plan to continue investing in our business with capital expenditures of approximately 2.5% of sales for fiscal 2025. We believe that we will grow market share in any environment by strengthening our competitive position with our customers and delivering the best customer experience in home improvement.

Thank you. Our first question comes from the line of Zach <unk> with Wells Fargo. Please proceed with your question.

Hey, good morning, starting with the July improvement and if you view this more of a catch up due to weather or are underlying change in trend and then as you think about the second half comp about a 50 basis point improvement implied from Q2 couple of points on a two year basis, perhaps we can level set on.

Speaker #6: Thank you for your participation in today's call. And Christine, we are now ready for questions.

Speaker #2: Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press *1 on your telephone keypad.

Christine: Thank you. 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. A confirmation tone will indicate your line is in the question queue. You may press star two if you 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 star keys. One moment, please, while we pull for questions. Thank you. Our first question comes from the line of Zach Fadim with Wells Fargo. Please proceed with your question.

The drivers across.

Traffic ticket pricing et cetera, and whether you anticipate any changes there.

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Thanks back that's a that's a fulsome question.

We feel really great about our Q2 performance as you know we had a really tough weather in the first quarter of the year leading to.

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Relatively flat U S comps and slightly negative overall with FX and recovered here with 1% for the company in Q1, 4% for the U S and as you said those comps got markedly stronger as the months went on through the quarter and that's really a fan.

Speaker #2: Thank you. Our first question comes from a line of Zach Fadum with Wells Fargo. Please proceed with your question.

Speaker #4: Hey, good morning. Starting with the July improvement, if you view this more as a catch-up due to weather or an underlying change in trend, and then as you think about the second half comp, about a 50 basis point improvement is implied from Q2, a couple of points on a two-year basis. Perhaps we could level set on the drivers across traffic, ticket, pricing, etc., and whether you anticipate any changes there.

Analyst: Good morning. Starting with the July improvement, if you view this more of a hash out due to weather or underlying change in trend, then as you think about the second half comp, about a 50 basis point improvement implied from Q2, a couple of points on a two-year basis, perhaps we could level set on the drivers across traffic, ticket, pricing, et cetera, and whether you anticipate any changes there.

Doctor of two things first we definitely saw broader engagement across the portfolio do you use for the best.

Comps, we've seen across most departments in nearly two years as Billy said the performance adjusted for some of the Hurricane activity. We saw last year across the regions was consistent in the <unk>.

Speaker #5: Thanks, Zach. That's a full question.

Ted Decker: Thanks, Zach. That's a fulsome question. We feel really great about our Q2 performance. As you know, we had really tough weather in the first quarter of the year, leading to relatively flat U.S. comps and slightly negative overall with FX and recovered here with 1% for the company and 1.4% for the U.S. As you said, those comps got markedly stronger as the months went on through the quarter. That's really a factor of two things. First, we definitely saw broader engagement across the portfolio. These were the best comps we've seen across the most departments in nearly two years, as Billy Bastek said. The performance adjusted for some of the hurricane activity we saw last year across the regions was consistent. The consumers, both pro and consumer, engaged broadly across the business. Granted, in smaller projects, we still haven't seen the recovery in the much larger discretionary projects.

Speaker #6: We feel really great about our Q2 performance. As you know, we had really tough weather in the first quarter of the year, leading to relatively flat U.S. comps and slightly negative overall with FX. We recovered here with 1% for the company and 1.4% for the U.S.

Consumers, both pro and consumer engaged broadly across the business granted in smaller projects, we still haven't seen the recovery in much larger discretionary projects and then finally weather did have a big impact we had a not a great <unk>.

Spring overall and that went into Q2, but in July in particular, the north the weather in the north in particular really turned favorable in that team responded and recaptured great sales. So feel great about underlying momentum in the business helped by a little weather and when you look at.

Speaker #6: And as you said, those comps got markedly stronger as the months went on through the quarter. And that's really a factor of two things.

Speaker #6: First, we definitely saw a broader engagement across the portfolio. These were the best comps we've seen across the most departments in nearly two years. As Billy said, the performance adjusted for some of the hurricane activity we saw last year, across the regions, was consistent.

The back half of the year, just focus on the U S and Richard can go into some exchange rate differentials, but when you look at the U S.

We're looking at just a slight uptick in comp to have that 1% for the full year. So were just under 1% in the first half do a little better than 1% in the back half gets us to about 1% guide.

Speaker #6: And the consumers, both pro and consumer, engaged broadly across the business. Granted, in smaller projects, we still haven't seen the recovery in much larger discretionary projects.

Guide for the year. So we feel really good about our ability to do that particularly with the broader engagement across the portfolio and Richard there is some FX sure just to just to tick tick out what Ted said, so recall when we established guidance at the beginning of the year our guidance assumed a slight.

Speaker #6: And then finally, weather did have a big impact. I mean, we had a not a great spring overall, and that went into Q2. But in July in particular, the north, the weather in the north in particular, really turned favorable and that team responded and we captured great sales.

Ted Decker: Finally, weather did have a big impact. We had not a great spring overall, and that went into Q2. In July in particular, the weather in the north in particular really turned favorable, and that team responded, and we captured great sales. I feel great about underlying momentum in the business, helped by a little weather. When you look at the back half of the year, just focus on the U.S., and Richard McPhail can go into some exchange rate differentials. When you look at the U.S., we're looking at just a slight uptick in comp to have that 1% for the full year. We were just under 1% in the first half, do a little better than 1% in the back half, gets us to that 1% guide for the year. We feel really good about our ability to do that, particularly with the broader engagement across the portfolio.

Speaker #6: So, I feel great about the underlying momentum in the business, helped by a little weather. When you look at the back half of the year, you know, just focus on the U.S., and Richard can go into some exchange rate differentials.

Improvement and frankly, a continuation and the momentum that we had seen in the back half of 2024 to continue gradually through the year 2025, that's what we've seen to date and so that is still embedded in the assumptions.

Speaker #6: But when you look at the U.S., we're looking at just a slight uptick in comp to have that 1% for the full year. So we've just under 1% in the first half, do a little better than 1% in the back half, which gets us to that 1% guide for the year.

Underlying our guidance.

So just to ticket out we were a positive point.

9%.

In the U S. In the first half and as Ted said, we're assuming a slight improvement in that trajectory from an FX perspective.

Speaker #6: So we feel really good about our ability to do that, particularly with the broader engagement across the portfolio. And Richard, there's some FX.

Total company had a 55 basis point headwind from FX in the first half at current FX rates that actually flips to a 25 basis point tailwind and so for those reasons.

Ted Decker: Richard, there's some FX.

Speaker #5: Sure, just to tick out what Ted said, so recall when we established guidance at the beginning of the year, our guidance assumed a slight improvement and, frankly, a continuation in the momentum that we had seen in the back half of 2024.

Richard Mcphail: Sure, just to tick out what Ted said. Recall when we established guidance at the beginning of the year, our guidance assumed a slight improvement and frankly a continuation in the momentum that we had seen in the back half of 2024 to continue gradually through the year 2025. That is what we have seen to date. That is still embedded in the assumptions underlying our guidance. Just to tick it out, we were a positive 0.9% in the U.S. in the first half. As Ted said, we are assuming slight improvement in that trajectory. From an FX perspective, total company had a 55 basis point headwind from FX in the first half. At current FX rates, that actually flips to a 25 basis point tailwind. For those reasons, we feel confident in our guide.

We feel confident in our guide and I think it's also important to note that the momentum that we saw through the second quarter has continued through the first two weeks of the third quarter.

Speaker #5: To continue gradually through the year 2025, that's what we've seen today, and so that is still embedded in the assumptions underlying our guidance. Just to tick it out, we were a positive 0.9% in the U.S. in the first half, and as Ted said, we're assuming slight improvement in that trajectory.

Thanks, Richard and Ted for all the color there and then just a follow up there's been a lot more talk about the potential for rate cuts later this year and we also have some tax reform dynamics as well. So just curious to what extent these could be positive catalyst for your business and if you have any thoughts on the level of.

Speaker #5: From an FX perspective, the total company had a 55 basis point headwind from FX in the first half. At current FX rates, that actually flips to a 25 basis point tailwind.

Rate cut you'd need to see to begin seeing that impact.

Yes.

Certainly some some relief on mortgage rates in particular could could help.

I think referring to it a bit of a frozen housing market.

Speaker #5: And so, for those reasons, we feel confident in our guide. I think it's also important to note that the momentum we saw through the second quarter has continued into the first two weeks of the third quarter.

40, plus year low turnover rates and even new starts are struggling a bit so lower rates would certainly help we don't have a crystal ball on what that number is when we talk generally though to our customers each of our sets of consumers.

Richard Mcphail: I think it is also important to note that the momentum that we saw through the second quarter has continued through the first two weeks of the third quarter.

Speaker #4: Thanks, Richard. And Ted, for all the color there. And then just to follow up, there's been a lot more talk about the potential for rate cuts later this year.

