Home Depot, Inc. (The)

Greetings, and welcome to the Home Depot second quarter 2019 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 Jancy. Please go ahead.

Thank you and good morning, everyone. Joining us on our call today are Craig Menear, Chairman, CEO, and President, Ted Decker, Executive Vice President of Merchandising, and Carol Tomei, Chief Financial Officer and Executive Vice President, Corporate Services. 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 our Investor Relations Department at 770-384-2387. Before I turn the call over to Craig, let me remind you that today's press release and the presentations made by our executives include forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. These statements are subject to risks and uncertainties that could cause actual results to differ materially from our expectations and projections. These risks and uncertainties include but are not limited to the factors identified in the release and in our filings with the Securities and Exchange Commission. Today's presentations will also include certain non-GAAP measures. Reconciliation of these measures is provided on our website. Now, let me turn the call over to Craig.

Thank you, Isabel, and good morning, everyone. Sales for the second quarter were $30.8 billion, up 1.2% from last year. Comp sales were up 3% from last year, with U.S. comps of positive 3.1%. Diluted earnings per share were $3.17 in the second quarter. We were pleased with these results. We overcame a tough May and continued lumber price deflation to deliver accelerating comp performance throughout the quarter. Looking at our results geographically, all of our U.S. divisions posted positive comps. 17 of 19 U.S. regions also posted positive comps. with the exceptions being our Gulf and Florida regions, which delivered high storm-related comps last year. Internationally, Mexico posted high single-digit positive comp, and Canada posted low single-digit positive comp, both in local currency. We saw broad-based growth across the stores, both comp ticket and transactions group. With the exception of lumber, all of our merchandising departments posted positive comments. We saw a healthy balance of growth among both pro and DIY categories, with pro sales outpacing our DIY business in the U.S. As Ted will detail, we continue to invest in a portfolio of service offerings to deepen our level of engagement with the pro. We know that the more dimensional our relationship is with this customer, the more they spend. From a strategic perspective, I'm encouraged by the progress we are making to deliver the One Home Depot experience, a seamless, interconnected shopping experience for our customers. Our in-store investments are focused on ease of navigation and improved speed to checkout. We have implemented our wayfinding sign and store refresh package in over 1,400 of our U.S. stores. And customer service scores in the category of neat and clean have increased 140 basis points. Our front-end store investments, now in over 400 stores, are designed to get customers in and out of stores faster, and they're doing just that. Customer service scores and checkout time satisfaction have increased over 450 basis points versus last year. While our stores remain the hub of our business, We know that many of our in-store sales are influenced by online visits, and approximately 50% of all online U.S. orders were picked up in our stores during the quarter. Our customers continue to blend the channels of engagement, and we are investing to remove the friction as they do so. We continue to roll out automated pickup lockers for online orders with over 1,100 stores completed. and have seen a 250 basis point increase in checkout scores for stores with lockers versus those without. Our investment in the digital price labels for our appliance department has enabled us to incorporate ratings and reviews from the digital world into the store shopping experience, enhancing the overall customer experience in the category. As we invest to address the unique demands of an interconnected customer experience in stores, We also continue to invest in our website and mobile applications to further enhance the digital customer experience. Our focus in improving search capabilities, site functionality, category presentation, and product content has yielded higher traffic, better conversion, and continued sales growth. Second quarter online sales grew 20% from the second quarter of 2018. We also continue to leverage our digital platform to drive incremental growth from new categories as we lean into adjacencies like HD home, pool, and workwear. The traction we are seeing from investments across our digital and physical assets are encouraging not only from a customer experience standpoint, but they are also driving productivity throughout the business. Our front-end investments are optimizing labor and merchandising space productivity. Digital appliance labels enable associates to be more productive with their time. Instead of spending multiple hours manually changing price signs, our associates can reallocate their time to engage with customers in a high-touch category. The virtual cycle of productivity at the Home Depot has been a hallmark of our operational excellence over the years and continues as we move forward. Our focus on enhancing the customer experience and end-to-end productivity extends to the supply chain investments as well. During the quarter, we completed the retrofit of our Hagerstown facility into a parcel direct fulfillment center, which expands our one-day delivery capabilities for stock parcel goods from approximately 30% to approximately 50% of the U.S. population. We also drove productivity and cost out to our mechanization efforts and our upstream supply chain. We are on track with our planners to create the fastest, most efficient delivery network and home improvement and are pleased with the progress that we have made thus far. Turning to our outlook for the remainder of the year, the building blocks of our financial model remain in place. As Carol will detail, we are lowering our sales guidance for the year, mostly to reflect the impact of lumber price deflation, as well as some conservatism to account for the recently announced tariffs. We now expect fiscal 2019 comp sales growth of approximately 4% and reaffirm our expectation for diluted earnings per share of $10.03. I want to close by thanking our associates for their hard work. which resulted in the highest quarterly sales in our company history. And with that, let me turn the call over to Tim.