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Home Depot(HD) - 2024 Q4 - Annual Report
HDHome Depot(HD)2024-03-12 16:00
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Store Operations and Expansion - The company operated 2,335 stores as of the end of fiscal 2023, with an average store size of approximately 104,000 square feet of enclosed space and 24,000 square feet of outside garden area[7] - The company plans to open approximately 80 new stores over five years to address market voids and population growth, aiming to improve customer experience and drive revenue growth[23] Capital Expenditures and Cost Management - In fiscal 2023, the company invested 3.2billionincapitalexpenditurestosupportbusinessgrowthandbuildaninterconnectedcustomerexperience[9]−Thecompanyplanstoreduceitsfixedcoststructurebyapproximately3.2 billion in capital expenditures to support business growth and build an interconnected customer experience[9] - The company plans to reduce its fixed cost structure by approximately 500 million, with expected realization in fiscal 2024[9] Shareholder Returns - The company returned over 16billiontoshareholdersinfiscal2023throughcashdividendsandsharerepurchases[10]ProductAssortmentandMerchandising−Atypicalstorestocksapproximately30,000to40,000itemsannually,withonlineofferingssignificantlyexpandingtheproductassortment[15]−Thecompany′smerchandisingorganizationfocusesonproductinnovation,assortmentoptimization,andvaluedelivery,leveragingtechnologyandsuppliercollaboration[16]CustomerSegmentsandServices−Thecompanyservestwoprimarycustomergroups:DIY(Do−It−Yourself)andprofessionalcustomers,withinitiativestodrivegrowthinbothsegments[11][12][13]−Thecompanyoffersinstallationservicesincategoriessuchasflooring,waterheaters,andcabinets,servingbothDIYandDIFM(Do−It−For−Me)customers[14]MROOperationsandSupplyChain−Thecompany′sMROoperations,throughHDSupply,servemultifamily,hospitality,healthcare,andgovernmenthousingfacilities,primarilythroughadistributioncenter−basedmodel[13]−Thecompanyhasinvestedinsupplychainautomationandmechanization,with5016 billion to shareholders in fiscal 2023 through cash dividends and share repurchases[10] Product Assortment and Merchandising - A typical store stocks approximately 30,000 to 40,000 items annually, with online offerings significantly expanding the product assortment[15] - The company's merchandising organization focuses on product innovation, assortment optimization, and value delivery, leveraging technology and supplier collaboration[16] Customer Segments and Services - The company serves two primary customer groups: DIY (Do-It-Yourself) and professional customers, with initiatives to drive growth in both segments[11][12][13] - The company offers installation services in categories such as flooring, water heaters, and cabinets, serving both DIY and DIFM (Do-It-For-Me) customers[14] MRO Operations and Supply Chain - The company's MRO operations, through HD Supply, serve multifamily, hospitality, healthcare, and government housing facilities, primarily through a distribution center-based model[13] - The company has invested in supply chain automation and mechanization, with 50% of U.S. online orders fulfilled through stores in fiscal 2023[26] Global Sourcing and Intellectual Property - The company maintains a global sourcing program with offices in Mexico, Canada, China, India, Vietnam, and Europe, ensuring high-quality and innovative products[17] - The company has a robust intellectual property portfolio, including trademarks for proprietary brands like HDX, Husky, and Hampton Bay, and patents with varying terms up to 20 years[18] Competition and Digital Experience - The company faces intense competition from various retailers, including traditional brick-and-mortar, multichannel, and online-only competitors, with a focus on customer experience, price, and product availability[19] - The company is enhancing its digital experience, with a significant majority of digital traffic coming from mobile devices, leading to higher traffic and better conversion rates[22] Technology and Innovation - The company has rolled out Computer Vision in U.S. stores to improve on-shelf product availability and task prioritization, enhancing associate productivity[24] - The company is investing in tools and technology to enhance the customer experience, including expanding rental locations and improving order management systems[13][16] Corporate Responsibility and Sustainability - The company focuses on corporate responsibility through