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spk03: Greetings and welcome to the Home Depot first quarter 2024 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.
spk01: Thank you, Christina, and good morning, everyone. Welcome to Home Depot's first quarter of 2024 earnings call. Joining us on our call today are Ted Decker, chair, president, and CEO of Anne Marie Campbell, Senior Executive Vice President, Billy Bastic, 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 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 Ted, 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 presentation will also include certain non-GAAP measures. Reconciliation of these measures is provided on our website. Now, let me turn the call over to Ted.
spk00: Thank you, Isabelle, and good morning, everyone. Sales for the first quarter were $36.4 billion, down 2.3% from the same period last year. Comp sales declined 2.8% from the same period last year, and our U.S. stores had negative comps of 3.2%. Diluted earnings per share were $3.63 in the first quarter compared to $3.82 in the first quarter last year. The team executed a high level in the quarter and continued to grow market share. While the quarter was impacted by a delayed start to spring and continued softness in certain larger discretionary projects, we feel great about our store readiness, product assortment, and associate engagement. Our associates are energized and ready to serve our customers as spring breaks across the country. As you will hear from Billy, where weather was favorable, we saw good customer engagement and strength in outdoor projects. In addition, our focus remains on creating the best interconnected experience, growing pro wallet share with a differentiated set of capabilities, and building new stores. Driving sales growth with our pro customers remains one of our top focus areas. Remember, we operate in a $45 trillion asset class, which represents the installed base of homes in the United States. And we serve a highly fragmented addressable market of approximately $1 trillion. Within that TAM, the greatest opportunity is with the residential pro contractor who shops across many categories of home improvement products while working on complex projects. We've defined that specific opportunity as an approximately $250 billion TAM, of which we have relatively little share today. We also know that to effectively serve this TAM, we need an expanded set of capabilities and services that we refer to as our pro ecosystem. And while the store remains the center of that ecosystem, we are developing more fulfillment options, a dedicated sales force, specific digital assets, trade credit, and order management capabilities geared at the residential pro who shops across categories. As we've shared with you before, our more mature markets with this pro ecosystem have seen great success, so we're expanding to other markets. As you heard last quarter, we'll have the foundational elements of our ecosystem in 17 markets by the end of the fiscal year. And while these 17 markets are currently at different maturity levels, they are outperforming our other large pro markets in aggregate. Earlier this quarter, we announced our intent to acquire SRS, a residential specialty trade distributor with a leading position in three Large, highly fragmented, specially-trade verticals serving the roofer, the pool contractor, and the landscape professional. SRS is complementary to the ecosystem we've been building, giving us another avenue to more effectively serve the complex project occasion. They also give us the right to win with a Specially-Trade Pro customer. SRS does an exceptional job serving the Specially-Trade Pro, who typically only shops one category and need specialized capabilities to complete their project. In addition, SRS is an exceptionally well-run business with a world-class management team. As we build out our own ecosystem, we can leverage their expertise and deep product catalog in the verticals in which they operate. We have significant growth opportunities in front of us, and we are very happy with the operational execution in our core business. and despite pressure in the market, we continue to invest in our business. We are gaining share of Wallet with our customers, whether they are shopping in our stores, on our digital assets, or through our pro ecosystem. Our merchants, store and met teams, supplier partners, and supply chain teams are always ready to serve in any environment. They did an outstanding job delivering value and service to our customers throughout the quarter, and I'd like to close by thanking them for their dedication and hard work. With that, let me turn the call over to Ann.
spk05: Thanks, Ted, and good morning, everyone. As we head into a bigger selling season, our associates continue to be engaged, excited, and ready to serve our customers. As Ted mentioned, Growing share of wallet with a pro and winning the pros working on complex projects continues to be our largest growth opportunity. We know that delivering the best shopping experience for any purchase occasion is critical to our success. That is why we continue to invest in our pro sales teams and capabilities. We have developed new capabilities within our pro intelligence tool, which feeds or CRM platform and leverages data science to bring better insight to our sales teams. These tools are helping us to both assist in identifying the optimal pro targets in a market, as well as the highest value cross selling opportunities to drive action and sales. Another critical component of the shopping experience is being in stock with the right products and ensuring those products are on shelf and available for sale. We've talked to you before about Sidekick and Computer Vision and are thrilled with the results we've seen so far. This year, we will continue to lean in to improve our OSA and drive productivity by creating consistent, actionable, and directed tasks for our associates. What's really exciting is how we are also now leveraging computer vision for other applications across the store. For example, computer vision helps us maintain the integrity of our base by ensuring that the product on the shelf meets all quality standards. Maintaining high-quality, damage-free product is a key component of delivering on the customer experience. Additionally, we have also deployed this technology in our self-checkout corral to help us mitigate shrink. Computer vision can identify complex carts or high-value carts and signal a cashier to help the customer with their basket to ensure all products are scanned and accounted for. While we will continue to improve upon all these technology-enabled applications, we are thrilled with the early results we are seeing. Last quarter, we talked with you about one of our areas of opportunity within our post-sale experience, specifically within our returns process. I'm excited to update you that over 70% of online orders are now able to be self-service returned from their My Account profile on our website. Now, our customers can create their own return of an online order and drop it off at a UPS with a scan of a barcode. Later this year, we will enable job site pickup for returns back to our FDC, which will be a game changer for a pro shopping experience. This enhancement will allow our customers, primarily the residential pro, to initiate a return from their job site versus having to return big and bulky items to the store. This is a massive win, not only for pros, but also for associates and or stores and will drive better customer satisfaction and greater store productivity. These initiatives are just a few examples of the different ways we're improving the shopping experience for customers and or associates. I am so excited about all we are doing to drive sales in our stores, and I look forward to the opportunity that's ahead of us. None of this would be possible without our amazing associates, and I want to thank them for all they do to take care of our customers. With that, let me turn the call over to Billy.