Analyst: Thanks, Richard and Ted, for all the color there. Just to follow up, there has been a lot more talk about the potential for rate cuts later this year. We also have some tax reform dynamics as well. Curious to what extent these could be positive catalysts for your business, and if you have any thoughts on the level of rate cut you would need to see to begin seeing that impact.

And pros the number one reason for deferring the large project is general economic uncertainty that that.

Speaker #4: And we also have some tax reform dynamics as well. So, I'm just curious to what extent these could be positive catalysts for your business. And if you have any thoughts on the level of rate cut you'd need to see to begin seeing that impact.

As larger than prices of projects of labor availability all those various things we've talked about in the past by a wide margin economic uncertainty is number one and when you look at things like the tax Bill passed in the last time, we were together we didn't know what tax rates would be corp.

Speaker #6: Yeah, certainly some relief on mortgage rates in particular could help in referring to it as a bit of a frozen housing market. With 40-plus year low turnover rates and even new starts struggling a bit.

Ted Decker: Certainly some relief on mortgage rates in particular could help. I think referring to it a bit of a frozen housing market with 40-plus-year low turnover rates. Even new starts are struggling a bit, so lower rates would certainly help. We do not have a crystal ball on what that number is. When we talk generally, though, to our customers, each of our sets of consumers and pros, the number one reason for deferring the large project is general economic uncertainty. That is larger than prices of projects, of labor availability, all the various things we have talked about in the past. By a wide margin, economic uncertainty is number one.

Or personal rates, that's all been settled with even some some more favorable.

Lowering of taxes and increases in child tax credits and the like so little.

Speaker #6: So lower rates would certainly help. We don't have a crystal ball on what that number is. When we talk generally, though, to our customers—each of our sets of consumers and pros—the number one reason for deferring large projects is general economic uncertainty.

A little help on the interest rate front would be helpful. And then I think we have a great result.

The tax package that passed that should put some more.

Discretionary spending.

Spending in our consumers' wallets and just from a pure cash tax perspective, we will see a benefit from from bonus depreciation and full expensing of R&D.

Speaker #6: That is larger than prices of projects, of labor availability, and all the various things we've talked about in the past. By a wide margin, economic uncertainty is number one.

That's not a book.

Benefit, but it's a cash tax benefit and we'll be we'll be thinking about how that factor.

Speaker #6: And when you look at things like the tax bill passing, the last time we were together, we didn't know what tax rates would be.

Ted Decker: When you look at things like the tax bill passing, the last time we were together, we did not know what tax rates would be, corporate or personal rates. That has all been settled with even some more favorable lowering of taxes and increases of child tax credits and the like. A little help on the interest rate front would be helpful. I think we have a great result with the tax package that passed that should put some more discretionary spending in our consumers' wallets.

Factors into our plans going forward.

Thanks for the time.

Speaker #6: Corporate or personal rates. That's all been settled, with even some more favorable lowering of taxes and increases in child tax credits and the like.

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

Great. Thanks, very much for taking my question I wanted to follow up on that second question. There Ted when you think about some of the clarity you have got in on the tax package and we're waiting on rates how does it inform your view on the shape of recovery and that large project activity.

Speaker #6: So, a little help on the interest rate front would be helpful. And then I think we have a great result with the tax package that passed, which should put some more discretionary spending in our consumers' wallets.

As we as we sit here today do you think thats something that could materialize in the next 12 months.

Speaker #6: And just from a pure cash tax perspective, we will see a benefit from bonus depreciation and full expansion of R&D. That's not a book benefit, but it's a cash tax benefit.

Richard Mcphail: From a pure cash tax perspective, we will see a benefit from bonus depreciation and full expensing of R&D. That is not a book benefit, but it is a cash tax benefit. We will be thinking about how that factors into our plans going forward.

Well again, we don't we don't know when those rates will come there is clearly expectation that we'd start to get some cuts.

In the second half of this year.

Remember that the short term rates.

Speaker #6: And we'll be thinking about how that factors into our plans going forward.

While that will help on the on our HELOC rate, which is often utilized for larger projects.

Speaker #4: Thanks for the time.

Analyst: Thanks for the time.

The longer rate is and more associated the mortgage rate is more associated with the 10 year and the longer bond rates. So again I'm optimistic that some of the reduction in the overall deficit.

Speaker #2: Our next question comes from a line of Steven Zaccone with City. Please proceed with your question.

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

Speaker #4: Great, thanks very much for taking my question. I wanted to follow up on Zach's second question there. Ted, when you think about some of the clarity you've gotten on the tax package and then we're waiting on rates, how does it inform your view on the shape of recovery in that large project activity?

Analyst: Great. Thanks very much for taking my question. I want to follow up on Zach's second question there. Ted, when you think about some of the clarity you've gotten on the tax package, then we're waiting on rates, how does it inform your view on the shape of recovery in that large private activity? As we sit here today, do you think that's something that can materialize in the next 12 months?

That would be the.

Longer more sustainable benefit to the long term rates and we see some we see some progress there so.

Speaker #4: You know, as we sit here today, do you think that's something to materialize in the next 12 months?

With lower taxes and now permanent.

Tax position that uncertainty is removed and with lower rates.

Speaker #6: Well, again, we don't know when those rates will come. There's clearly an expectation that we start to get some cuts in the second half of this year.

Ted Decker: Again, we do not know when those rates will come. There is clearly an expectation that we start to get some cuts in the second half of this year. Remember that the short-term rates, while that will help on a HELOC rate, which is often utilized for a larger project, the longer rate is more associated, the mortgage rate is more associated with the 10-year and the longer bond rate. Again, I am optimistic that with some of the reduction in the overall deficit, that will be the longer, more sustainable benefit to the long-term rates. We see some progress there. With lower taxes and now a permanent tax position, that uncertainty is removed. With lower rates, it is hard, Steve, to pick the number that unlocks turnover and mobility in the U.S. housing and new construction.

Hard hard Steve to pick the number that unlocks turnover and mobility in the U S housing and in new construction, but.

Speaker #6: You know, remember that the short-term rates, while that will help on a HELOC rate—which is often utilized for larger projects—the longer rate is more associated; the mortgage rate is more associated with the 10-year and the longer bond rate.

Things things will certainly.

Look better given tax and interest rates.

Then the environment, we're in right now.

Okay understood and then maybe just for.

For the second half of the year can you help us think a bit more about <unk>.

Speaker #6: So again, I'm optimistic that with some of the reduction in the overall deficit, that will be the longer, more sustainable benefit to the long-term rates.

And pricing how did that perform in the quarter. It sounds like commercial activity was down a bit but just as you think about the second half of the year.

The complexion of ticket and transaction, how does pricing fit into that equation.

Speaker #6: And we see some progress there. So with lower taxes, and now a permanent tax position, that uncertainty is removed. And with lower rates, it's hard, Steve, to pick the number that unlocks turnover.

Yes. Thanks, Stephen This is Billy let me give some more more color on that both both kind of the macro piece for us as we as we think about diversification and those things that I can give you a little color on some of the Q2 performance that you asked about but listen I'd say, a couple of things on pricing going back to our.

Speaker #6: And you know, mobility in U.S. housing and new construction. But things will certainly look better given tax and interest rates than the environment we're in right now.

Call in May 1st it's Super important to remember that over 50% of our products are sourced domestically.

Ted Decker: Things will certainly look better given tax and interest rates than the environment we are in right now.

It wouldn't be subject to any tariffs.

Now some of the imported goods, obviously tariff rates are significantly higher today than they were when we spoke spoke in may. So as you would expect there'll be some modest price movement.

Speaker #4: Okay, understood. And then maybe just for the second half of the year, can you help us think a bit more about AUR and pricing?

Analyst: Okay, understood. Then maybe just for the second half of the year, can you help us think a bit more about AUR and pricing? You know, how did that perform in the quarter? It sounds like promotional activity was down a bit. As you think about the second half of the year, you know, the complexion of ticket and transaction, how does pricing fit into that equation?

Some categories, but it won't be broad based.

Speaker #4: You know, how did that perform in the quarter? It sounds like promotional activity was down a bit. But just as you think about the second half of the year, the complexion of ticket and transaction—how does pricing fit into that equation?

And I think it's important to keep in mind as well our customers tend to shop for the entire project and you think about a small flooring project tile grout bathtub and Vanity and the Bath project and so we're laser focused on protecting the cost of the entire project and so listen our goal is to maintain the best value for our customers we are going.

Speaker #5: Yeah, thanks, Steven. This is Billy. Let me give some more color on that. Most kind of the macro piece for us as we think about diversification and those things, and I can give you a little color on some of the Q2 performance that you asked about.