three pillars: Focus on Our People, Operate Sustainably, and Strengthen Our Communities, with detailed efforts outlined in its annual ESG Report[27] - The company plans to reduce combined absolute Scope 1 and 2 emissions and Scope 3 Category 11 emissions by 42% by the end of fiscal 2030 from a fiscal 2020 base year[32] - The company aims to produce or procure renewable electricity equivalent to the electricity needs for all Home Depot facilities by the end of fiscal 2030[33] - By the end of fiscal 2028, 85% of U.S. and Canada in-store and online sales of push mowers and handheld outdoor power equipment will be powered by rechargeable battery technology[33] - The company has a goal to eliminate added PFAS chemicals in new private-brand patio and home décor products sold in U.S. and Canada stores by the end of fiscal 2025[33] - All private brand fiber packaging for new SKUs in U.S. and Canada stores and online will be compostable, recyclable, or made from recycled content by the beginning of fiscal 2027[33] - The company received a CDP Climate Change score of "A-" in February 2024, reflecting leadership and improved action on climate change[33] Workforce and Culture - The company emphasizes a culture of servant leadership, with core values guiding human capital management and associate development programs[28] - The company invests in competitive wages, benefits, and training to attract and retain skilled associates, ensuring a superior customer experience[29] - The company employed approximately 463,100 associates at the end of fiscal 2023, with 88.8% (411,200) based in the United States, 7.3% (33,800) in Canada, and 3.8% (17,800) in Mexico[30] - The U.S. workforce demographic data shows 49% minority and 49% white associates, with 37% female and 62% male representation[31] Financial Performance - Net sales for fiscal 2023 were 152.669 billion, a decrease from 157.403billioninfiscal2022[121]−Grossprofitforfiscal2023was157.403 billion in fiscal 2022[121] - Gross profit for fiscal 2023 was 50.960 billion, down from 52.778billioninfiscal2022[121]−Netearningsforfiscal2023were52.778 billion in fiscal 2022[121] - Net earnings for fiscal 2023 were 15.143 billion, compared to 17.105billioninfiscal2022[121]−Cashandcashequivalentsincreasedto17.105 billion in fiscal 2022[121] - Cash and cash equivalents increased to 3.760 billion in fiscal 2023 from 2.757billioninfiscal2022[120]−Merchandiseinventoriesdecreasedto2.757 billion in fiscal 2022[120] - Merchandise inventories decreased to 20.976 billion in fiscal 2023 from 24.886billioninfiscal2022[120]−Totalassetsremainedrelativelystableat24.886 billion in fiscal 2022[120] - Total assets remained relatively stable at 76.530 billion in fiscal 2023 compared to 76.445billioninfiscal2022[120]−Long−termdebtincreasedto76.445 billion in fiscal 2022[120] - Long-term debt increased to 42.743 billion in fiscal 2023 from 41.962billioninfiscal2022[120]−Retainedearningsgrewto41.962 billion in fiscal 2022[120] - Retained earnings grew to 83.656 billion in fiscal 2023 from 76.896billioninfiscal2022[120]−Dilutedearningspersharedecreasedto76.896 billion in fiscal 2022[120] - Diluted earnings per share decreased to 15.11 in fiscal 2023 from 16.69infiscal2022[121]−Thecompany′sinternalcontroloverfinancialreportingwaseffectiveasofJanuary28,2024[114]−Netearningsforfiscal2023were16.69 in fiscal 2022[121] - The company's internal control over financial reporting was effective as of January 28, 2024[114] - Net earnings for fiscal 2023 were 15.143 billion, a decrease from 17.105billioninfiscal2022[122]−Comprehensiveincomeforfiscal2023was17.105 billion in fiscal 2022[122] - Comprehensive income for fiscal 2023 was 15.384 billion, compared to 17.091billioninfiscal2022[122]−Totalstockholders′equityforfiscal2023was17.091 billion in fiscal 2022[122] - Total stockholders' equity for fiscal 2023 was 1.044 billion, down from 1.562billioninfiscal2022[124]−Netcashprovidedbyoperatingactivitiesinfiscal2023was1.562 billion in fiscal 2022[124] - Net cash provided by operating activities in fiscal 2023 was 21.172 billion, up from 14.615billioninfiscal2022[125]−Capitalexpendituresinfiscal2023were14.615 billion in fiscal 2022[125] - Capital expenditures in fiscal 2023 were 3.226 billion, slightly higher than 3.119billioninfiscal2022[125]−Repurchasesofcommonstockinfiscal2023amountedto3.119 billion in fiscal 2022[125] - Repurchases of common stock in fiscal 2023 amounted to 7.951 billion, compared to 6.696billioninfiscal2022[125]−Cashdividendspaidinfiscal2023were6.696 