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WMA-2024-Home-Depot

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The corporations on our annual list of the world’s largest companies delivered a record $41 trillion in aggregate revenues.

G500-2023-Home Depot

Rising inflation, tighter consumer budgets, and slower housing market activity didn’t stop the home improvement retail chain from raking in $157 billion in sales in the 2022 fiscal year, a 4% increase from the previous year. 
<ul> 
 	<li>In February 2023, the company announced that it would raise its starting wage to $15 an hour for its workers in the U.S. and Canada, following some of its retail competitors in taking similar steps.</li> 
 	<li>Edward “Ted” Decker, who had been named CEO of Home Depot in March 2022, became chairman on Oct. 1, 2022. Decker replaced Craig Menear in both posts.</li> 
</ul>

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F500 2023-Home Depot

Rising inflation, tighter consumer budgets, and slower housing market activity didn’t stop the home improvement retail chain from raking in $157 billion in sales in the 2022 fiscal year, a 4% increase from the previous year. 
<ul> 
 	<li>In February 2023, the company announced that it will raise its starting wage to $15 an hour for its workers in the U.S. and Canada, following some of its retail competitors in taking similar steps.</li> 
 	<li>Edward “Ted” Decker, who had been named CEO of Home Depot in March 2022, became chairman on Oct. 1, 2022. Decker replaced Craig Menear in both posts.</li> 
</ul>

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WMAC 2022-24-Home Depot

Aggregate sales hit $37.8 trillion last year—an increase of 19%, the highest annual growth rate in the list’s history.

G500 2022-43-Home Depot

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F500 2022 Home Depot

Despite dealing with supply-chain problems and shortages, Home Depot brought in over $150 billion in sales in the 2021 fiscal year, as the company proved a resource for new and old homeowners looking to redecorate and renovate. More recently, as lockdown DIY projects have trailed off and inflation has surged, Home Depot’s fortunes have wavered; its stock declined about 27% in the first four months of 2022. In a bid to enhance its e-commerce experience, the company has partnered with Walmart for delivery services and created a new executive role to oversee and streamline online orders.

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G500-2021-041-Home Depot

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F500-2021-18-Home Depot

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G500-2020-059-Home-Depot

The home improvement leader has continued to best its competitors—including Lowe’s. Credit both the ongoing effort to spruce up store brands and new technology tools that let store workers see a fuller picture of a shopper’s spending history as it offers opportunities for upselling. The company's e-commerce operation grew more than 20% last year. Home Depot has also gingerly expanded its assortment, dipping its toes into home furnishings and decor, to get more spending from each shopper visit. While the housing market could be heading for bumpy times in a recession, Home Depot appears to be gathering the tools it needs to keep outperforming rivals.

This year's Fortune 500 marks the 66th running of the list.

F500-2020-026-Home-Depot

The home improvement leader has continued to best its competitors—including Lowe’s. Credit both the ongoing effort to spruce up store brands and new technology tools that let store workers see a fuller picture of a shopper’s spending history and offering them insights for upselling. The company's e-commerce operation grew more than 20% last year. Home Depot has also gingerly expanded its assortment, dipping its toes into home furnishings and decor, to get more spending from each shopper visit. While the housing market could be heading for bumpy times in a recession, Home Depot appears to be gathering the tools it needs to keep outperforming rivals.

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Wal-Mart stayed on top as its sales crept closer to half-a-trillion dollars. Apple moved into the top five. And UnitedHealth Group continued its steady climb. 

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Home Depot is the world’s largest home improvement retailer, operating almost 2,500 superstores in all 50 U.S. states. Home Depot sells items including appliances, tools, and hardware in its stores and online. As of 2026, it employed 472,000 associates, who are known for wearing distinctive orange uniform aprons. To expand beyond stores and e-commerce, Home Depot has invested billions in professional builder and contractor businesses. In 2024, it acquired SRS Distribution, a large distributor of building products. The deal was valued at $18.25 billion and is the largest in the retailer’s history.

Q2 2027

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Q4 2026

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Q3 2025

Home Depot (HD): Company Profile, Stock Price, News, Rankings

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Home Depot

home depot

Greetings, and welcome to The Home Depot Third Quarter 20 24 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. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Isabelle Jansy.

