Yahoo Finance The Home Depot Inc (HD) (Q1 2024) Earnings Call Transcript Highlights: Navigating Market ...
Sales: $36.4 billion, down 2.3% year-over-year.
Comp Sales: Declined 2.8% year-over-year.
U.S. Comp Sales: Down 3.2%.
Diluted EPS: $3.63, decreased from $3.82 last year.
Gross Margin: Increased to 34.1%, up by approximately 45 basis points.
Operating Margin: 13.9%, down from 14.9% the previous year.
Store Count: Opened 2 new stores, total 2,337.
Merchandise Inventories: $22.4 billion, down 12% from last year.
Inventory Turns: 4.5x, improved from 3.9x last year.
Capital Expenditures: $850 million invested back into the business.
Dividends: Paid approximately $2.2 billion to shareholders.
Share Repurchases: $600 million returned to shareholders.
Online Sales: Increased by 3.3%.
Guidance for 2024: Total sales growth approximately 1%, comp sales around -1%.
Release Date: May 14, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
The Home Depot Inc (NYSE:HD) continues to grow market share and invest in its business despite market pressures.
The company is expanding its pro ecosystem, which has shown great success in more mature markets, leading to expansion into additional markets.
The acquisition of SRS Distribution is expected to enhance The Home Depot Inc (NYSE:HD)'s capabilities and market reach, particularly in specialty trade verticals.
The Home Depot Inc (NYSE:HD) has maintained strong operational execution, with significant improvements in inventory management and turnover.
Investments in technology and capabilities, such as the pro intelligence tool and Computer Vision, are enhancing customer and associate experiences and driving productivity.
Negative Points
Sales for the first quarter were down 2.3% year-over-year, with comp sales declining 2.8%.
The Home Depot Inc (NYSE:HD) experienced negative comps in U.S. stores, particularly impacted by a delayed start to spring and continued softness in larger discretionary projects.
Big ticket transactions over $1,000 were down 6.5% compared to the first quarter of last year, indicating softer engagement in larger discretionary projects.
The company faces challenges in the kitchen and bath segments, where there is a noticeable decrease in project sizes and some trading down among consumers.
Despite strong operational focus, external factors such as organized retail crime continue to pose challenges and pressure the company's performance.
Q & A Highlights
Q: Can you discuss the impact of weather on spring sales and how it compares to last year's spring season? A: Edward P. Decker - The Home Depot, Inc. - Chairman, President & CEO: The spring season was inconsistent across different regions, but in areas with good weather, particularly in northern markets, sales were strong, especially in the power business driven by outdoor power equipment. The overall impact of weather has been mixed, with hopes for improved conditions as the prime selling weeks approach.
Q: How are larger discretionary projects, particularly those that are financed, performing given the current economic environment? A: Richard V. McPhail - The Home Depot, Inc. - Executive VP & CFO: There's increased pressure on large discretionary projects, especially those that are financed, such as kitchen and bath remodels. This trend has shifted from last year, where the pressure was more on single-item purchases.
Q: Can you elaborate on the lock-in effect and its impact on housing turnover and customer spending? A: Richard V. McPhail - The Home Depot, Inc. - Executive VP & CFO: The lock-in effect due to high interest rates has significantly reduced housing turnover, reaching historical lows. This reduction impacts our business as customers tend to spend more in years they buy or sell homes. The expectation is that housing turnover can't decline much further, and spending on housing might shift from discretionary to necessary over time.
Q: What trends are you seeing in transaction growth, and is it more driven by professional or DIY customers? A: Edward P. Decker - The Home Depot, Inc. - Chairman, President & CEO: Transaction growth is improving, and it appears that Home Depot is gaining market share. Both professional and DIY customer segments performed similarly in terms of negative growth for the quarter. The larger professional customers, especially those engaged in the pro ecosystem, continue to outperform.
Q: How does the acquisition of SRS Distribution fit into Home Depot's strategy, especially regarding the complex pro segment? A: Edward P. Decker - The Home Depot, Inc. - Chairman, President & CEO: The acquisition of SRS Distribution opens up a new $50 billion TAM in highly fragmented markets where SRS holds strong positions. It complements our existing efforts to build wholesale capabilities and provides an opportunity to learn from SRS's established operations in these specialty trade areas.
Q: With the delayed start to spring, how is business tracking in May compared to the first quarter? A: William D. Bastek - The Home Depot, Inc. - EVP of Merchandising: Early May showed similar patterns to the first quarter, with strong customer engagement and sales in regions experiencing favorable weather. The company remains optimistic about performance in these areas as the weather improves.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