spk06: 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. As you heard from Ted, during the first quarter, our sales were impacted by a delayed start to spring and continued softness in certain larger discretionary projects. However, where weather was favorable, we saw good customer engagement and strength in outdoor projects. Before providing commentary on our comp performance, it's important to note that we made some merchandising department changes to more closely reflect how our customer shopper categories and better align with our merchandising growth efforts. We now have 16 departments, up from 14 previously, and have separated electrical and lighting and kitchen and bath. Additionally, we have renamed our tools department to power and included outdoor power equipment to capture synergies and maximize the strength of our battery-powered platforms. Turning to our department comp performance for the first quarter, our building materials and power departments posted positive comps, while outdoor garden, paint, lumber, plumbing, and hardware were all above the company average. During the first quarter, our comp transactions decreased 1.5% and comp average ticket decreased 1.3%. However, we continue to see our customers trading up for new and innovative products. Big-ticket comp transactions of those over $1,000 were down 6.5% compared to the first quarter of last year. We continue to see softer engagement in larger discretionary projects where customers typically use financing to fund the project, such as kitchen and bath remodels. Turning to total company online sales, sales leveraging our digital platforms increased 3.3% compared to the first quarter of last year. For those customers that chose to transact with us online during the first quarter, nearly half of our online orders were fulfilled through our stores. We are incredibly focused on removing friction for our customers to create an excellent interconnected shopping experience. We continue to work on improving our online search functionality and serving the most relevant product offerings to our customers. To do this, we rolled out an intent-based search engine that combines keywords, behaviors, and intent deliver more targeted results. And we enhanced our filtering capabilities, improving the customer's ability to find exactly what they're looking for. All of these initiatives work together to drive strong results in our online business. Pro and DIY customers' performance was relatively in line with one another, but both were negative for the quarter. While pro backlogs remain relatively stable, we hear from our pros that homeowners continue to take on smaller projects. The investments we are making are resonating with our pros as we see increased engagement. For example, we have made significant progress with the pro who paints and continue to see share gains with this customer. Our partnerships with Bayer and PPG, as well as enhanced capabilities around our in-store service and job site delivery capabilities are helping to remove friction from their experience. During the end of the first quarter, we hosted our annual Spring Black Friday and Spring Gift Center events and saw strong performance across both events. Our merchants did a fantastic job curating the best products, and we saw strong engagement with our customers throughout the events. We are pleased with the results we saw, particularly in categories like riding lawnmowers and outdoor power equipment, where we had experienced some discretionary pull forward over the last couple of years. The trend away from gas to battery-powered products is continuing, and we are well-positioned with our assortment. We have the brands our customers are looking for, whether it's Ryobi, Milwaukee, DeWalt, Makita, or RIDGID. We estimate that there are nearly 500 million batteries in the market today, and our assortment covers the vast majority of these batteries. In fact, more than 70% of batteries with brands that are exclusive to the Home Depot in the big box channels. With hundreds of products across each of these platforms, this is one of the best loyalty programs that keeps customers coming back to the Home Depot. And our live goods category looks incredible. We are ready for spring with everything from shrubs to a variety of flowers, herbs, and vegetables for every type of gardener. We're excited about spring breaking across the country, and we remain ready to help our customers with all of their outdoor projects and outdoor living needs. With that, I'd like to turn the call over to Richard.
spk02: Thank you, Billy, and good morning, everyone. In the first quarter, total sales were $36.4 billion, a decrease of approximately 2.3% from last year. During the first quarter, our total company comps were negative 2.8%, with comps of negative 4% in February, negative 0.8% in March, and negative 3.3% in April. Comps in the U.S., were negative 3.2% for the quarter, with comps of negative 4.8% in February, negative 1.3% in March, and negative 3.6% in April.
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