Billy Bastek: Yeah, thanks, Steven. This is Billy Bastek. Let me give some more color on that, both kind of the macro piece for us as we think about diversification and those things. I can give you a little color on some of the Q2 performance that you asked about. Listen, I would say a couple of things on pricing. Going back to our call in May, first, it is super important to remember that over 50% of our products are sourced domestically and would not be subject to any tariffs. Some of the imported goods, obviously, tariff rates are significantly higher today than they were when we spoke in May. As you would expect, there will be some modest price movement in some categories, but it will not be broad-based. I think it is important to keep in mind as well, our customers tend to shop for the entire project.

Take a portfolio approach as we've talked a lot about in the past as we always do and we will have a price leadership position in home improvement.

Speaker #5: But listen, I’d say a couple of things on pricing. Going back to our call in May, you know, first it’s super important to remember that over 50% of our products are sourced domestically.

The second piece that you alluded to some of the dynamics in Q2, when I mentioned in my prepared remarks about some promotional activity that was really focused around just some of the smaller garden projects think malte think chemicals.

Speaker #5: And wouldn't be subject to any tariffs. Now, some of the imported goods, obviously, tariff rates have significantly increased today than they were when we spoke in May.

Those those things I mean, those are the biggest you know hedge.

Headwinds that we had as it related to just the transaction comp in the quarter. So that was if you think about our job which is to help impact some of the tariff pressure being a little less promotional on a couple of those garden areas.

Speaker #5: So as you'd 'd expect, there'll be some modest price movement. In some categories, but it won't be broad-based. And I think it's important to keep in mind as well, you know, our customers tend to shop for the entire project.

Speaker #5: You need to think about a small flooring project: tile, the grout, bathtub, and vanity in a bath project. And so we're laser-focused on protecting the cost of the entire project.

Billy Bastek: You think about a small flooring project, tile, the grout, bathtub, and vanity in a bath project. We are laser-focused on protecting the cost of the entire project. Our goal is to maintain the best value for our customers. We are going to take a portfolio approach, as we have talked a lot about in the past, as we always do. We will have a price leadership position in home improvement. The second piece that you alluded to, some of the dynamics in Q2, when I mentioned in my prepared remarks about some promotional activity, that was really focused around just some of the smaller garden projects. Think mulch, think chemicals, those things. Those were the biggest headwinds that we had as it related to just the transaction comp in the quarter.

The nature of what we did in Q2 and so again for those five categories that we saw an impact from we just related to some of the lower ticket garden projects.

Speaker #5: And so, listen, our goal is to maintain the best value for our customers. We're going to take a portfolio approach, as we've talked a lot about in the past, as we always do.

Understood Best of luck in the second half.

Our next question comes from the line of Christopher <unk> with Jpmorgan. Please proceed with your question.

Speaker #5: And we'll have a price leadership position in home improvement. The second piece that you alluded to, some of the dynamics in Q2, and when I mentioned my prepared remarks about some promotional activity, that was really focused around just some of the smaller garden projects.

Thanks, and good morning. So my first question is more near term than my thoughts a bit more bigger picture. So following up on this last line of questioning there are a number of puts and takes in the back half around comp cadence that I'd love for you to for you to talk about do you expect much difference between.

Speaker #5: Think mulch, think chemicals. You know, those things—I mean, those were the biggest headwinds that we had as it related to just the transaction comp in the quarter.

The quarters it looks like the hurricane lift was pretty similar but then chicken inflation, given inventory receipts and seasonal probably accelerates.

Speaker #5: So that was, you know, if you think about our job, which is, you know, to help impact some of the tariff pressure, being a little less promotional on a couple of those garden areas was just the nature of what we did in Q2.

Billy Bastek: That was, if you think about our job, which is to help impact some of the tariff pressure, being a little less promotional in a couple of those garden areas was just the nature of what we did in Q2. Again, for those five categories that we saw an impact from, we just related to some of the lower ticket garden projects.

Over the year, but on the other side of this you have this sort of euphoric December post election with the consumer so any thoughts there on on the puts and takes of comp cadence in the back half.

Speaker #5: And so, you know, again, for those five categories that we saw an impact from, we're just relating to some of the lower-ticket garden projects.

Speaker #4: Okay, understood. Best of luck in the second half.

Analyst: Understood. Best luck in the second half.

Yes, Chris.

As Richard outlined earlier, there's there's not a big uptick necessary to meet our guide U S business will be.

Speaker #2: Our next question comes from a line of Christopher Hoovers with JP Morgan. Please proceed with your question.

Christine: Our next question comes from the line of Christopher Horvers with JPMorgan. Please proceed with your question.

Speaker #4: Thanks, and good morning. So my first question is more near-term than my thoughts, a bit more big picture. Following up on this last line in the question, you know, there are a number of puts and takes in the back half around comp cadence that I'd love for you to talk about.

Analyst: Thanks, and good morning. My first question is more near-term, and my follow-up is a bit more bigger picture. Following up on this last line in the question, there are a number of puts and takes in the back half around comp cadence that I would love for you to talk about. Do you expect much difference between the quarters? It looks like the hurricane lift was pretty similar, but then ticket inflation, given inventory receipts and seasonal, probably accelerates over the year. On the other side of this, you had this sort of euphoric December post-election with the consumer. Any thoughts there on the puts and takes of comp cadence in the back half?

No more or less a similar comp rate with no meaningful lift necessary and we get that swing of <unk>.

80 basis points of FX pressure for total company.

Speaker #4: Do you expect much difference between the quarters? It looks like the hurricane lift was pretty similar, but then, you know, ticket inflation, given inventory receipts and seasonal factors, probably accelerates.

On ticket and transactions you saw higher ticket in Q2 to transactions and as Billy said that is that is.

Really the the increase in spend on large items, where we had a two 6% comp.

Speaker #4: Over the year, but then on the other side of this, you had this sort of euphoric December post-election with the consumer. So, any thoughts there on the puts and takes of comp cadence in the back half?

Tickets over $1000 and again that was broad based.

Speaker #6: Yeah, Chris, as Richard and I outlined earlier, there's not a big uptick necessary to meet our guide. The U.S. business will be more or less a similar comp rate with no meaningful lift necessary, and we get that swing of 80 basis points of FX pressure for total company.

Ted Decker: Yeah, Chris, as Richard and I outlined earlier, there's not a big uptick necessary to meet our guide. The U.S. business will be, you know, more or less a similar comp rate with no meaningful lift necessary. We get that swing of 80 basis points of FX pressure for total company. On, you know, ticket and transactions, you saw a higher ticket in Q2 to transactions. As Billy Bastek said, that is really the increase in spend on large items where we had a 2.6% comp in tickets over $1,000. Again, that was broad-based. In the lack of a lot of promotional activity in outdoor garden, that tends to be a smaller ticket. That mix effect is what helped the ticket. It really wasn't price. Similarly, that slight decrease in transactions was all in that modest pullback in outdoor garden promotions.

And the lack of a lot of promotional activity and outdoor garden that tends to be smaller ticket.

That mix effect is what helped ticket really wasn't price.

And similarly that slight decrease in transactions was all in that modest pullback in outdoor garden promotions in but I mean that explains all of the negative.

Speaker #6: On ticket and transactions, you saw higher ticket in Q2. To transactions, and as Billy said, that is really the increase in spend on large items, where we had a 2.6% comp.

Transactions that we saw so youre going to cycle through that we're not planning for any more hurricanes. The hurricane impacts were smaller in Q2 than they were in Q1 there'll be smaller yet again in three and four so we're just looking at the continued momentum broadly in our.

Speaker #6: In tickets over $1,000, and again, that was broad-based. In the lack of a lot of promotional activity and outdoor garden, that tends to be smaller ticket.

<unk> and our geographies to deliver about 1% guidance.

Yeah.

Got it and then bigger.

Bigger picture on Gms could you compare and contrast, the business relative to the roofing business, which is srs's largest vertical.

Speaker #6: That mix effect is what helped the ticket. It really wasn't price. Similarly, that slight decrease in transactions was all in that modest pullback in outdoor garden promotions.

From the outside it seemed to some that gms with maybe more commodity oriented and something that perhaps you could have achieved through the expanded fulfillment offering that you have in about 20 markets in the large large pro side is there something particularly in the assets that you acquired that you want to acquire that was easier to buy than bill.

Ted Decker: I mean, that explains all of the negative transactions that we saw. You're going to cycle through. We're not planning for any more hurricanes. The hurricane impacts were smaller in Q2 than they were in Q1. They'll be smaller yet again in Q3 and Q4. We're just looking at the continued momentum broadly in our departments, in our geographies to deliver that 1% guidance.

Speaker #6: But I mean, that explains all of the negative transactions that we saw. So, you're going to cycle through. We're not planning for any more hurricanes; the hurricane impacts were smaller in Q2 than they were in Q1.

<unk> is it sort of dry wall. So so so foundational and so thats a big part of the market is it the sales force and so forth. Thanks very much.

Speaker #6: There'll be smaller yet again in Q3 and Q4. So we're just looking at the continued momentum broadly in our departments and our geographies to deliver that 1% guidance.

Sure Chris It's a number of those things so let me just.

