The paragraph is an introduction to the Home Depot Fourth Quarter 2024 Earnings Conference Call. It indicates that all participants are currently in listen-only mode, with a question and answer session to follow the formal presentation. The call is hosted by Isabel Janci and includes key Home Depot executives, such as Ted Decker, Anne Marie Campbell, Billy Bastek, and Richard McPhail. The introduction notes that the presentations will include forward-looking statements subject to risks and uncertainties, and it will reference non-GAAP financial measures. Participants are reminded to limit themselves to one question and a follow-up, and if questions are not addressed, to contact Investor Relations.

In the second paragraph of the article, Ted Decker provides an overview of the company's financial performance for fiscal 2024, with sales reaching $159.5 billion, marking a 4.5% increase from the previous year, despite a 1.8% decline in comparable sales (comps) in U.S. stores. Adjusted diluted earnings per share slightly decreased from $15.25 to $15.24 year-over-year. However, in the fourth quarter, comp sales rose by 0.8%, with U.S. stores seeing a 1.3% increase, and earnings per share improved to $3.13 from $2.86. The fourth quarter exceeded expectations with positive comps across 15 of 19 U.S. regions and in Canada and Mexico. The company continued its strategic investments despite macroeconomic challenges, focusing on improving the interconnected shopping experience, expanding delivery options, and growing its "pro" customer base. Enhanced delivery speeds and increased customer spending were also highlighted, with Billy set to provide more details.

The company has been investing in enhancing store experiences, fulfillment options, and sales teams, resulting in incremental sales growth. They recently acquired SRS, which has contributed significantly to sales and opened new locations, as well as integrated successfully into QuoteCenter, increasing sales exponentially. The company plans to support SRS's continued growth. The company's real estate expansion is also progressing well, with new stores opening in high-growth areas. In fiscal 2024, they opened 12 new stores and plan to open 13 more in fiscal 2025. The company expects moderate sales growth and a slight decline in earnings per share for fiscal 2025, but remains optimistic about growth opportunities.

The paragraph highlights the company's commitment to ongoing investments that ensure continued success by enhancing customer service and shopping experiences. Appreciation is expressed for the hard work of associates, particularly during disasters like hurricanes and fires. A focus is placed on growing the market share with professional customers (pros) through investments in stores and the pro ecosystem. Initiatives to improve the shopping experience include simplifying in-store processes, increasing inventory, enhancing labor models, and developing tools for better customer service.

The paragraph discusses the company's investments in its FTC network and in-store improvements, which have enhanced the shopping experience, increased product availability, and freed up employee resources. These efforts have led to faster delivery, expanded fulfillment options, and a more tailored service for professional customers. The enhancements, which include CRM tools, digital capabilities, and loyalty programs, have resulted in significant sales growth, exceeding $1 billion annually across various markets. The company is committed to further improvements in delivery and technology to better serve professional customers and has experienced increased employee engagement and retention.

The company's safety performance was exceptional, and they made significant progress on shrinkage through specific initiatives, positioning them well for future growth. Billy Bastek thanked associates and supplier partners for their commitment, highlighting the company's better-than-expected fourth-quarter performance, driven by home improvement projects and hurricane recovery efforts. However, higher interest rates are affecting larger remodeling projects. In merchandising, ten out of sixteen departments posted positive comps, with an increase in both comp transactions and average ticket size partly due to inflation in lumber and copper wire. Customers are trading up for innovative products, and big-ticket transactions rose by 0.9% compared to the previous year. Positive sales were seen in both professional and DIY segments, despite softer engagement in larger projects that typically require financing.

In the fourth quarter, the company experienced strong growth in professional customer categories such as gypsum, decking, concrete, and fencing. Online sales also performed well, driven by improvements in shopping, browsing, delivery, and leveraging AI for enhanced customer experiences. The company focused on improving delivery by expanding its assortment, partnering with third-party providers, and enhancing technology across stores, achieving the fastest delivery times and more fulfillment options, including same-day and next-day delivery. Superior customer experiences and faster delivery have led to increased customer satisfaction, engagement, conversion, and sales. The company also reported record sales during events like the appliance gift center, decorative holiday, and Black Friday.