Thank you, Christine, and good morning, everyone. Welcome to Home Depot's Q3 2024 earnings call. Joining us on our call today are Ted Decker, Chair, President and CEO 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, including, but not limited to adjusted operating margin and adjusted diluted earnings per share. For a reconciliation of these and other non GAAP measures to the corresponding GAAP measures, please refer to our earnings press release and our website. Now, let me turn the call over to Ted.

Thank you, Isabelle, and good morning, everyone. Sales for the Q3 were $40,200,000,000 an increase of 6.6% from the same period last year. Comp sales declined 1.3% from the same period last year and our U. S. Stores had negative comps of 1.2%.

Adjusted diluted earnings per share were $3.78 in the 3rd quarter compared to $3.85 in the Q3 last year. From a geographical perspective, storms and more favorable weather throughout the quarter drove a higher degree of variability in the performance across our divisions and 4 of our 19 U. S. Regions delivered positive comps. In local currency, Mexico and Canada posted comps above the company average with Mexico posting positive comps in the quarter.

In the Q3, our associates and communities were impacted by 2 hurricanes. As you'll hear from Anne, our associates and supplier partners worked tirelessly under difficult circumstances to serve our customers and communities. Our thoughts continue to be with those impacted by hurricanes Helene and Milton. Excluding the impacts from the hurricanes, our 3rd quarter performance exceeded our expectations. As weather normalized, we saw better engagement across seasonal goods in certain outdoor projects.

But as Billy will detail, we continue to see pressure on larger remodeling projects driven by the higher interest rate environment and continued macroeconomic uncertainty. Today, we updated our guidance primarily as a result of the better performance in the Q3 as well as expected hurricane related demand in the Q4. For fiscal 2024, we now expect our sales to grow approximately 4%, comps to decline approximately 2.5% and adjusted diluted earnings per share to decline approximately 1%. Richard will take you through the details in a moment. Despite the continued uncertainty in the macroeconomic environment, our focus remains on creating the best interconnected experience, growing pro wallet share through a differentiated set of capabilities and building new stores.

Today, I would like to highlight where we are improving the interconnected experience. Recall that over the last several years, we built a network of downstream supply chain facilities, including 19 direct fulfillment centers, allowing us to reach 90% of the U. S. Population with same or next day delivery. Recently, we expanded our assortment in these facilities to allow for faster delivery speeds across more products.

We made significant website enhancements to better communicate faster delivery options. Many customers were not aware of our robust delivery options. In the Q3, we launched a marketing campaign that builds awareness of our faster delivery speeds. While this is just launched, we are seeing the intended results, greater customer engagement, higher conversion and incremental sales. This is also the Q1 that reflects a full period of SRS in our financials.

SRS gives us the right to win with a specialty trade pro customer who need specialized capabilities to complete their project. The SRS team did an exceptional job in the quarter and is on track to deliver $6,400,000,000 in sales for the approximately 7 months we'll owe them in fiscal 2024. As you would expect, the immediate focus with SRS is supporting their growth, both organically and through acquisitions. However, we are also seeing incremental cross sale opportunities from our distinct product catalogs and competitive advantages. As you can tell, we remain excited about the growth opportunities in front of us.

We are committed to investing in our capabilities to continue growing share in any environment. Our merchants, store and met teams, supplier partners and supply chain teams did an outstanding job executing throughout the quarter and I'd like to thank them for their dedication and hard work. Before I turn the call over to Ann, I'd like to take a moment to reflect on the legacy of our Co Founder, Bernie Marcus. We owe an immeasurable debt of gratitude to Bernie. He was a master merchant and a retail visionary.

But even more importantly, he valued our associates, customers and communities above all. He's left us with an invaluable legacy and the backbone of our company, our values and culture. The entire Home Depot family is deeply saddened by his passing. He will be missed. With that, let me turn the call over to Ann.

Thanks, Ted, and good morning, everyone. First, I want to extend my deepest sympathy and support to all the residents and communities that have been impacted by hurricanes Helen and Milton. One of the hallmarks of The Home Depot has always been to support our communities through natural disasters and we're incredibly proud of the tireless efforts of our teams pre and post the storms to stage and deliver the needed products while ensuring the safety of our associates. In the aftermath of the storms, the efforts of both our field and store support center teams have been extraordinary and demonstrate the culture and exceptionalism of our amazing associates who are committed to providing the necessary support and resources to help rebuild and restore their communities. Our thoughts and prayers continue to be with all of our affected associates and communities as they navigate this challenging time.