Wind back a minute as I said, we're super pleased with Srs roofing is the biggest category.

Speaker #4: Got it. And then, you know, bigger picture on GMS, could you compare and contrast the business relative to the roofing business, which is SRS's largest vertical?

Analyst: Got it. Then, bigger picture on GMS, could you compare and contrast the business relative to the roofing business, which is SRS Distribution's largest vertical? From the outside, it seemed to some that GMS is maybe more commodity-oriented and something that perhaps you could have achieved through the expanded fulfillment offering that you have in about 20 markets on the large Pro side. Is there something particularly in the assets that you want to acquire that was easier to buy than build? Is it drywall so foundational and thus it is a big part of the market? Is it the sales force and so forth? Thanks very much.

So pool and landscape and those are verticals that they run.

As a specialty trade distributor.

Speaker #4: From the outside, it seems to sum that, you know, GMS is maybe more commodity-oriented and something that perhaps you could have achieved through the expanded fulfillment offering that you have in about 20 markets in the large pro side. Is there something particularly in the assets that you want to acquire that was easier to buy than build?

And from what we saw in public company announcements in Q2, we took share we won in the marketplace in each of those three verticals and when we look at the opportunity set in our pro initiative, we talk about talked about a game board different category.

Speaker #4: Is drywall sort of foundational and thus a big part of the market? Is it the sales force? And so forth.

Trees and different customers and different purchase occasions, and where are there attractive profit pools and share opportunities. We're building out with our own organic pro ecosystem, a focus on the cross trade pro who's going to shop.

Speaker #4: Thanks very much.

Speaker #6: Sure, Chris. It's a number of those things. So let me just wind back a minute. As I said, we're super pleased with SRS. Roofing is the biggest category.

Ted Decker: Sure. Chris, it is a number of those things. Let me just wind back a minute. As I said, we are super pleased with SRS Distribution. Roofing is the biggest category, also pool and landscape. Those are verticals that they run as a specialty trade distributor. From what we saw in public company announcements in Q2, we took share, we won in the marketplace in each of those three verticals. When we look at the opportunity set in our Pro initiative, we talk about a game board, different categories and different customers in different purchase occasions.

Across the home depot store.

Speaker #6: Also, pool and landscape are verticals that they run as a specialty trade distributor. From what we saw in public company announcements, in Q2, we took share and won in the marketplace in each of those three verticals.

Which will increasingly engaged with them with an outside sales force and sales.

Trade credit of delivery as we've talked about but then we've also said well there. These verticals of specialty that are very attractive srs being incredibly attractive.

Roofing pool and landscape.

In dry wall.

Speaker #6: And when we look at the opportunity set in our pro initiative, we talk about a game board, different categories, different customers, and different purchase occasions.

Sealing are very much adjacent complementary verticals to that Srs business models. So small branches truckload delivery high inventory turn effective sales engagement asset light.

Speaker #6: And where are there attractive profit pools and share opportunities? We're building out with our own organic pro ecosystem, a focus on the cross-trade pro, who's going to shop across The Home Depot store.

Ted Decker: Where are there attractive profit pools and share opportunities? We are building out with our own organic Pro ecosystem a focus on the cross-trade Pro, who is going to shop across the Home Depot store, which will increasingly engage with them with an outside sales force and sales trade credit and delivery, as we have talked about. We have also said, there are these verticals of specialty that are very attractive, SRS Distribution being incredibly attractive in roofing, pool, and landscape. Drywall and ceiling are very much adjacent complementary verticals to that SRS Distribution business model. Small branches, truckload delivery, high inventory turn, effective sales engagement, asset light, similar margins going into, again, largely residential remodel and construction. We believe GMS, Inc. is the best property, the best asset in that space. We have been talking to them for some time.

Similar margins going into again, largely residential remodel and construction.

We believe Gms is the best property, the best asset in that space and we've been talking to them for some time.

Speaker #6: Which will increasingly engage with them with an outside sales force and sales trade credit and delivery, as we've talked about. But then we've also said, well, there are these verticals of specialty that are very attractive, SRS being incredibly attractive in roofing, pool, and landscape.

Dan Tinker and the Srs team had been in contact with John Turner and the leadership at CMS for some time. This was not something that happened overnight. This is something we've been engaging with them and thinking about how how these two businesses could add value working together and the management team.

Speaker #6: And drywall in the ceiling are very much adjacent complementary verticals to that SRS business model. So, small branches, truckload delivery, high inventory turn, effective sales engagement, asset-light, similar margins, going into, again, largely residential remodel and construction.

<unk> with cultures the approach to single ERP systems go to market strategies at the branch level are very very similar to Srs. We think this will be a seamless integration under that Srs platform and they will they'll attack their markets the way they.

You always have growing specialty trade business, and then and in Mike and our teams as we build out our pro ecosystem, we have a great new list of.

Speaker #6: We believe GMS is the best property, the best asset in that space. We've been talking to them for some time. Dan Tinker in the SRS team had been in contact with John Turner and the leadership at GMS for some time.

Larger customers, we have an additional 400 nodes of distribution to add to the 800.

Ted Decker: Dan Tinker in the SRS Distribution team had been in contact with John Turner in the leadership at GMS, Inc. for some time. This was not something that happened overnight. This is something we have been engaging with them and thinking about how these two businesses could add value working together. The management teams, the cultures, the approach to single ERP systems, go-to-market strategies at the branch level are very, very similar to SRS Distribution. We think this will be a seamless integration under that SRS Distribution platform. They will attack their markets the way they always have, growing the specialty trade business. Ann-Marie Campbell and Billy Bastek and our teams, as we build out our Pro ecosystem, we have a great new list of larger customers. We have an additional 400 nodes of distribution to add to the 800 that SRS Distribution already have.

<unk> already have as I said in my remarks, 1200 additional distribution branches in total.

Speaker #6: This was not something that happened overnight. This is something we've been engaging with them on and thinking about how these two businesses could add value by working together.

And mentioned shipped from best location will be leveraging those branches as well combined with the 2000 stores you can start to see this ecosystem that we're putting together with customers with sales force with distribution nodes and with delivery assets. We're just super excited on how we can take incremental.

Speaker #6: And the management teams, the cultures, and the approach to single ERP systems, go-to-market strategies, and the branch level are very, very similar to SRS. We think this will be a seamless integration under that SRS platform.

Rental share, bringing this unified capabilities set together.

Speaker #6: We will attack their markets the way we always have, growing the specialty trade business. And then Ann, Mike, and our teams, as we build out our pro ecosystem, we have a great new list of larger customers. We have an additional 400 nodes of distribution to add to the 800 that SRS already has.

Great. Thank you very much.

Yes.

Yeah.

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

Hey, good morning, I wanted to follow up. Please on was a phrase that Richard you used in prepared remarks, and then I think Ted said it again this notable improvement in underlying demand.

Speaker #6: As I said in my remarks, 1,200 additional distribution branches in total. When Ann mentioned the shift from the best location, we'll be leveraging those branches as well, combined with the 2,000 stores.

Ted Decker: As I said in my remarks, 1,200 additional distribution branches in total that when Ann-Marie Campbell mentioned shipped from best location, we will be leveraging those branches as well, combined with the 2,000 stores. You can start to see this ecosystem that we are putting together with customers, with sales force, with distribution nodes, and with delivery assets. We are just super excited on how we can take incremental share, bringing this unified capability set together.

You qualified it with some commentary around weather.

Assume also maybe bathtub effect is the same definition can you talk about the degree to which you think there is underlying turning in housing or was this market share or was this weather or are we seeing an inflection. Thank you.

Speaker #6: You can start to see this ecosystem that we're putting together with customers, with Salesforce, with distribution nodes, and with delivery assets. We're just super excited about how we can take incremental share by bringing this unified capability set together.

Thanks, Simeon well as we've said I think our assumption what we've observed in the assumption going forward.

Is that first.

More than anything we have a very healthy customer right our customers the homeowner or the pro that serves that homeowner.

Speaker #4: Great, thank you very much.

Analyst: Great. Thank you very much.

Speaker #2: Our next question comes from a line of Simeon Gutman with Morgan Stanley. Please proceed with your question.

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

They are fully employed they've seen strong income gains over the past several years.

Speaker #4: Hey, good morning. I want to follow up, please, on a phrase that Richard used in prepared remarks, and then I think Ted said it again: this notable improvement in underlying demand.

Analyst: Hey, good morning. I want to follow up, please, on a phrase that Richard, you used in prepared remarks, and then I think Ted said it again, this notable improvement in underlying demand. You qualified it with some commentary around weather. I assume also maybe bathtub effect is the same definition. Can you talk about the degree to which you think there is underlying turning in housing, or was this market share, or was this weather? Are we seeing an inflection? Thank you.

They have seen home price appreciation of 50% since 2019, they are sitting on topical equity of over 11 trillion dollars, which is double that.