The paragraph outlines Home Depot's optimistic outlook for the upcoming spring selling season, highlighting their focus on innovative products, particularly the industry's shift from gas-powered to battery-powered tools, featuring brands like Ryobi, Milwaukee, DeWalt, and Makita. They emphasize their efforts to offer an extensive array of battery-powered products with improved run times and performance. Additionally, Home Depot is enhancing its live goods program by partnering with regional and local growers for better garden assortments, aiming to improve customer satisfaction and loyalty. The paragraph also mentions that Home Depot's fourth-quarter sales reached $39.7 billion, a 14% increase from the previous year, partly due to a fifty-third week in fiscal 2024. Overall company comps were slightly positive for the quarter, with varying performance across the months.

In the fourth quarter, the company's US comparable sales (comps) increased by 1.3%, with fluctuations due to holiday shifts and a $220 million boost from hurricane-related sales. Foreign exchange rates had a negative impact on overall company comps. Annual sales reached $159.5 billion, a 4.5% increase from the previous year, although total and US comp sales both decreased by 1.8%. The fourth quarter gross margin decreased slightly due to a change in mix from the SRS acquisition, though it met expectations. Operating expenses as a percentage of sales rose by thirty basis points during the quarter and seventy-five basis points for the year. The operating margin decreased to 11.3% in the fourth quarter and to 13.5% for the year, compared to the previous year. Adjusted operating margin for the quarter also saw a slight decline.

In fiscal 2024, the adjusted operating margin was 13.8%, slightly down from 14.3% in 2023. Interest and other expenses rose by $150 million in the fourth quarter due to higher debt levels. The effective tax rate was 22.9% in the fourth quarter and 23.7% for the year. Diluted earnings per share (EPS) for the fourth quarter increased by 7% to $3.02, while fiscal year EPS decreased by 1.3% to $14.91. Adjusted diluted EPS for the fourth quarter rose by 9.4% to $3.13. The company opened 12 new stores, ending the year with 2,347 locations and retail sales of about $600 per square foot. Merchandise inventory increased by $2.5 billion, with inventory turns rising from 4.3 to 4.7 times. Capital expenditures for the year totaled $3.5 billion and dividends paid amounted to $8.9 billion. The company announced a 2.2% increase in the quarterly dividend, raising it to $2.30 per share, equivalent to an annual dividend of $9.20 per share.

In fiscal 2024, the company returned about $600 million to shareholders through share repurchases, with a return on invested capital of 31.3%, down from 36.7% in the previous quarter. Looking ahead to fiscal 2025, they are optimistic about the investments made in 2024 but remain cautious due to ongoing uncertainties in the home improvement market. They expect sales growth of about 2.8% and comp sales growth of 1% compared to fiscal 2024, aided by the SRS acquisition and new store openings. The gross margin is projected to remain stable at 33.4%, while operating margins are anticipated to be around 13% and adjusted operating margin at 13.4%, influenced by sales dynamics and business investments, including the SRS acquisition.

The paragraph provides an overview of financial expectations and strategic plans for a company. It outlines a targeted effective tax rate of approximately 24.5% and anticipates a net interest expense of around $2.2 billion. The company expects diluted earnings per share to reduce by about 3% compared to fiscal 2024 due to the difference in the number of weeks in each fiscal year, with adjusted diluted earnings per share expected to decline by approximately 2%. On a fifty-two-week basis, earnings are expected to be flat compared to fiscal 2024. The company plans capital expenditures of about 2.5% of sales for fiscal 2025 to strengthen its market position and improve customer experience, asserting that it can grow market share in any environment. An investor conference is announced for December 9, 2025, in New York City. During a Q&A session, Simeon Gutman of Morgan Stanley queries about the housing market and home improvement demand. Ted Decker responds, noting no change in assumptions regarding housing turnover rates.