Over the last year, I've provided some key insights on the progress we're making with our Pro ecosystem capabilities that serve Pro working on larger complex projects. We are pleased with the performance of this Pro ecosystem which is now in 17 U. S. Markets. Today, I would like to take a moment to highlight some of the investments we are making in our stores to deliver the best experience for every pro buying occasion.

You've heard us talk about or focus on improving on shelf availability through multiple initiatives, but we are also enhancing leadership oversight, processes and systems to drive the overall in store Pro customer experience. We recently introduced a Pro customer experience manager to help drive a higher level of connectivity with our in store Pro and sales team in order to deliver a more seamless experience and exceptional service. This new leadership role with our existing teams enables us to focus more on the needs of the Casa Xcare Pro with a focus on building relationships with our most important Pros, ensuring we have job lot quantities available for sale on critical SKUs and allocated more labor hours to the Pro desk during peak shopping times. We also continue to improve my view with more robust insights to drive a deeper level of engagement and more actionable outcomes for Pro customers. These tools combined with the process improvements, leadership engagement and increased emphasis on service are driving more customer engagement and improving the in store shopping experience for our Pro customers.

I would also like to take a minute to share with you a bit more around the progress we have seen over the last few quarters as it relates to shrink. For us, our focus on mitigating shrink has been a continual and evolving process, leveraging our cross functional teams and investing in technology to test and learn the most effective methods of reduce and shrink. While the external environment continues to be challenging, we're incredibly pleased with the positive momentum we are seeing and improve results through our shrink mitigating initiatives. I could not be more excited about the progress we are making across the business to drive a best in class experience for customers. Our stores are ready and our associates stay engaged and I would like to thank them for all that they do.

Lastly, as one of the 100 of 1000 of Home Depot associates inspired by Bernie's passion for giving back to our associates and communities, I want to extend my deepest condolences to the entire Marcus family. With that, let me turn the call over to Billy.

Thank you, Ann, 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, our performance during the Q3 exceeded our expectations as we saw better engagement in some seasonal related categories as a result of more favorable weather throughout the quarter. In addition, we also saw incremental sales as a result of the hurricanes. However, the higher interest rate environment and greater macroeconomic uncertainty continues to pressure overall project demand.

Turning to our merchandising department comp performance for the Q3. Our power, outdoor garden, building materials, indoor garden and paint departments posted positive comps, while lumber, plumbing and hardware were all above the company average. During the Q3, our comp transactions decreased 0.6% and comp average ticket decreased 0.8%. However, we continue to see our customers trading up for new and innovative products. Big ticket comp transactions or those over $1,000 were down 6.8% compared to the Q3 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. During the Q3, pro sales were positive and outpaced the DIY customer. And those pros engaging with elements of our pro ecosystem, who also have a dedicated salesperson, were our strongest performing pros in the quarter. Turning to total company online sales, sales leveraging our digital platforms increased 4% compared to the Q3 of last year. And for those customers that chose to transact with us online during the Q3, nearly half of our online orders were fulfilled through our stores.

In addition, as you heard from Ted, we are focused on continuing to improve our interconnected retail experience, whether it is our faster delivery speeds, our more relevant and personalized search results or our enhanced product review summaries powered by AI, all of which are leading to greater purchasing confidence for our customers. During the Q3, we hosted our annual supplier partnership meeting, where we focused on how we will continue to work together to bring the best products to market, deliver innovative solutions that simplify the project and offer great value with best in class features and benefits. At the event, we recognized a number of vendors across categories who continue to transform the industry with the innovation they bring to our customers on a daily basis. This included StarLink, Milwaukee, Ryobi, Wago, Glacier Bay, Henry Roofing and many more. We are proud of the innovation and partnership that our suppliers bring to The Home Depot and the value that we are able to offer both our pro and DIY customers.

We also hosted our annual Labor Day and Halloween events and we're pleased with the results. During our Labor Day event, we were encouraged with the customers' engagement across a number of categories, including grills, which had positive comps for the quarter led by Traeger. And 2024 was another record sales year for our Halloween program both in store and online as our customers continue to add to their collection with our unique and exclusive product assortment. As we turn our attention to the Q4, we plan to maintain our momentum with our annual holiday, Black Friday and gift center events. In our gift center event, we continue to lean into brands that matter most for our customers with our assortment of Milwaukee, Ryobi, Makita, DEWALT, Rigid, Husky and more.