Speaker #4: You qualified it with some commentary around weather. I assume also maybe the bathtub effect is the same definition. Can you talk about the degree to which you think there is underlying turning in housing, or was this market share, or was this weather? You know, are we seeing an inflection?

That they were sitting on in 2019.

So as we predicted we have observed.

Continued engagement and momentum in that game across the core of our of our categories as Billy spelled out.

Speaker #4: Thank you.

Speaker #5: Thanks, Simeon. Well, you know, as we've said, I think our assumption, what we've observed and the assumption going forward is that, first and foremost, we have a very healthy customer.

Billy Bastek: Thanks, Simeon. Well, you know, as we have said, I think our assumption, what we have observed and the assumption going forward is that first, more than anything, we have a very healthy customer. Our customer is the homeowner or the pro that serves that homeowner. They are fully employed. They have seen strong income gains over the past several years. They have seen home price appreciation of 50% since 2019. They are sitting on tappable equity of over $11 trillion, which is double that they were sitting on in 2019. As we predicted, we have observed continued engagement and momentum in that engagement across the core of our categories. As Billy Bastek spelled out, you know, 12 of 16 categories in positive comp territory, the strongest and broadest performance we have seen in over two years. That is what we expected, and that is what we have seen.

In 2016 categories and positive comp.

Territory, the strongest and broadest performance, we've seen in over two years and Thats, what we expected and that's what we've seen.

Yep.

Speaker #5: Right? Our customer is the homeowner or the pro that serves that homeowner. They're fully employed; they've seen strong income gains over the past several years.

As Ted pointed out and as we've discussed before.

Our customers still tell us that the rate environment is giving them pause on larger remodeling projects that would typically required debt financing and tad alluded to where mortgage rates and HELOC rates are.

Speaker #5: They have seen home price appreciation of 50% since 2019. They're sitting on tappable equity of over $11 trillion, which is double what they were sitting on in 2019.

We know that that is still an impediment and our customers' mindset to executing on projects. What I think is important to note is.

Speaker #5: And so, as we predicted, we have observed continued engagement and momentum in that engagement across the core of our categories. As Billy spelled out, you know, 12 of 16 categories have positive comp.

<unk>.

Our our pros, we survey every quarter and say that their customers tell them. They are deferring projects, they're not canceling projects.

Home improvement demand persists.

Speaker #5: Territory: the strongest and broadest performance we've seen in over two years, and that's what we expected and that's what we've seen. As Ted pointed out, and as we've discussed before, our customers still tell us that the rate environment is giving them pause.

And so our job is to position ourselves to be ready for that.

At the same time, our guidance for the remainder of the year as I said doesn't assume any.

Billy Bastek: As Ted Decker pointed out, and as we have discussed before, our customers still tell us that the rate environment is giving them pause on larger remodeling projects that would typically require debt financing. Ted Decker alluded to where mortgage rates and HELOC rates are. We know that that is still an impediment in our customers' mindset to executing on projects. What I think is important to note is our pros, we survey every quarter and say that their customers tell them they are deferring projects. They are not canceling projects. Home improvement demand persists. Our job is to position ourselves to be ready for that. At the same time, our guidance for the remainder of the year, as I said, does not assume any improvement in the outlook for larger projects or a turn in housing per se.

Improvement in the outlook for larger projects for a turn in housing per se.

Speaker #5: On larger remodeling projects that typically require debt financing, Ted alluded to where mortgage rates and HELOC rates are. We know that this is still an impediment in our customers' mindset.

Really just assumes that consistent momentum that we've already seen really for four quarters now.

And that continued in the first two weeks of the quarter.

Okay, and a follow up can I ask about proof points on the complex projects or complex pro are you seeing sequential inflections, whether it's some of the core capabilities that home depot has implemented or related to crossover benefits from Srs.

Speaker #5: To executing on projects, what I think is important to note is our pros. We survey every quarter and say that their customers tell them they're deferring projects.

Speaker #5: They're not canceling projects. Home improvement demand persists, and so our job is to position ourselves to be ready for that. At the same time, our guidance for the remainder of the year, as I said, doesn't assume any improvement in the outlook for larger projects.

Yes.

Your share comment we believe we're taking share as I've said, we've looked at.

The public company.

Disclosures that rips.

Porting of Q2, and how we performed and that includes you know paint roofing landscape dry wall.

We're starting to see some really neat cross synergies on distribution front and on the sales front maker and if you'd like to comment a little bit about the momentum we're seeing in our organic efforts and then with some of the cross sell with Srs.

Speaker #5: Or a turn in housing per se. It really just assumes that consistent momentum that we've already seen really for four quarters now. And that continued in the first two weeks of the quarter.

Billy Bastek: It really just assumes that consistent momentum that we have already seen really for four quarters now and that continued in the first two weeks of the quarter.

Speaker #4: Okay, and a follow-up: can I ask about proof points on complex projects or complex pro? Are you seeing sequential inflections, whether it's some of the core capabilities that Home Depot has implemented or related to crossover benefits from SRS?

Analyst: Okay. Can I ask about proof points on complex projects or complex Pro? Are you seeing sequential inflections, whether it is some of the core capabilities that Home Depot has implemented or related to crossover benefits from SRS Distribution?

Yeah Zane mentioned in her prepared remarks, we're pretty thrilled with the progress making as we continue investing in the pro ecosystem continued to optimize assortments as we talked she talked about account management or sales force service model fulfillment among other things, notably for the cross sell approach, so notably delivery reliability.

Speaker #6: Yeah, on your share comment, we believe we're taking share because, as I said, we looked at the public company disclosures that reported Q2. And how we performed, and that includes paint, roofing, landscape, and drywall.

Ted Decker: Yeah, on your share comment, we believe we are taking share. As I have said, we have looked at the public company disclosures that reporting of Q2 and how we performed, and you know that includes paint, roofing, landscape, drywall. We are starting to see some really neat cross synergies on distribution front and on the sales front. Mike or Ann, if you would like to comment a little bit about the momentum we are seeing in our organic efforts and then with some of the cross-sell with SRS.

Quickly related to being on time and complete are Paramount for the pro experience and were pleased with the improvement that we've seen in terms of the pros feedback around customer satisfaction with their deliveries along with our improved performance for being on time and complete and we see this both for large job site deliveries, notably on Flatbreads and box trucks, but.

Speaker #6: We're starting to see some really neat cross-synergies on the distribution front and on the sales front. Mike or Ann, if you'd like to comment a little bit about the momentum we're seeing in our organic efforts and then with some of the cross-sell with SRS.

Also their use of car deliveries as we leveraged our distribution assets for faster parcel delivery, we've seen a double digit lift in spend on parcel items, enabling pros to stay on the job site and then just further with pro trade credit works hand in hand, with the advances, we're making with order management and delivery and again as Ed noted seeing strong lift.

Speaker #7: Yeah, as Ann mentioned in our prepared remarks, we're pretty thrilled with the progress we're making as we continue investing in the pro ecosystem. We will continue to optimize assortments, as we talked about account management and our sales force service model.

Richard Mcphail: As Ann-Marie Campbell mentioned in her prepared remarks, we are pretty thrilled with the progress making as we continue investing in the Pro ecosystem, continue to optimize assortments as she talked about account management, our sales force service model, fulfillment, among other things, notably for that cross-sale Pro. Delivery reliability, specifically related to being on time and complete, are paramount for the Pro experience. We are pleased with the improvement that we have seen in terms of the Pros' feedback around customer satisfaction with their deliveries, along with our improved performance for being on time and complete. We see this both for large job site deliveries, notably on flatbeds and box trucks, but also their use of car deliveries. As we have leveraged our distribution assets for faster parcel delivery, we have seen a double-digit lift in spend on parcel items, enabling Pros to stay on the job site.

From now being able to invoice on delivery of goods versus upon the purchase of those goods.

Speaker #7: Fulfillment, among other things, is notably important for that cross-sell pro. Specifically, delivery reliability—particularly being on time and complete—is paramount for the pro experience.

Thank you good luck.

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

Good morning, guys. I guess this is a bit of a follow up to finian's question.

Speaker #7: And we're pleased with the improvement that we've seen in terms of the pros' feedback around customer satisfaction with their deliveries, along with our improved performance for being on time and complete.

You had previously given us some figures on the incremental sales you've been able to generate from your complex CRO effort can you update us on that most recent performance and where you have rolled it out obviously you just talked about kind of the ones that are happening, but how should we be thinking about the growth curve in those markets.

Speaker #7: And we see this both for our large job site deliveries, notably on flatbeds and box trucks, but also their use of car deliveries. As we've leveraged our distribution assets for faster parcel delivery, we've seen a double-digit lift in spend on parcel items.

Scott, we're not we're not going to keep updating that billion dollars. We just wanted to ask is nice.

Speaker #7: Enabling pros to stay on the job site. And then, just further, you know, with Pro Trade Credit, it works hand in hand with the advances we're making with order management and delivery.