The paragraph discusses the current state of the housing market, highlighting that while housing turnover remains at a low of about three percent, there is not expected to be a significant rebound or rise in new housing starts soon. Despite higher mortgage rates, the average customer, who has seen income growth and increased home equity, remains financially healthy. Many are choosing to stay in their current homes and undertake larger remodeling projects instead of moving, often using HELOCs or cash-out refinancing for financing. With significant home equity built up, it is expected that as homes age and people adapt to higher rates, they will increasingly invest in remodeling projects, although this shift might not accelerate significantly until after 2025.

The paragraph features a conversation primarily between Simeon Gutman and Richard McPhail regarding the business's financial metrics and expectations. The discussion involves the company's exit run rates, the effects of past hurricanes on Q4, and the inclusion of SRS in the company’s comparisons for the year. They address how a marginal increase in comparable store sales might influence the company's profit margins, with McPhail suggesting that each point of increase reflects a ten basis point improvement, with limited impact from shifts in product mix. Subsequently, Christopher Horvers from JPMorgan shifts the focus to specific product categories like appliances and paint, questioning whether their growth was volume-driven and how it compares to Home Depot’s market share, noting expectations for replacement cycle improvements in the future.

The paragraph features a discussion, primarily involving Ted Decker, about the recent performance of a business in the home improvement industry. Decker notes that sales have exceeded expectations, highlighting positive comparable sales and transactions for the first time in two years. This improvement is broad-based across various categories and regions, a trend not seen in over two years, possibly even three. He mentions that the shifts in consumer spending patterns due to COVID-19 have mostly settled, with a focus now on repairs, smaller updates, and decor improvements. Billy adds that ten out of sixteen departments showed positive performance, particularly in appliances and gift centers, where they achieved record sales.

The paragraph discusses the financial performance and challenges faced by a company, highlighting a balance of transactions and strong performance in certain product categories like gypsum and decking. Despite facing financial pressures, the company is pleased with its performance, particularly given the challenges posed by a recent hurricane. Christopher Horvers inquires about the effects of holiday shifts and weather on U.S. monthly sales, and Richard McPhail confirms that holiday shifts influenced December positively, while November and January saw detriments, with January also heavily impacted by poor weather. Ted Decker concludes the conversation with a hopeful note for spring.

In response to a question from Michael Lasser of UBS about Home Depot's 2025 market share outlook, Ted Decker explained that they anticipate a flat to slightly increasing overall market. Despite lower expectations in recent months, Home Depot aims for a one percent comparable growth, driven by their strategic investments and initiatives. The company focuses on enhancing capabilities through interconnected investments and their pro ecosystem, which are contributing to incremental sales and market share gains in both the professional and consumer sectors. Additionally, SRS, a part of their business, is expected to grow faster than the core and capture market share in its verticals.

The paragraph discusses the company's growth and strategies to increase market share in both the DIY and professional sectors despite a flat market, highlighting the positive impact of new stores and strong online sales driven by enhanced site experiences and fast delivery. The company's investments have improved conversion rates and increased cross-channel engagement, leading to more in-store purchases. Michael Lasser then asks about the potential impact of government efficiency measures and immigration policies on the U.S. consumer and whether these factors have been considered in the company's guidance, while noting that weather was identified as affecting January results.

The paragraph consists of a conversation during an earnings call involving Ted Decker, Michael Lasser, and Scott Ciccarelli. Ted Decker addresses concerns about housing inventory in the Mid Atlantic, mentioning that they haven't observed specific changes but discussing related factors like tax policy, tariffs, and a shortage of skilled tradespeople due to immigration issues. Decker expresses satisfaction if the corporate tax rate remains at 21% and confidence in their ability to manage tariff challenges. Scott Ciccarelli then shifts the focus to Anne-Marie Campbell, asking about the measurement of incremental sales in markets where complex pro capabilities are being developed, and inquiring about expected progress in 2025 with the introduction of new capabilities.