We'll have something for everyone whether it's our wide assortment of cordless Ryobi tools, Milwaukee M18 fuel tool kits and our new Husky bite tools. We are bringing more innovation in batteries with Ryobi Edge, DEWALT XR and the expansion of the Milwaukee Fords lineup with new 8 12 amp hour batteries, all designed to bring more power to our customers. And the innovative Husky Bites tool technology offers increased grip on new and rounded fasteners, better access, more torque and more leverage, making them a great addition to any toolbox at a great value and they are exclusive to the Home Depot. Our merchandising organization remains focused on being our customers' advocate for value. This means continuing to provide a broad assortment of best in class products that are in stock and available for our customers when they need it.

We will also continue to provide innovative product solutions that simplify the project, saving our customers time and money. That's why I'm so excited about the innovation we continue to bring to the market. And with that, I'd like to turn the call over to Richard.

Thank you, Billy, and good morning, everyone. In the Q3, total sales were $40,200,000,000 an increase of approximately 6.6% from last year. During the Q3, our total company comps were negative 1.3 percent with comps of negative 3.3% in August, negative 2.3% in September and positive 1% in October. Comps in the U. S.

Were negative 1.2 percent for the quarter with comps of negative 3.5% in August, negative 2.2% in September and positive 1.4% in October. The progression of our monthly comps reflects in large part hurricane related sales. Our results for the 3rd quarter include a net contribution of approximately $200,000,000 in hurricane related sales, which positively impacted total company comps by approximately 55 basis points for the quarter and approximately 120 basis points for October. In the Q3, our gross margin was approximately 33.4%, a decrease of approximately 40 basis points from the Q3 last year, primarily driven by mix as a result of the SRS acquisition, partially offset by benefits from lower shrink. During the Q3, operating expense as a percent of sales increased approximately 45 basis points to 19.9% compared to the Q3 of 2023.

Our operating expense performance was in line with our expectations. Our operating margin for the Q3 was 13.5% compared to 14.3% in the Q3 of 2023. In the quarter, pretax intangible asset amortization was $138,000,000 including $86,000,000 related to SRS. Excluding the intangible asset amortization in the quarter, our adjusted operating margin for the Q3 was 13.8% compared to 14.5% in the Q3 of 2023. Interest and other expense for the Q3 increased by $157,000,000 to $595,000,000 due primarily to higher debt balances than a year ago.

In the Q3, our effective tax rate was 24.4% compared to 23.3% in the Q3 of fiscal 2023. Our diluted earnings per share for the Q3 were $3.67 a decrease of approximately 4% compared to the Q3 of 2023. Excluding intangible asset amortization, our adjusted diluted earnings per share for the Q3 were $3.78 a decrease of approximately 2% compared to the Q3 of 2023. During the Q3, we opened 5 new stores bringing our total store count to 2,345. Retail selling square footage was approximately 243,000,000 square feet.

At the end of the quarter, merchandise inventories were $23,900,000,000 up approximately $1,100,000,000 compared to the Q3 of 2023 and inventory turns were 4.8 times, up from 4.3 times last year. Turning to capital allocation. During the Q3, we invested approximately $820,000,000 back into our business in the form of capital expenditures. And during the quarter, we paid approximately $2,200,000,000 in dividends to our shareholders. Compute on the average of beginning and ending long term debt and equity for the trailing 12 months, return on invested capital was approximately 31.5 percent, down from 38.7% in the Q3 of fiscal 2023.

Now I will comment on our updated outlook for fiscal 2024. As you heard from Ted, while macro uncertainty remains and continues to pressure home improvement demand, our performance in the 3rd quarter was better than expected. Our performance reflects hurricane related sales in the Q3 and we expect some hurricane related sales in the Q4. Given the better than expected performance in the Q3 and incremental hurricane related sales, we have updated our fiscal 2024 guidance. We now expect total sales growth of approximately 4%, including SRS in the 53rd week.