Richard Mcphail: Further, with Pro trade credit works hand in hand with the advances we are making with order management and delivery. As Ann-Marie Campbell noted, seeing strong lift from now being able to invoice on delivery of goods versus upon the purchase of those goods.

Hallmark for us to the $1 billion Mark on incremental sales.

Speaker #7: And again, as Ann noted, we're seeing strong lift from now being able to invoice on delivery of goods versus upon the purchase of those goods.

Just me we are reviewing every every week increments.

On on all we're doing with the pro initiative.

Speaker #4: Thank you, good luck.

Analyst: Thank you. Good luck.

As Mike said, it's at.

Speaker #2: Our next question comes from a line of Scott Ciccarelli with Truist. Please proceed with your question.

Christine: Our next question comes from the line of Scott Ciccarelli with Truist. Please proceed with your question.

It starts with engaged sales force solution selling with a mature.

Speaker #4: Good morning, guys. I guess this is a bit of a follow-up to Simeon's question. You had previously given us some figures on the incremental sales you've been able to generate from your complex pro efforts.

Analyst: Good morning, guys. I guess this is a bit of a follow-up to Simeon's question. You have previously given us some figures on the incremental sales you have been able to generate from your complex Pro efforts. Can you update us on that most recent performance and where you have rolled it out? Obviously, you just talked about kind of what is better happening, but how should we be thinking about the growth curve in those markets? Thanks.

Outside sales force supported with inside sales.

Sales.

Support.

Speaker #4: Can you update us on the most recent performance? And where you have rolled it out? Obviously, you just talked about the improvements happening.

On time and complete delivery is Paramount and that is where we've seen a real step change John Dean and his team on the delivery side from our FTC's remember the 17 markets. We have the flatbed distribution centers we have.

Speaker #4: But how should we be thinking about the growth curve in those markets? Thanks.

Speaker #6: Scott, yeah, we're not going to keep updating that $1 billion. We just wanted to, as a nice hallmark for us, to hit the $1 billion mark on incremental sales.

Ted Decker: Scott, we are not going to keep updating that billion dollars. We just wanted it was a nice, you know, hallmark for us to hit the billion dollar mark on incremental sales. But trust me, we are reviewing every week incrementality on all we are doing with the pro initiative. As Mike said, it starts with an engaged sales force. This is solution selling with a mature outside sales force supported with inside sales support. On time and complete delivery is paramount, and that is where we have seen a real step change. John Deaton and his team on the delivery side from our FDCs, remember the 17 markets, we have the flatbed distribution centers. We have, you know, 20 plus parcel delivery facilities.

20, plus.

Parcel delivery facilities, we have 200, plus market delivery operations, which are big and bulky product.

Speaker #6: But trust me, we are reviewing every week incrementality on all we're doing with the pro initiative. As Mike said, it starts with an engaged sales force.

And appliances and mentioned with ship from vessel location, we're leveraging stores as well so we're putting all of those nodes.

Into an opportunity set to optimize delivery for the customer.

Speaker #6: You know, this is a solution selling with a mature outside sales force supported by inside sales support. On-time and complete delivery is paramount, and that is where we've seen a real step change, John Deaton, in his team on the delivery side from our FDCs. Remember the 17 markets we have, the flatbed distribution centers, we have 20-plus parcel delivery facilities, and we have 200-plus market delivery operations, which are pretty big and bulky products.

Which node is going to have the quickest delivery time at the lowest cost at the greatest chance of being on time and complete for the customer and that's all the machine learning and AI, where we're putting into effect to make that happen we've seen step change.

Improvement in our on time and complete delivery, that's giving our sales team more confidence to sell that's keep retaining customers who try to swanson liked us try us again, we satisfy them again now.

Ted Decker: We have 200 plus market delivery operations, which are for big and bulky product and appliances. Ann-Marie Campbell mentioned the shift from best location. We are leveraging stores as well. So we are putting all those nodes into an opportunity set to optimize delivery for the customer. From which node is going to have the quickest delivery time at the lowest cost, at the greatest chance of being on time and complete for the customer. And that is all the machine learning and AI we are putting into effect to make that happen. We have seen step change in improvement in our on time and complete delivery. That is giving our sales team more confidence to sell. That is keeping retaining customers who tried us once and liked us, you know, try us again. We satisfy them again.

Trade credit to the equation, it's still such early days with trade credits.

Speaker #6: And appliances, Ann mentioned the shift from best location. We're leveraging stores as well, so we're putting all those nodes into an opportunity set to optimize delivery for the customer, from which node is going to have the quickest delivery time, at the lowest cost, at the greatest chance of being on time and complete for the customer.

<unk>.

Pro customers and we literally have small single digit thousands on trade credit. So this virtuous cycle of this whole ecosystem trying to work is gaining steam and the great thing about having someone like Srs and then doing all the diligence in the work with Gms.

We actually understand.

Speaker #6: And that's all the machine learning and AI we're putting into effect to make that happen. We've seen a step change in improvement in our on-time and complete delivery.

That part of the business is behaving like a distributor and we are satisfying these larger pros and they're complex purchase occasions, as we need to as a true professional wholesale deliver so super.

Speaker #6: That's giving our sales team more confidence to sell. That's keeping our customers who try us once and like us, you know, to try us again. We satisfy them again.

Super excited and the momentum is building.

I appreciate that good luck.

Speaker #6: Now you add trade credit to the equation. It's still such early days with trade credit, and we have millions of pro customers, but we literally have small single-digit thousands on trade credit.

Ted Decker: Now you add trade credit to the equation. It is still such early days with trade credit, and we have millions of pro customers, and we literally have small single-digit thousands on trade credit. This virtuous cycle of this whole ecosystem trying to work is gaining steam. And the great thing about having someone like SRS Distribution and then doing all the diligence in the work with GMS, Inc., you know, we actually understand that part of the business is behaving like a distributor, and we are satisfying these larger pros in their complex purchase occasions as we need to as a true professional wholesale deliverer. So super excited, and the momentum is building.

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

Good morning. Thank you so much for taking my question so over the last several.

<unk> home depot has taken some big Queen made some big call.

Speaker #6: So this virtuous cycle of this whole ecosystem trying to work is gaining steam. And the great thing about having someone like SRS and then doing all the diligence in the work with GMS, you know, we actually understand that part of the business is behaving like a distributor.

Including building the pro ecosystem buying Srs and now GMA.

Are these calls driven by something that you are seeing that is changing in the home improvement market.

That's changing in the home depot, that's meeting though.

Speaker #6: And we are satisfying these larger pros and their complex purchase occasions, as we need to as a true professional wholesale deliverer. So, super excited and the momentum is building.

The prompting that.

The need to take bigger calls in order to gain market share and as part of this how do you weigh the potential trade off between growth and returns.

Speaker #4: Appreciate that. Good luck.

In these capital allocation decisions or is that just a moot point because home depot is going to be able to cheat.

Analyst: Appreciate that. Good luck.

Speaker #2: Our next question comes from a line of Michael Lasser with UBS. Please proceed with your question.

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

Both.

And then a robust recovery situation and then in the next few years. Thank you very much.

Speaker #4: Good morning. Thank you so much for taking my question. Over the last several years, Home Depot has taken some big swings and made some big calls.

Billy Bastek: Good morning. Thank you so much for taking my question. Over the last several years, Home Depot has taken some big swings, made some big calls, including building the Pro ecosystem, buying SRS Distribution, and now GMS, Inc. Are these calls driven by something that you are seeing that is changing in the home improvement market or something that is changing in Home Depot that is prompting the need to take bigger calls in order to gain market share? As part of this, how do you weigh the potential trade-off between growth and returns in these capital allocation decisions, or is that just a moot point because Home Depot is going to be able to achieve both in a robust recovery situation in the next few years? Thank you very much.

Great question, Michael I'd also add what.

What we've done with e-commerce, and the Big swing, we've done building out the distribution group.

Speaker #4: Including building the Pro ecosystem, buying SRS, and now GMS. Are these calls driven by something that you are seeing that is changing in the home improvement market?

Good point, good point, Ted R E Commerce, which has taken a tremendous share.

I'll, let Richard talk about.

Speaker #4: Or something that's changing in The Home Depot that's prompting the need to take bigger calls in order to gain market share? And as part of this, how do you weigh the potential trade-off between growth and returns in these capital allocation decisions?

Tradeoff returns.

As we've said we look at this this gameboard in this opportunity set of where the profit pools, and where we can satisfy the customer, but we're always looking customer back as we went into this and what.

What we are.

Told by our pro customers there.

They're dealing with so many different suppliers. They are dealing with 2030 50 different suppliers on a job site. If we can make their job easier.

Speaker #4: Or is that just a moot point because Home Depot is going to be able to achieve both and then a robust recovery situation in the next few years?

Speaker #4: Thank you very much.

Take out five different sales calls five other delivery trucks five other.

Speaker #6: It's a great question, Michael. I'd also add what we've done with e-commerce in the big swing we've made by building out the distribution centers.

