Home Depot(US:HD)2024-05-14 15:32Financial Data and Key Metrics Changes - Total sales for Q1 2024 were $36.4 billion, a decrease of 2.3% year-over-year. Comp sales declined by 2.8%, with U.S. stores experiencing negative comps of 3.2% [7][25] - Diluted earnings per share were $3.63, down from $3.82 in the same quarter last year, representing a 5% decrease [7][27] - Gross margin improved to 34.1%, an increase of approximately 45 basis points from the previous year, primarily due to lower transportation costs and shrink [25][26] - Operating margin decreased to 13.9% from 14.9% year-over-year [26][27] - Merchandise inventories were $22.4 billion, down approximately $3 billion or 12% compared to the previous year, with inventory turns increasing to 4.5x from 3.9x [27] Business Line Data and Key Metrics Changes - Comp transactions decreased by 1.5%, while the average ticket size decreased by 1.3%. Big ticket transactions (over $1,000) were down 6.5% compared to the previous year [19][20] - Online sales increased by 3.3% year-over-year, with nearly half of online orders fulfilled through stores [20][21] - Building materials and power departments posted positive comps, while outdoor garden, paint, lumber, plumbing, and hardware categories were above the company average [18] Market Data and Key Metrics Changes - U.S. comp sales were negative 3.2% for the quarter, with February at -4%, March at -0.8%, and April at -3.3% [25] - Mexico posted positive comps, while Canada was slightly below the company average [25] Company Strategy and Development Direction - The company is focused on enhancing its Pro ecosystem to capture a larger share of the $250 billion total addressable market (TAM) for residential Pro contractors [8][10] - The acquisition of SRS Distribution aims to strengthen capabilities in specialty trade verticals, enhancing service to complex project customers [10][62] - The company plans to expand its Pro ecosystem to 17 markets by the end of the fiscal year, with expectations to grow further in the future [9][64] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the impact of delayed spring weather and continued softness in larger discretionary projects but expressed optimism about store readiness and customer engagement as spring progresses [7][11] - The company reaffirmed its guidance for fiscal 2024, expecting total sales growth of approximately 1% and comp sales of approximately -1% [30][31] - Management emphasized the importance of execution in the core business and the positive trends in customer engagement despite current market pressures [66][70] Other Important Information - The company invested approximately $850 million in capital expenditures during the quarter and paid $2.2 billion in dividends [27][28] - The effective tax rate for the quarter was 22.6%, down from 24.2% in the previous year [26][27] Q&A Session Summary Question: Can you talk about the impact of weather on sales? - Management noted that inconsistent weather affected sales, with some markets performing well while others did not. Positive engagement was seen where weather was favorable [34][35] Question: How is the big ticket project business performing? - The big ticket project business continues to face pressure, particularly in financed projects like kitchen and bath remodels, while some categories like outdoor power equipment are seeing strong engagement [39][40] Question: What is the outlook for the second half of the year? - Management indicated that the primary factor for improvement in same-store sales in the second half would be the anticipated stabilization of average unit retail (AUR) pressures [82] Question: How is the promotional environment changing? - The promotional environment remains rational, with events designed to drive excitement rather than deep discounts. The market has normalized to pre-COVID levels [84]