The 53rd week is projected to add approximately $2,300,000,000 to total sales and SRS is expected to contribute approximately $6,400,000,000 in incremental sales. Comparable sales are expected to decline approximately 2.5 percent for the 52 week period. We expect to open approximately 12 new stores. Our gross margin is expected to be approximately 33.5 percent. We expect operating margin to be approximately 13.5% and adjusted operating margin to be approximately 13.8%.

Our effective tax rate is targeted at approximately 24%. We expect net interest expense of approximately $2,100,000,000 We expect our diluted earnings per share to decline approximately 2% compared to fiscal 2023 with the extra week contributing approximately $0.30 per share. And we expect our adjusted diluted earnings per share to decline approximately 1% compared to fiscal 2023 with the extra week contributing approximately $0.30 per share. We believe that we will grow market share in any environment. We are continuing to invest to strengthen our competitive position with our customers and leverage our scale and low cost position to drive growth faster than the market and deliver shareholder value.

Thank you for your participation in today's call. And Christine, we are now ready for questions.

Thank you. We will now be conducting a question and answer session. Thank you. Our first question comes from the line of Scot Ciccarelli with Truist. Please proceed with your question.

breaking up. Can you repeat your question, please?

Sales were better than we would have expected. I know you guys outlined her specific but do you have a comment on the open prices here, because obviously it was quite favorable

Scott, sorry to cut you off. We can't really hear you. So we're going to go to the next question and we'll come back to you.

Our next question comes from the line of Zach Fadem with Wells Fargo. Please proceed with your question.

Hey, good morning. So starting with the hurricane impact, Richard, you called out about 55 basis points in Q3. Any color on category impacts and if those sales skewed more DIY versus pro? And then as you think about Q4, how would you characterize the implied down 2.5% comp guide between hurricane driven and the underlying business?

I'll let Bill again. Hey Zach, it's Billie and then I'll turn it over to Richard to answer the back half of that question. Just in terms of the hurricane piece, obviously, pretty similar to all events. Think about generators, think about cleanup. You think about obviously lumber as it relates to what we do to help our communities get ready for those events.

So pretty similar from a product assortment standpoint. And obviously, all that's consumer driven as customers ready themselves for that event. And I'll flip it to Richard to answer the back half of that.

Yes. So Zach, just talking about the guide of 2.5% for the year. Our guidance really principally reflects the outperformance that we saw in Q3 driven by hurricane related sales as well as reflecting the fact that we just saw exceptional weather across the entire country for most of the quarter. So the full year view is basically the flow through of that Q3 performance with some Q4 impact of hurricane related sales.

Got it. Appreciate the color. And just taking a step back, how much of your business would you categorize as needs based versus discretionary today? And is it still fair to say that the larger and bigger ticket projects are being deferred while needs based break fix type projects are getting done? And also any color on how those two buckets have been trending through the year?

Yes, Zach, that's always difficult to parse out needs based versus discretionary project. We would say your needs based projects are getting done. We've talked about there being strong engagement in home improvement and certainly with our pros, but the larger more discretionary projects are the ones that are being deferred and that balance has been consistent throughout this year.

Yes. Our next question comes from the line of Chuck Grom with Gordon Haskett. Please proceed with your question.

Hey, good morning. Thanks very much. Can you discuss SRS and the progress you've made in cross selling products and services across the two businesses? And then can you also touch on the volume contribution specifically in the Q3?

Sure. So we're very pleased with our progress with SRS. As I said in my prepared remarks, job 1 is to support them executing their play of growing their business, which they do with what we would call comp growth through their existing branches, opening up new branches and then doing tuck in M and A. They've continued to do that through the Q3. They opened a number of branches.

They grew the business and they even made a couple small tuck in acquisitions. So the strategic game plan for SRS is proceeding as expected. On the cross sell opportunity, the initial things we're working on is to make their catalog available to our customers largely through the ProDesk and through our outside sales resources and we're seeing terrific take up on that. The comp sales of SRS product through the Home Depot ecosystem while obviously a very small base is accelerating incredible sort of triple digit comp growth with those specific sales. And then we're also beginning to quote our product into their customer base.

Now remember they're specialty trade and they're focused on roofers, landscapers, folks putting down hardscapes and backyards and then working on repairing and maintaining pools and irrigation. However, those customers do engage in some broader home improvement activity and we've already begun to actively quote our broader catalog into their customer base. Very, very early days, but the sales teams are working together incredibly well, getting to know each other, going on some joint customer calls together. So early days on that, but again the strategic thesis is playing out exactly how we had hoped.