Ted Decker: Great question, Michael. I would also add what we have done with e-commerce in the big swing we have done building out the distribution centers to be plastic moving.

Invoice payment cycles that is making their business easier and that is our value proposition is that you can get a lot more from one supplier.

Speaker #4: Good point. Good point, Ted.

Billy Bastek: Good point, good point, Ted Decker.

Speaker #6: Our e-commerce has taken tremendous share, and I'll let Richard talk about trade-off returns. As we've said, we look at this game board and this opportunity set of where their profit pools are and where we can satisfy the customer.

Ted Decker: Our e-commerce, which has taken tremendous share. I will let Richard McPhail talk about trade-off returns. As we have said, we look at this game board and this opportunity set of where their profit pools and where we can satisfy the customer. We are always looking customer back as we went into this. What we were told by our Pro customers, they are dealing with so many different suppliers. They are dealing with 20, 30, 50 different suppliers on a job site. If we can make their job easier, to take out five different sales calls, five other delivery trucks, five other invoice payment cycles, that is making their business easier. That is our value proposition, is that you can get a lot more from one supplier. We will never get 100% of someone's spend or even 100% of someone's spend in a particular category.

We'll never get 100% of someone's spend or even 100% of some of the spend in that particular category, but the more we can consolidate activity for them, particularly on a job site.

And the selling cycle and the billing and payment cycle.

Speaker #6: But we're always looking customer back as we went into this. And what we're told by our pro customers is they're dealing with so many different suppliers.

That's our value proposition and that's where they told us.

We have a right to win and they're interested in that I would also say that there.

Speaker #6: They're dealing with 20, 30, or even 50 different suppliers on a job site. If we can make their job easier—by eliminating five different sales calls, five other delivery trucks, and five other invoice payment cycles—we are truly making their business easier.

There is some consolidation there is consolidation on the manufacturer side on the distributor side and even the customer side and scale matters and we've always been the scaled player.

And not in the pro wholesale type activity, but but certainly in home improvement and we're satisfying that scale game as well and we think the returns you get there in a different way, but Richard the return profiles attractive absolute.

Speaker #6: And that is our value proposition: you can get a lot more from one supplier. We will never get 100% of someone's spend or even 100% of someone's spend in a particular category.

Speaker #6: But the more we can consolidate activity for them, particularly on a job site, and the selling cycle and the billing and payment cycle, that's our value proposition. That's where they told us we have a right to win, and they're interested in that.

Ted Decker: The more we can consolidate activity for them, particularly on a job site, in the selling cycle and the billing and payment cycle, that is our value proposition. That is where they told us we have a right to win, and they are interested in that. I would also say that there is some consolidation. There is consolidation on the manufacturer's side, on the distributor's side, and even the customer's side. Scale matters. We have always been the scale player and not in the Pro wholesale type activity, but certainly in home improvement. We are satisfying that scale game as well. We think the returns, you get there in a different way, but Richard McPhail, the return profile is attractive.

So, but when we think about capital allocation as we've always told you.

We invest in our business first and Thats what.

We've leaned into and these last last few years.

Speaker #6: I'd also say that there is some consolidation. There's consolidation on the manufacturer side, on the distributor side, and even on the customer side.

We view our our goal here is to drive <unk>.

Sales growth through driving share capture which then drives EPS growth.

We have to do that in concert with creating shareholder value and so that's when returns.

Speaker #6: And scale matters. We've always been the scale player, and not in the pro wholesale type activity, but certainly in home improvement. We're satisfying that scale game as well.

We understand first of all just on the on the Tam and the share capture perspective.

We've seen an increase Tam, but we've also increased our Tam through the acquisition of Srs and then Gms would further increase that Tam. So we have one of the most attractive addressable markets in the I call. It the U S consumer economy in North American consumer consumer economy.

Speaker #6: And we think the returns you get there in a different way, but Richard, the return profile is attractive. Absolutely. So look, when...

Billy Bastek: Absolutely. So, look, when we think about capital allocation, as we have always told you, we invest in our business first. That is what we have leaned into in these last few years. We view our goal here is to drive sales.

Speaker #5: We think about capital allocation, as we've always told you: we invest in our business first. And that's what we've leaned into in these last few years.

And it starts there second.

As you as Ted said, we are the scaled player.

In that market and so we have tremendous opportunities and we feel like it's our responsibility to put ourselves in a unique position to win share. So now let's talk about returns.

Speaker #5: We view our goal here as driving sales growth through driving shared capture, which then drives EPS growth. We have to do that in concert with creating shareholder value.

Richard Mcphail: growth through driving share capture, which then drives EPS growth. We have to do that in concert with creating shareholder value. That's when returns we understand. First of all, just on the TAM and the share capture perspective, we've seen an increased TAM, but we've also increased our TAM through the acquisition of SRS Distribution, and GMS, Inc. would further increase that TAM. We have one of the most attractive, addressable markets in the, I call it the U.S. consumer economy, North American consumer economy, and it starts there. Second, as Ted Decker said, we're the scale player in that market. We have tremendous opportunities, and we feel like it's our responsibility to put ourselves in a unique position to win share. Now let's talk about returns.

Simply put when we find an investment that allows us to drive share capture and drive earnings growth.

Speaker #5: And so that's when returns come. We understand, first of all, just on the TAM and the share capture perspective, we've seen an increased TAM, but we've also increased our TAM.

That drives a return higher than our cost of capital with a little bit of a margin of safety built in.

Speaker #5: Through the acquisition of SRS and then GMS, we would further increase that TAM. So we have one of the most attractive addressable markets in the, I call it the North American consumer economy.

To make that investment.

And so you've seen us lean in.

Through a variety of investments over the last five years.

What might surprise you is that many of these investments are more capital light and higher return have a higher return profile than some of our more conventional investment. So I'll give you two examples.

When you think about an Srs branch comparatively speaking.

The capital required and then the return on that capital through time is actually lower capital required on a percent of sales basis than a home depot store Woody and the return on that capital actually comes more quickly than it does at the home depot store and by the way, we think that the 100.

Richard Mcphail: Simply put, when we find an investment that allows us to drive share capture and drive earnings growth that drives a return higher than our cost of capital with a little bit of a margin of safety built in, we're going to make that investment. You've seen us lean in to a variety of investments over the last five years. What might surprise you is that many of these investments are more capital-light and higher return, have a higher return profile than some of our more conventional investments. I'll give you two examples. When you think about an SRS Distribution branch, comparatively speaking, the capital required and then the return on that capital through time is actually lower capital required on a percent of sales basis than a Home Depot store would be. The return on that capital actually comes more quickly than it does at a Home Depot store.

Depot store as one of the most rock solid investments, we can make which is while we've leaned into that program. So srs wholesale distribution a capital light model.

Our <unk> if you take our <unk> and you look at where they are on their maturity curve, they're actually generating higher returns on invested capital than an equivalent home depot store what at this point in their lifecycle.

Again, if you're using the benchmark.

A home depot store to us is almost like buying treasuries that is as close to.

The most confident return we can drive in this business and the incremental investments, we're making I'll argue are positioned to drive higher returns on that capital now if you look at it in the earlier stages of investment ROIC is lower in the earlier stages and in the later stages.

Richard Mcphail: By the way, we think that the Home Depot store is one of the most rock-solid investments we can make, which is why we've leaned into that program. SRS Distribution, wholesale distribution, a capital-light model. Second, our DFCs. If you take our DFCs and you look at where they are on their maturity curve, they're actually generating higher returns on invested capital than an equivalent Home Depot store would at this point in their life cycle. Again, if you're using the benchmark, a Home Depot store to us is almost like buying treasuries. That is as close to, the most confident return we can drive in this business. The incremental investments we're making, I'll argue, are positioned to drive higher returns on that capital.

Of that same investment is higher so we're simply ascribing to the fact that we have an opportunity to position ourselves like no one else in our trillion dollar total addressable market to win and win over the long term.

Okay, great. Thank you very much for that my quick follow up is.

Decision to reduce promotional activity during the quarter was tied to the tariff situation. So a how do you expect this to unfold, it's likely that tariffs are going to be with us for a while does that mean.

Home depot posture around promotional activity will be reduced.

How do you expect it.

To impact the P&L over the next few quarters and what have you assumed that within your guidance. Thank you very much.

Richard Mcphail: Now, if you look at it in the earlier stages of investment, ROIC is lower in the earlier stages, and in the later stages of that same investment, it's higher. We're simply ascribing to the fact that we have an opportunity to position ourselves like no one else in our trillion-dollar total addressable market to win and win over the long term.

Yes, Thanks, Michael and as I mentioned, a little bit earlier to Steven's question, we did pull back.

Again those are those were primarily in the outside garden space.

Which caused some of that transaction comp noise.

That I mentioned, I mean listen the home depot as an EDI LP retailer.

