Financial Data and Key Metrics Changes - The company reported diluted earnings of $0.44 per share for Q4 2024, including a net benefit of $6.8 million from a derivative litigation settlement [14] - For the full year 2024, diluted earnings were $1.90 per share, which also included the $0.05 benefit from the settlement [15] - Q4 2024 gross profit rose by 8.9%, with a gross margin rate of 43.5%, while the full-year gross margin rate increased to 43.3% from 42.1% [56] - Selling and store operating expenses increased by 10.1% in Q4 2024, while general and administrative expenses decreased by 5.4% [57][59] - Adjusted EBITDA for Q4 2024 increased by 11.1% to $119.8 million, while full-year adjusted EBITDA declined by 7.0% to $512.5 million [63][65] Business Line Data and Key Metrics Changes - Total sales for Q4 2024 increased by 5.7% year-over-year, while comparable store sales decreased by 0.8%, showing improvement from previous quarters [23][24] - The company opened 10 new warehouse format stores in Q4 2024, totaling 30 new stores for the fiscal year [19] - Spartan Surfaces experienced a 17.9% decline in Q4 sales, primarily due to weakness in the multifamily residential market [46] Market Data and Key Metrics Changes - The company noted that existing home sales rose for the third consecutive month in December 2024, despite elevated mortgage interest rates [24] - The west division showed encouraging comparable store sales trends, with modest growth year-over-year [28] Company Strategy and Development Direction - The company aims to open 25 new warehouse format stores in fiscal 2025, focusing on strategic growth despite industry pressures [20][21] - Investments in innovative merchandise and technology are prioritized to enhance customer experience and drive long-term growth [15][30] - The company is diversifying its supply chain to reduce reliance on China, with the U.S. now being the largest country of manufacture [34] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about long-term growth opportunities in hard-surface flooring due to supply and demand imbalances in housing [16] - The company is carefully planning for fiscal 2025 amid geopolitical uncertainties and mixed economic indicators, with total sales expected to range from $4.740 billion to $4.900 billion [68][70] - Management highlighted the importance of existing home sales for driving growth in same-store sales [100] Other Important Information - The company achieved a record high net promoter score in January 2025, reflecting strong customer service [53] - The company plans to continue investing in technology and e-commerce to enhance customer engagement [37] Q&A Session Summary Question: What is driving the slightly weaker performance quarter-to-date? - Management attributed the slowdown to weather impacts, noting that sales typically recover over time [80] Question: How should we think about the incrementality or flow-through to the model? - Management indicated that better-than-expected sales lead to strong flow-through, with expectations of high 30s flow-through if sales exceed projections [84][86] Question: What are the expectations for housing backdrop and its impact on sales? - Management expects a slow recovery in housing, with benefits from immature stores contributing to sales growth [99][100] Question: How will the company manage supply chain costs and pricing in 2025? - The company plans to negotiate with suppliers, diversify sourcing, and adjust prices as necessary to manage costs [128]

Financial Data and Key Metrics Changes - For Q4 2024, net sales were $1.1 billion, a 5% decrease compared to Q4 2023, with organic sales down 1% after adjusting for external impacts [11][46] - Full year 2024 net sales were flat at $4.6 billion, with organic sales down 5% or down 2% excluding China and one-time disruptions [12][46] - Q4 2024 EPS was $0.98, up 3% from Q4 2023, while full year EPS was $4.12, a 5% increase over 2023 [11][13] - Operating margins for Q4 were 16.4%, a 60 basis point improvement year-over-year, and full year operating margins increased by 90 basis points to 16.9% [12][46] Business Line Data and Key Metrics Changes - Water Innovation segment saw Q4 sales down 3%, but organic sales increased 2% when excluding China and hurricane impacts, with operating margins at 23.7% [29][47] - Outdoor segment sales decreased by 2% in Q4, but full year sales increased by 1%, with operating margins at 18.2% for Q4 [35][51] - Security segment sales were down 17% in Q4, or down 10% when adjusting for a software outage, with full year sales down 4% [37][53] Market Data and Key Metrics Changes - The overall market for products is expected to be down 2% to up 1% in 2025, with U.S. R&R (repair and remodel) projected to be down 1% to up 2% [59][60] - The single-family new construction market is anticipated to be flat in 2025, with low single-digit growth in starts and completions [26][59] Company Strategy and Development Direction - The company is focusing on high-growth and profitable opportunities, simplifying its leadership structure, and investing in digital transformation and brand building [5][9][10] - A new $1 billion share repurchase authorization was approved, reflecting confidence in cash generation and long-term shareholder value [14][54] - The company plans to leverage its digital capabilities