billion in fiscal 2022[125] - Cash dividends paid in fiscal 2023 were 8.383 billion, up from 7.789billioninfiscal2022[125]−Receivables,netforfiscal2023were7.789 billion in fiscal 2022[125] - Receivables, net for fiscal 2023 were 3.328 billion, slightly higher than 3.317billioninfiscal2022[132]−Merchandiseinventoriesvaluedusingtheretailmethodrepresentapproximately623.317 billion in fiscal 2022[132] - Merchandise inventories valued using the retail method represent approximately 62% of total merchandise inventories[133] - The company's outstanding payment obligations under its supplier finance program were 514 million at January 28, 2024, and 480millionatJanuary29,2023[144]−Thecompany′sself−insuranceliabilitieswere480 million at January 29, 2023[144] - The company's self-insurance liabilities were 1.4 billion at January 28, 2024, and 1.3billionatJanuary29,2023[147]−Deferredrevenueforproductsandserviceswas1.3 billion at January 29, 2023[147] - Deferred revenue for products and services was 1.7 billion as of January 28, 2024, and 2.0billionasofJanuary29,2023[150]−Thecompany′sperformanceobligationsforunredeemedgiftcardswere2.0 billion as of January 29, 2023[150] - The company's performance obligations for unredeemed gift cards were 1.1 billion as of both January 28, 2024, and January 29, 2023[150] - The company's estimated useful lives for buildings and improvements range from 5 to 45 years, furniture, fixtures, and equipment from 2 to 20 years, and leasehold improvements from 5 to 45 years[136] - The company's leases typically have remaining terms of one to 20 years, with options to extend for five-year terms[137] - The company's payment terms with a majority of its suppliers generally range from 30 to 60 days[144] - The company's software development costs are amortized over an estimated useful life ranging from three to seven years[136] - The company's goodwill impairment assessment in fiscal 2023 indicated that the fair value of each reporting unit substantially exceeded its respective carrying value[141] - The company's intangible assets with indefinite lives were tested for impairment in fiscal 2023, with no impairment losses recognized[142] - Net advertising expense included in SG&A was 1.1billionforfiscal2023,1.1 billion for fiscal 2023, 1.1 billion for fiscal 2022, and 1.0billionforfiscal2021[154]−Cumulativeforeigncurrencytranslationadjustmentsrecordedinaccumulatedothercomprehensivelosswere1.0 billion for fiscal 2021[154] - Cumulative foreign currency translation adjustments recorded in accumulated other comprehensive loss were 365 million as of January 28, 2024, and 597millionasofJanuary29,2023[159]−NetpropertyandequipmentintheU.S.was597 million as of January 29, 2023[159] - Net property and equipment in the U.S. was 23,347 million as of January 28, 2024, compared to 23,057millionasofJanuary29,2023[164]−NetsalesintheU.S.were23,057 million as of January 29, 2023[164] - Net sales in the U.S. were 140,083 million for fiscal 2023, 144,840millionforfiscal2022,and144,840 million for fiscal 2022, and 138,920 million for fiscal 2021[165] - Net sales outside the U.S. were 12,586millionforfiscal2023,12,586 million for fiscal 2023, 12,563 million for fiscal 2022, and 12,237millionforfiscal2021[165]−Netsalesfromproductswere12,237 million for fiscal 2021[165] - Net sales from products were 146,835 million for fiscal 2023, 151,804millionforfiscal2022,and151,804 million for fiscal 2022, and 145,745 million for fiscal 2021[165] - Net sales from services were 5,834millionforfiscal2023,5,834 million for fiscal 2023, 5,599 million for fiscal 2022, and 5,412millionforfiscal2021[165]−NetsalesfromBuildingMaterialswere5,412 million for fiscal 2021[165] - Net sales from Building Materials were 57,039 million for fiscal 2023, 59,533millionforfiscal2022,and59,533 million for fiscal 2022, and 54,990 million for fiscal 2021[168] - Net sales from Décor were 50,295millionforfiscal2023,50,295 million for fiscal 2023, 52,322 million for fiscal 2022, and 50,437millionforfiscal2021[168]−NetsalesfromHardlineswere50,437 million for fiscal 2021[168] - Net sales from Hardlines were 45,335 million for fiscal 2023, 45,548millionforfiscal2022,and45,548 million for fiscal 2022, and 45,730 million for fiscal 2021[168] - Net sales for Fiscal 2023 totaled 152.669billion,withAppliancescontributing152.669 billion, with Appliances contributing 13.863 billion (9.1% of total sales), Building Materials 11.975billion(7.811.975 billion (7.8%), and Indoor Garden 14.743 billion (9.7%)[169] - Total net