The paragraph discusses the company's impressive financial performance and strategic focus on expanding capabilities across key markets. They have achieved a billion dollars in annualized sales in seventeen markets, outperforming the top forty markets. Looking towards 2025, the company aims to mature existing capabilities and introduce new ones, such as delivery, sales force expansion, and enhancements in trade credit, order management, and account management. They also plan to leverage opportunities within the SRS portfolio and increase their FPC facilities. Ann-Marie Campbell responds to Scott Ciccarelli's question about the biggest challenge in rolling out these initiatives, which involves building their Salesforce and gaining recognition from complex professionals.

The paragraph features a discussion in an earnings call. The speaker talks about the complexity and importance of refining and perfecting their ecosystem involving sales, delivery, and account management, recognizing the difficulty of rolling out capabilities at different levels of maturity. The aim is to advance at a pace that ensures positive outcomes while achieving perfection in the market. The speaker highlights progress made in 2024 and expresses excitement for future developments in 2025 and beyond. Following this, a question from Karen Short of Melius Research is answered by Richard McPhail. She inquires about the relationship between sales growth and operating margin growth, specifically regarding the exclusion of noncash amortization expenses. Richard McPhail confirms that removing these expenses gives a clearer view of the underlying operating margin and states that their guidance will continue this practice.

In the conversation, Karen Short and Richard McPhail discuss the relationship between total sales growth and operating margin at Home Depot. McPhail explains that the adjusted operating margin aligns with the GAAP operating margin concerning leverage, so no changes are necessary. He also addresses capital expenditures (capex), noting that the typical expectation of two percent of sales has increased to reflect successful investments and a significant new store program. This program, named SOAR, involves building 80 stores over five years starting in 2023. They are ahead of expectations with 25 stores already built, and plan to complete the program by 2027, thus justifying the increased capex to 2.5 percent of sales. As the discussion concludes, the operator introduces the next speaker, Steven Seguin from Citi.

The paragraph discusses the financial performance and impact of SRS on Home Depot after seven months of ownership. The acquisition is meeting expectations, contributing positively to Home Depot’s top and bottom lines, and is anticipated to be cash accretive within the first year. There is a 40 basis point mix impact on Home Depot's full-year results due to SRS, which the company views positively. The paragraph also touches on the pricing environment, with prices having settled, and mentions the potential influence of tariffs on pricing, indicating that the market is rational at the moment.

The paragraph discusses the company's promotional activities, pricing adjustments, and tariff impacts, stating they are similar to pre-COVID levels. The company is actively managing its sourcing and vendor relationships to maintain value for customers. It addresses the operating margin guidance, noting a decrease from 13.8% to 13.4%, explaining this as a result of natural deleverage and the impact of owning SRS for a full year compared to seven months, which contributed to a 40 basis point decrease.

In the paragraph, the speaker addresses questions about their operating margin guidance and the relationship between sales growth and expenses. They explain that a comparison to a fifty-three-week year impacts margins slightly, and investments are being funded through productivity improvements. They expect a base case of 3-4% top-line growth and flat gross margins once the market normalizes, with operating expense leverage leading to mid to high single-digit earnings per share growth. This expectation was outlined in their 2023 investor conference and remains unchanged.

The paragraph discusses Home Depot's financial outlook, addressing concerns about the pressure on gross margins due to SRS (same-store sales) dilution in 2025. It highlights that improvements in supply chain productivity and shrink (loss prevention) within store operations are expected to mitigate this pressure. Additionally, Ted Decker responds to a question about the impact of Complex Pro initiatives on long-term ROI, stating that these initiatives are asset-light and involve leasing distribution centers and trucks, which should help drive incremental sales and profit growth without significantly impacting return on invested capital.

The paragraph discusses the company's strategy of using commissioned sales teams to grow their portfolios and mentions their limited current exposure to trade credit. Despite plans to scale trade credit, it will not significantly impact their overall balance sheet. Zihan Ma expresses gratitude, and Isabel Janci concludes the teleconference by thanking participants and announcing plans for a future earnings call in May.

This summary was generated with AI and may contain some inaccuracies.