Billy Bastek: Okay. Thank you very much for that. My quick follow-up is the decision to reduce promotional activity during the quarter was tied to the tariff situation. How do you expect this to unfold? It is likely that tariffs are going to be with us for a while. Does that mean Home Depot's posture around promotional activity will be reduced? How do you expect this to impact the P&L over the next few quarters and what have you assumed that within your guidance? Thank you very much.

So anything that we can do to continue to drive value for our customers in this marketplace.

And going forward and you're right the tariffs.

But then increase since we met in May that's all in our go forward guidance. So listen we feel great about the values I mentioned holiday, we have many things coming up in the back half of the year, we will talk a little bit more in Q3, but our gift center and all of the things that we'll have there we're going to continue to be focused on E LP and taking market share we love our price position.

As it stands today and we look forward to partnering even closer with our supplier partners and continuing to drive that value for customers and believe me there'll be plenty of great opportunities for our consumers our customers every day in our stores now through the back half of the year.

Richard Mcphail: Yeah, thanks, Michael. As I mentioned a little bit earlier to Steven's question, we did pull back. Again, those were primarily in the outside garden space, which caused some of that transaction comp noise that I mentioned. The Home Depot is an EDLP retailer. Anything that we can do to continue to drive value for our customers in this marketplace and going forward, and you are right, the tariffs have been increased since we met in May. That is all in our go-forward guidance. We feel great about the values. I mentioned holiday. We have many things coming up in the back half of the year. We will talk a little bit more in Q3 about our gift center and all the things that we will have there. We are going to continue to be focused on EDLP and taking market share.

Thank you very much and good luck.

Christine we have time for one more question.

Thank you. Our final question comes from the line of Chuck Grom with Gordon Haskett. Please proceed with your question.

Thanks very much my question is for Billy on category performance I was hoping you could maybe double click on the areas where the business is most notably improved you know you guys have called out well, but of the 16 categories.

The best breadth of performance I think since the second quarter of 2002. So maybe just quick on the categories a little bit and then also regionally.

Callouts in the quarter.

Richard Mcphail: We love our price position as it stands today. We look forward to partnering even closer with our supplier partners and continuing to drive that value for customers. Believe me, there will be plenty of great opportunities for our consumers, our customers every day in our stores now through the back half of the year.

Yeah, no happy to talk through that a greater Chuck.

As you mentioned and we called out 12 of our 16 Department.

Posted positive comps in 13 in the U S had some FX pressure in paint.

<unk> for our consumers our customers every day in our stores now through the back half of the year.

But really it was the broad based performance that as I mentioned the strongest we've seen in over two years. So I called out some of the seasonal pieces patio live goods and barbecue, but just to give some color on some of the other businesses and I know Richard talked about this being much more broad based when you think about our <unk>.

Billy Bastek: Thank you very much, and good luck.

Thank you very much and good luck.

Christine: Christine, we have time for one more question.

Christine we have time for one more question.

Isabel Janci: Thank you. Our final question comes from the line of Chuck Grom with Gordon Haskett. Please proceed with your question.

Thank you. Our final question comes from the line of Chuck Grom with Gordon Haskett. Please proceed with your question.

Ted Decker: Hey, thanks very much. My question is for Billy. On category performance, I was hoping you could maybe double-click on the areas where the business has most notably improved. You guys have called out 12 out of the 16 categories. That is the best breadth of performance, I think, since the second quarter of 2022. So maybe just click on the categories a little bit. Also regionally, any callouts in the quarter?

Hey, Thanks very much my question is for Billy on category performance I was hoping you could maybe double click on the areas where the business is most notably improved you know you guys have called out 12, but of the 16 categories.

Portable power business, our cleaning business dimensional lumber concrete water heaters vanities interior paint and in fact, the largest comp contributions to the quarter. We're really outside of seasonal of course, we saw a pickup with Ted mentioned, the north picking up and certainly more traffic in our stores drives more.

<unk> breadth of performance I think since the <unk>.

Second quarter of 'twenty, two so maybe just click on the categories a little bit and then also regionally.

Our projects as well, but it was really broad based across the business not only the 12 department, but I gave you some color around just what we're seeing.

Any callouts in the quarter.

Richard Mcphail: Yeah, no, happy to talk through that. It is greater, Chuck. As you mentioned, we called out 12 of our 16 departments hosted positive comps. We actually had 13 in the U.S. with some FX pressure and pain. It was really the broader-based performance that, as I mentioned, the strongest we have seen in over two years. So I called out some of the seasonal pieces, patio, live goods, and barbecue, but just to give some color on some of the other businesses. I know Richard McPhail talked about this being much more broad-based. If you think about our portable power business, our cleaning business, dimensional lumber, concrete, water heaters, vanities, interior paint. In fact, the largest comp contributions to the quarter were really outside of seasonal. Of course, we saw a pickup. Ted Decker mentioned the north picking up.

Yeah, no happy to talk through that a greater Chuck.

As you mentioned and we called out 12 of our 16 Department posted positive comps in 13 in the U S had some FX pressure in paint.

Inside some of those what we consider a really core home improvement projects that are just outside of obviously your typical when spring comes and you sell a little bit more on the garden state. So we're really really pleased thrilled with the work that the merchant team has done along with our supply chain folks just incredible work.

But really it was the broad based performance that as I mentioned the strongest we've seen in over two years. So I called out some of the seasonal pieces patio live goods and barbecue, but just to give some color on some of the other businesses and I know Richard talked about this being much more broad based but if you think about.

Excited about the back half of the year and more of the broad based.

<unk> that we're seeing.

That's great and then my follow up just for Richard on gross margins flat year over year.

Portable power business, our cleaning business dimensional lumber concrete water heaters vanities interior paint and in fact, the largest comp contributions to the quarter. We're really outside of seasonal of course, we saw a pickup with Ted mentioned, the north picking up and certainly more traffic in our stores drive.

Talk about the moving parts in the quarter, how youre thinking about the cadence in the back half and then zooming out I think this will be the third straight year gross margins will be around 33.4, I guess, how youre thinking about that line item in the out years. Thank you.

Richard Mcphail: Certainly, more traffic in our stores drives more projects as well. It was really broad-based across the business, not only the 12 departments, but I gave you some color around just what we are seeing inside some of those, what we would consider really core home improvement projects that are just outside of, obviously, your typical when spring comes and you sell a little bit more in the garden space. We are really, really pleased. Thrilled with the work that the merchant team has done along with our supply chain folks. Just incredible work. Really excited about the back half of the year and more of the broad-based impact that we are seeing.

More projects as well, but it was really broad based across the business not only the 12 department, but I gave you some color around just what we're seeing in.

Right well, we'll just we'll keep our comments too.

This year gross margin.

We guided at the beginning of the year that it's going to be essentially flat at 33, 4% youre not going to see a lot of movement in that in that line item.

Inside some of those what we consider a really core home improvement projects that are just outside of obviously your typical when spring comes and you sell a little bit more on the garden space. We're really really pleased thrilled with the work that the merchant team has done along with our supply chain folks just incredible work.

Other than seasonal swing, a little bit that we always see and so are we.

We've reaffirmed guidance at that level and and then we will address future years, when we get together in December.

And really excited about the back half of the year and more of the broad based <unk>.

That we're seeing.

Alright, thank you.

Ted Decker: That is great. I will follow up for Richard McPhail on gross margins, flat year over year. Can we just talk about the moving parts in the quarter? How are you thinking about the cadence in the back half? Zooming out, I think this will be the third straight year gross margins will be around 33.4%. I guess how are you thinking about that line item in the out years? Thank you.

That's great and then my follow up just for Richard on gross margins flat year over year can you just talk about the moving parts in the quarter, how youre thinking about the cadence in the back half and then zooming out I think this will be the third straight year gross margins will be around 33.4, I guess, how youre thinking about that line item in the out years. Thank you.

Thank you Mr. E&C I'd like to turn the floor back over to you for closing comments.

Thank you and thank you all for joining US today, we look forward to speaking with you on our third quarter earnings call in November.

Yes.

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.

Richard Mcphail: Well, we will just keep our comments to this year. Gross margin, we got it at the beginning of the year that it is going to be essentially flat at 33.4%. You are not going to see a lot of movement in that line item, other than seasonal swing a little bit that we always see. We have reaffirmed guidance at that level. We will address future years when we get together in December.

Right well, we'll just we'll keep our comments to two.

This year of gross margin.

Got it at the beginning of the year that it's going to be essentially flat at 33, 4% youre not going to see a lot of movement in that in that line item.

Other than seasonal swing, a little bit that we always see and so.

We've reaffirmed guidance at that level.

And and then we will address.

For years, when we get together in December.

Ted Decker: Great. Thank you.

Alright, thank you.

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

Thank you Mr. Anti I'd like to turn the floor back over to you for closing comments.

Christine: Thank you. We look forward to speaking with you on our third quarter earnings call in November.

Thank you and thank you all for joining US today, we look forward to speaking with you on our third quarter earnings call in November.

Yes.

Isabel Janci: 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.

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.