property and equipment increased to 26.154billioninJanuary2024,upfrom26.154 billion in January 2024, up from 25.631 billion in January 2023, driven by growth in land (9.027billion)andbuildings/improvements(9.027 billion) and buildings/improvements (20.030 billion)[171] - Depreciation and finance lease amortization expense rose to 3.020billioninFiscal2023,comparedto3.020 billion in Fiscal 2023, compared to 2.756 billion in Fiscal 2022 and 2.650billioninFiscal2021[173]−Totalleaseassetsincreasedto2.650 billion in Fiscal 2021[173] - Total lease assets increased to 10.724 billion in January 2024, with operating lease assets at 7.884billionandfinanceleaseassetsat7.884 billion and finance lease assets at 2.840 billion[175] - Operating lease cost for Fiscal 2023 was 1.359billion,whilefinanceleasecostincluded1.359 billion, while finance lease cost included 304 million in amortization and 126millionininterestexpense[176]−Weightedaverageremainingleasetermsforoperatingandfinanceleaseswere10yearsand13years,respectively,asofJanuary2024[177]−Futureminimumleasepaymentstotal126 million in interest expense[176] - Weighted average remaining lease terms for operating and finance leases were 10 years and 13 years, respectively, as of January 2024[177] - Future minimum lease payments total 10.071 billion for operating leases and 4.045billionforfinanceleases,withpresentvaluesof4.045 billion for finance leases, with present values of 8.132 billion and 3.268billion,respectively[179]−Goodwillincreasedto3.268 billion, respectively[179] - Goodwill increased to 8.455 billion at the end of Fiscal 2023, up from 7.444billionatthebeginningoftheyear,primarilyduetoacquisitions[182]−Totalintangibleassetsgrewto7.444 billion at the beginning of the year, primarily due to acquisitions[182] - Total intangible assets grew to 3.606 billion in January 2024, with customer relationships accounting for 2.755billionandtradenamesfor2.755 billion and trade names for 202 million[185] - Estimated future amortization expense for definite-lived intangible assets is 2.957billion,with2.957 billion, with 207 million expected annually for Fiscal 2024-2026[187] - The company has a commercial paper program allowing borrowings up to 5.0billion,withnooutstandingborrowingsasofJanuary28,2024andJanuary29,2023[188]−Maximumamountoutstandingunderthecommercialpaperprogramduringfiscal2023was5.0 billion, with no outstanding borrowings as of January 28, 2024 and January 29, 2023[188] - Maximum amount outstanding under the commercial paper program during fiscal 2023 was 1.453 billion, down from 2.745billioninfiscal2022[189]−Averagedailyshort−termborrowingsinfiscal2023were2.745 billion in fiscal 2022[189] - Average daily short-term borrowings in fiscal 2023 were 72 million, significantly lower than 269millioninfiscal2022[189]−Totallong−termdebtasofJanuary28,2024was269 million in fiscal 2022[189] - Total long-term debt as of January 28, 2024 was 44.111 billion, including 42.150billioninseniornotesand42.150 billion in senior notes and 3.268 billion in finance lease obligations[190] - In November 2023, the company issued three tranches of senior notes totaling 2.0billionwithinterestratesrangingfrom4.902.0 billion with interest rates ranging from 4.90% to 5.125%[191] - Long-term debt maturities for fiscal 2024 include 1.1 billion in principal repayments, with 2.75billiondueinfiscal2025and2.75 billion due in fiscal 2025 and 30.25 billion thereafter[192] - The company has 5.4billionininterestrateswapagreementstohedgeagainstinterestratefluctuationsonseniornotes,withfairvaluesof5.4 billion in interest rate swap agreements to hedge against interest rate fluctuations on senior notes, with fair values of 858 million as of January 28, 2024[193] - The company amended all interest rate swap agreements to replace LIBOR with SOFR in Q2 fiscal 2023, with no material impact on financial statements[194] - Cash collateral posted by the company related to derivative instruments was 714millionasofJanuary28,2024,upfrom714 million as of January 28, 2024, up from 634 million in the previous year[194] - Total earnings before income taxes were 19.924billioninfiscal2023,downfrom19.924 billion in fiscal 2023, down from 22.477 billion in fiscal 2022[196] - Provision for income taxes was 4.781billioninfiscal2023,comparedto4.781 billion in fiscal 2023, compared to 5.372 billion in fiscal 2022[197] - Combined federal, state, and foreign effective tax rate was 24.0% in fiscal 2023, slightly up from 23.9% in fiscal 2022[199] - Deferred tax assets increased to 