and partnerships to drive growth, particularly in the connected products space [20][21] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to outperform in 2025, citing strong brand positioning and innovation [6][24] - The macro environment remains challenging, but there are medium to long-term tailwinds expected due to strong consumer demand for homes [25][56] - Management anticipates a cautious approach in the first half of 2025, with expectations for gradual improvement in the second half [72][76] Other Important Information - The company is moving its regional offices to a new headquarters in Deerfield, Illinois, to foster innovation and collaboration [8] - Significant investments were made in digital products, with digital sales reaching $214 million in 2024 and expected to contribute 150 basis points to growth in 2025 [16][21] Q&A Session Summary Question: Can you talk about the initiatives and actions taken over the last twelve months and their implications for 2025? - Management highlighted growth in the water segment and strong performance in the outdoor business, with digital assets and marketing strategies set to drive growth in 2025 [67][70] Question: How is the state of the consumer as we enter 2025? - The consumer remains cautious, but there is resilience in the high-end market, with efforts to differentiate brands against counterfeit products expected to drive sales [79][81] Question: Can you elaborate on the Connected Products growth and its contribution to overall sales? - Connected Products are expected to contribute 150 basis points to growth in 2025, with significant sales activation and conversion efforts underway [90]

Financial Data and Key Metrics Changes - Total sales for Q3 2024 were $40.2 billion, an increase of 6.6% from the same period last year [6][28] - Comparable sales declined by 1.3% year-over-year, with U.S. stores experiencing a negative comp of 1.2% [6][28] - Adjusted diluted earnings per share were $3.78, down from $3.85 in Q3 2023, reflecting a decrease of approximately 2% [6][31] - Gross margin was approximately 33.4%, a decrease of 40 basis points from the previous year [29] - Operating margin for Q3 was 13.5%, compared to 14.3% in Q3 2023 [30] Business Line Data and Key Metrics Changes - Positive comps were seen in power, outdoor garden, building materials, indoor garden, and paint departments, while lumber, plumbing, and hardware were above the company average [21] - Comp transactions decreased by 0.6%, and comp average ticket decreased by 0.8% [21] - Pro sales outpaced DIY customer sales, indicating stronger performance in the professional segment [22] Market Data and Key Metrics Changes - Mexico and Canada posted comps above the company average, with Mexico showing positive comps in the quarter [7] - The impact of hurricanes contributed approximately $200 million in sales, positively affecting total company comps by about 55 basis points for the quarter [29] Company Strategy and Development Direction - The company aims to enhance the interconnected experience and grow pro wallet share through differentiated capabilities and new store openings [9][10] - Investments are being made in supply chain capabilities, including direct fulfillment centers to improve delivery speeds [10] - The focus remains on supporting the growth of the SRS team and leveraging cross-sale opportunities [12] Management's Comments on Operating Environment and Future Outlook - Management acknowledged continued macroeconomic uncertainty and its impact on larger remodeling projects due to higher interest rates [9][68] - The company updated its fiscal 2024 guidance, expecting total sales growth of approximately 4% and adjusted diluted earnings per share to decline by about 1% [33][35] - Management remains optimistic about market share growth despite current challenges [35] Other Important Information - The company opened 5 new stores, bringing the total store count to 2,345 [31] - Merchandise inventories increased to $23.9 billion, up approximately $1.1 billion compared to Q3 2023 [32] - Return on invested capital was approximately 31.5%, down from 38.7% in Q3 2023 [32] Q&A Session Summary Question: Impact of hurricane-related sales - Management noted that hurricane-related sales contributed approximately 55 basis points to Q3 comps, with a focus on generators and cleanup products [41][42] Question: Needs-based vs discretionary projects - Management indicated that needs-based projects are being completed, while larger discretionary projects are being deferred due to economic conditions [44] Question: Progress with SRS and cross-selling - Management reported strong progress with SRS, contributing $2.9 billion in Q3, and highlighted the potential for cross-selling opportunities [51][49] Question: Gross margin pressures - Management explained that the primary impact on gross margin was from the mix due to SRS, with an expected annualized impact of about 70 basis points [54][56] Question: Market share performance - Management expressed confidence in gaining market share, particularly in seasonal categories and building materials [61][63] Question: Future housing market outlook - Management discussed the relationship between interest rates and housing turnover, emphasizing the need for stability in rates to encourage home improvement projects [96][97]