Home Depot, Inc. (The)

Greetings and welcome to the Home Depot's quarterly 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, Christine, and good morning, everyone. Welcome to Home Depot's fourth quarter and fiscal year 2020 earnings call. Joining us on our call today are Craig Menear, Chairman and CEO, Ted Decker, President and Chief Operating Officer, and Richard McVail, 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 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. Thanks for joining our call this morning. We hope that you and your loved ones are safe and healthy. Our thoughts are with those that have been impacted by the recent winter storms. Fiscal 2020 was a year that we certainly will not forget. It was a year of great hardship and adversity for so many, and our thoughts and prayers are with the millions of people who have been directly impacted by the pandemic. It is times like these that I have never been more thankful for the culture that our founders instilled in our business over 40 years ago. We have navigated this crisis by aligning our decisions and actions to some of our most important values, to do the right thing and to take care of our people. At the end of the day, it is our people and culture that make us unique. Our ability to manage unprecedented demand in the business while navigating the global pandemic and supporting our communities through multiple natural disasters and moments of crisis is a direct result of our associates' extraordinary efforts. As a result, investing in our associates during this time was one of the easier decisions we made this year. During fiscal 2020, in addition to record success-sharing payouts, we invested a total of approximately $2 billion on enhanced compensation and benefits for our associates. As we announced last quarter, we transitioned from temporary COVID-19 benefits to permanent compensation enhancements for our frontline hourly associates. At the beginning of the year, I would have never thought it possible for the business to grow over $21 billion in 2020. For context, it took us 19 years as a company to achieve the first $20 billion in total sales, and we outgrew that in this year alone. This was enabled by investments we've made in the business as well as the team's exceptional execution and cross-functional alignment. COVID-19 and its impacts have forced us to change the way we live, work, and interact with one another. And there are some key learnings. The first is that the investments we have made in the business over the past decade were the right ones. And the second is that those investments enabled agility and flexibility to execute on critical business decisions in a changing and dynamic operating environment. Investments in technology and infrastructure helped us to extend our in-store BOPUS offering to curbside in a matter of days and convert a newly opened market delivery center facility to a direct fulfillment center in order to reduce online delivery lead times and improve the customer experience. The mechanization of our upstream supply chain helped us to better flow products to our stores, while investment in tools for our store associates and MET teams helped to get that product to the shelves for the customer more quickly and efficiently. Our merchants leveraged data analytics to collaborate with our supplier partners to make real-time adjustments to our assortments as we worked to prioritize the highest demand SKUs for our customers. Despite one of the most difficult operating environments we have ever faced, we continue to make progress with regards to our strategic initiatives. Key components of our One Home Depot strategy, such as opening of various supply chain facilities, technology investments, and enhancements to the digital experience remain on track. We have also restarted many of the in-store investments that were paused at the outset of the pandemic. As customers engage with the Home Depot, we see a continued blend of both the physical and digital worlds. As a result, we believe that the distinct competitive advantages and overarching benefits of an interconnected One Home Depot strategy have never been more relevant. Now turn to our financial highlights. Our results for the year clearly indicate that for many customers, the home has never been more important. Fiscal 2020 sales grew $21.9 billion to $132.1 billion, up 19.9% from last year. Comp sales were up 19.7% from last year, and our US comps were positive 20.6%. Diluted earnings per share increased 16.5% to $11.94 for the year. We finished this year with another exceptional quarter as we saw the continuation of outsized demand for home improvement projects. Sales for the fourth quarter grew $6.5 billion to $32.3 billion, up 25.1% from last year. Comp sales were up 24.5% from last year, with U.S. comps a positive 25%. Diluted earnings per share were $2.65 for the fourth quarter. Our results this quarter, once again, were driven by broad-based strength across the business and geographies. All of our top 40 markets posted double-digit comps, while Canada posted comps above the company average, and Mexico posted double-digit comps in local currency. As Ted will detail, both ticket and transactions were up double digits in the quarter, and we saw a strong double-digit growth from both the pro and DIY customers. We had a record holiday season as our modified approach to Black Friday and gift center events clearly resonated with our customers. Our interconnected retail strategy and underlying technology infrastructure have continued to support record-level web traffic on a consistent basis throughout the year. For the quarter, sales leveraging our digital platforms increased approximately 83% versus the prior year, and approximately 55% of online orders were fulfilled through a store. For the year, sales leveraging our digital platforms increased approximately 86% versus last year, and approximately 60% of online orders were fulfilled through a store. We continue to invest in our digital assets, introducing new capabilities and different ways to engage with the Home Depot, all with the goal of improving the customer experience. One of the customer enhancement tools that had to be completely reimagined in the COVID-19 environment was our in-store workshop program. For years, we have offered a number of different in-store workshops, including our kids' workshops. Until COVID-19, there wasn't an online option for these workshops, but in a few short months, we were able to successfully transition 100% of our workshop content online. The live streaming platform has allowed us to go from an average of five in-store workshops per month to approximately 40 online live streaming workshops per month. These online workshops have driven a deeper level of engagement and connectivity with our participating customers. One thing that did not change in fiscal 2020 is our disciplined approach to capital allocation to create value for our shareholders. We remain committed to growing our dividend as earnings grow. As a result, today we announced our board approved a 10% increase in our quarterly dividend to $1.65 per share, which equates to an annual dividend of $6.60 per share. As we look to fiscal year 2021, Richard will provide some perspective into the factors that have the potential to impact the company's performance. I'm incredibly proud of all we have accomplished in this unprecedented year, and want to close by thanking our associates for the way they have lived our values by serving our customers, communities, and each other during these challenging times. I also want to thank our supplier partners for their continued support and partnership throughout this year. In addition, I would like to welcome the associates from HD Supply back to the Home Depot family. As we close fiscal 2020, We have nearly completed our multi-year accelerated investment program that has positioned us well to serve our customers in this dynamic and changing environment. We have more conviction than ever that we have been investing in the right areas of the business and will continue to invest to extend our competitive advantage and enable market share growth in any environment. We believe that our scale combined with our low-cost position and continued focus on the customer will help us win in a highly competitive marketplace and deliver exceptional returns for our shareholders. And with that, let me turn the call over to Ted.