3.658billionasofJanuary28,2024,from3.658 billion as of January 28, 2024, from 3.207 billion in the previous year[203] - The company has 4.8billionofnon−cashunremittedearningsfromnon−U.S.subsidiariesthatareindefinitelyreinvested[206]−Unrecognizedtaxbenefitsincreasedto4.8 billion of non-cash unremitted earnings from non-U.S. subsidiaries that are indefinitely reinvested[206] - Unrecognized tax benefits increased to 689 million at the end of fiscal 2023, up from 643millioninthepreviousyear[209]−TotalaccruedinterestandpenaltiesassociatedwithuncertaintaxpositionswereimmaterialasofJanuary28,2024andJanuary29,2023[210]−Commonstocksharesoutstandingattheendoffiscal2023were992million,downfrom1,016millioninfiscal2022[212]−Cashdividendspershareincreasedto643 million in the previous year[209] - Total accrued interest and penalties associated with uncertain tax positions were immaterial as of January 28, 2024 and January 29, 2023[210] - Common stock shares outstanding at the end of fiscal 2023 were 992 million, down from 1,016 million in fiscal 2022[212] - Cash dividends per share increased to 8.36 in fiscal 2023 from 7.60infiscal2022[212]−Thecompanyrepurchased26millionsharesinfiscal2023atatotalcostof7.60 in fiscal 2022[212] - The company repurchased 26 million shares in fiscal 2023 at a total cost of 8.074 billion[214] - As of January 28, 2024, 12.3billionremainedavailableunderthe12.3 billion remained available under the 15.0 billion share repurchase authorization[213] - The fair value of derivative agreements liabilities was 859millionasofJanuary28,2024,upfrom859 million as of January 28, 2024, up from 778 million as of January 29, 2023[218] - The fair value of senior notes was 38.495billionasofJanuary28,2024,comparedtoacarryingvalueof38.495 billion as of January 28, 2024, compared to a carrying value of 40.843 billion[220] - Pre-tax stock-based compensation expense was 382millioninfiscal2023,upfrom382 million in fiscal 2023, up from 367 million in fiscal 2022[222] - The company had 454millionofunrecognizedstock−basedcompensationexpenseasofJanuary28,2024,expectedtoberecognizedovertwoyears[222]−Thetotalintrinsicvalueofstockoptionsexercisedinfiscal2023was454 million of unrecognized stock-based compensation expense as of January 28, 2024, expected to be recognized over two years[222] - The total intrinsic value of stock options exercised in fiscal 2023 was 152 million[227] - Total fair value of restricted stock, performance shares, and restricted stock units vested in fiscal 2023 was 412million,comparedto412 million, compared to 479 million in 2022 and 405millionin2021[230]−Deferredsharesgrantedtonon−employeedirectorsinfiscal2023were19,000,thesameasin2022buthigherthanthe15,000grantedin2021[231]−Approximately1millionshareswerepurchasedundertheEmployeeStockPurchasePlans(ESPPs)infiscal2023atanaveragepriceof405 million in 2021[230] - Deferred shares granted to non-employee directors in fiscal 2023 were 19,000, the same as in 2022 but higher than the 15,000 granted in 2021[231] - Approximately 1 million shares were purchased under the Employee Stock Purchase Plans (ESPPs) in fiscal 2023 at an average price of 277.19[232] - Contributions to the Benefit Plans and the Restoration Plans in fiscal 2023 were 293million,upfrom293 million, up from 280 million in 2022 and 278millionin2021[233]−Basicweightedaveragecommonsharesinfiscal2023were999million,downfrom1,022millionin2022and1,054millionin2021[235]−Dilutedweightedaveragecommonsharesinfiscal2023were1,002million,downfrom1,025millionin2022and1,058millionin2021[235]−OutstandinglettersofcreditatJanuary28,2024totaled278 million in 2021[233] - Basic weighted average common shares in fiscal 2023 were 999 million, down from 1,022 million in 2022 and 1,054 million in 2021[235] - Diluted weighted average common shares in fiscal 2023 were 1,002 million, down from 1,025 million in 2022 and 1,058 million in 2021[235] - Outstanding letters of credit at January 28, 2024 totaled 598 million, primarily related to business transactions such as insurance programs and trade contracts[237] - The company completed three acquisitions in fiscal 2023 for a total aggregate cash purchase consideration of 1.5billion,recognizing1.5 billion, recognizing 469 million in definite-lived intangible assets and $998 million in goodwill[238] - The weighted average amortization period for the acquired intangible assets is 17 years, primarily related to customer relationships[238] - Net sales and net earnings attributable to the fiscal 2023 acquisitions were immaterial