Home Depot, Inc. (The)

Greetings and welcome to the Home Depot fourth quarter 2019 earnings 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 Minear, Chairman, CEO, and President, Ted Decker, Executive Vice President of Merchandising, and Richard McVale, 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 and 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 sectors identified in the release and in our filings with the Securities and Exchange Commission. Today's presentations also include certain non-GAAP measures. Reconciliation of these measures is provided on our website. Now, let me turn this all over to Craig.

Thank you, Isabel, and good morning, everyone. Fiscal 2019 was another record year for our business as we achieved the highest sales in company history. Excluding the extra week in 2018, fiscal 2019 sales grew 3.5% to $110.2 billion. Diluted earnings per share were $10.25. As expected, we finished the year with our strongest comp performance in the fourth quarter. Comp sales were up 5.2% from last year, and our U.S. comps were positive 5.3%. Sales for the fourth quarter were $25.8 billion, and diluted earnings per share were $2.28. We saw broad-based growth across all geographies and merchandising departments in the quarter. All 19 of our U.S. regions posted positive comps. And internationally, both Canada and Mexico reported positive comps in the fourth quarter. As Ted will detail, both comp ticket and transactions grew in the quarter, and we saw growth with both our pro and DIY customers. We had a strong holiday season with record-setting sales on Black Friday and during Cyber Week. These results reflect solid execution by our stores, our merchants, our supply chain teams, as well as our vendor partners, and demonstrate the overall health of the consumer. I'm proud of our results in fiscal 2019 as the team successfully navigated a number of external headwinds by maintaining a relentless focus on our customer. 2019 was also a pivotal year in our transformation to create the One Home Depot experience. We are now two years into our multi-year investment and are realizing benefits. We have more conviction than ever that these strategic initiatives are creating a value proposition that is unique to the marketplace and will extend our leadership position for years to come. The majority of our US stores have a new look and feel, and we address customer pain points around navigation and checkout. Our enhanced signage and store refresh package along with investments in the front end of our stores, have improved the customer experience and driven associate productivity. These store investments are driving higher customer satisfaction scores, which we believe is translating into market share gains. As a complement to our store investments, we are investing to strengthen the competitive advantages that we have built through the blending of our physical and digital platforms into a more seamless interconnected experience. For example, our chain-wide rollout of digital appliance labels, connecting ratings from the digital world to the physical world, enhancing the in-store shopping experience. Additionally, HomeDepot.com continues to be an engine for growth for our overall business, driving increased traffic online and additional footsteps to our stores. Because of this, We continue to invest in search functionality, category presentations, product content, and enhanced fulfillment options to remove friction from the online shopping experience. Excluding the extra week last year, online sales grew 20.8% in the quarter and 21.4% for the year. And over 50% of the time, our customers choose to pick up their order in a store. This is the power of the interconnected retail strategy. We have also expanded our digital capabilities by investing in a B2B website experience tailored specifically for the needs of our pro customers. We have now onboarded over 1 million pro customers. Additionally, during the quarter, we completed the integration of a third-party best-in-class CRM system for all of our pro sales and services teams. This enhances our visibility, enabling us to better serve our customers. I'm excited about the opportunities ahead as we continue to build capabilities to engage with a pro, no matter when, where, or how they want to interact. Another key component of the best-in-class interconnected shopping experience centers on the enhanced delivery and fulfillment options. In 2019, We've continued our multi-year journey to create the fastest, most efficient delivery network in home improvement. We are now live with at least one of each type of facility that we are building. Though it is early days, we are pleased with the initial results. For example, we have opened a dozen market delivery operations, or MDOs, that have enabled us to transition 20% of our appliance deliveries from an outsourced model to one in which we control more of the customer experience. This has translated to meaningful improvements in our customer satisfaction scores for appliance deliveries. Our supply chain build-out will continue to ramp from here, with the largest number of new facilities coming online in 2021 and 2022. Turning to 2020, Richard will take you through the details, but we expect another year of growth with both sales and comp growth ranging from approximately 3.5% to 4% and diluted earnings per share of approximately $10.45. Today, our board approved a 10% increase in our quarterly dividend to $1.50 per share, which equates to an annual dividend of $6 per share. We remain committed to maintaining a disciplined approach to capital allocation to create value for our shareholders. I'm incredibly proud of the progress our teams made as we transform ourselves into the One Home Depot of the future. While we define our sales growth in percentage terms, we capture share in dollar terms. And through the second year of our One Home Depot investment program, we have grown sales by over $9 billion. the level of growth unmatched in our market. As we look forward to 2020, I am more excited than ever about the opportunities ahead. We are investing to unlock the power of a truly interconnected customer experience by enhancing our already strong foundation to further extend our leadership position into the marketplace. As with any transformation, the work we are doing is complex. And I'm proud of the way our associates continue to execute at high levels and focus on what's most important in our business, our customers. I want to close by thanking our associates for their hard work and dedication in the fourth quarter and throughout the year. For the second half of the year, 100% of our stores will receive success sharing, our bonus program for our hourly associates. We look forward to continuing our momentum in 2020. And with that, let me turn the call over to Ted. Thanks, Craig, and good morning, everyone.