And Chuck you asked for specifics. They contributed $2,900,000,000 in the Q3. They're on track to deliver the expected $6,400,000,000 in sales contribution for the roughly 7 months that we'll end them.

Okay, great. Thanks very much. And then one for you, Richard, on gross margins down 40 basis points. It sounds like SRS was the lion's share. Is there any way to double click on that and just unpack?

I think it was about 35 basis points of pressure last quarter. And then just looking out, can we think about broader puts and takes for gross margins? I mean, relative to where you were pre COVID, which was north of 34%, how do we think about the gross margin trajectory over the next few years? Thanks.

Sure. Well, so specifically, look, when you look year over year, the major impact in gross margin versus last year was simply the mix impact from SRS. And so that was actually an 80 basis point impact for the quarter. So let's just let's talk about gross margin. It was in line with our expectations.

In fact, our guidance for gross margin for the full year has not changed. So again, in Q3, the impact was around 80 basis points from SRS. So you can do the math and see that the remainder of the business was up significantly and was in line with our expectations and that also reflected benefits from shrink that Anne had mentioned. And just to remind you, SRS will be for the year 2024, it will have about a 45 basis point impact on the year because remember we will have only owned them for about 7 months. But an annualized number for SRS impact to gross margin is about 70 basis points.

So if you just allow me a second to make sure everyone got that, that's 70 basis points of expected shift in our gross margin profile from adding them to our business. Our gross margin again was right where we expected it to be. Transportation expense or rather benefits from decreasing transportation expense were dynamic in the first half of the year, but that's largely sort of gone away as year over year comparisons flatten out. And so we were very pleased with our margin performance. And as I said, we have not changed our guidance for the full year gross margin.

Look as far as long term goes in June of 2023 at our investor conference we laid out a base case that in essence said, look, we anticipate flat gross margin as part of our operating model. There's a ton of productivity that our amazing supply chain team drives every single year that we reinvest in that gross margin. But that's reflective of our position as the sharpest value in the market for our customers and that's our intention. But again, the acquisition of SRS does present a shift in our margin base for the business.

Our next question comes from the line of Seth Sigman with Barclays. Please proceed with your question.

Hey, good morning, everyone. Nice progress in the quarter. My main question is around market share. Obviously, macro and housing matters a lot here, but you're also doing a lot to better serve your customer and all the different types of customers. I guess, in that context, it does seem like Home Depot's performance improved relative to the industry this quarter.

Can you speak to that and any specific categories you would call out where you do think you're gaining more share? Thanks.

I'll hit on the broader topic and pass over to Billy. We've always said it is tough to parse out market share. But if you look at PC expenditures in home, in furnishings, those were deeper negative as reported in government statistics than our results. So if you look at that broader macro, we would the highest level macro, we would say we took share and then we obviously look at reported results from competitors who are functioning in certain product categories that we operate in. And again in most of those, we see our businesses outperforming those of publicly traded companies results.

And Billy, if you want to hit on some categories.

Yes. As we said in our prepared remarks, certainly our seasonal performance, we saw increased great engagement across our seasonally related categories and that includes Halloween. Paint continues to be a great story for us. And while we did see some exterior business just related on the weather that we called out, we're certainly making great progress with the Pro That Paints, our partnerships with Behr, PPG, our in store service model enhancements, our job site delivery expansion has really helped us grow share in that segment and really pleased with the performance of the team there. And then you talk about Building Materials, continue to see really strong performance in our Building Materials.

That's multiple quarters on top of multiple quarters. So as Ted mentioned, pretty hard to kind of parse that out. We look at a lot of different data sets, but feel very confident that in any market we're going to continue to take share. But that's a few of the areas that we've seen great continued acceleration and as I mentioned in building materials specifically ongoing terrific improvement there.

Okay. That's helpful. I guess a follow-up question would be around big ticket more specifically. It does seem like it took a step down this quarter even in light of hurricane, certain categories you mentioned like generators. How do you categorize that?

I mean you mentioned interest rates. Do you think there was some election noise? I mean I guess ultimately we're trying to think about what needs to change in your view to really get those categories inflecting?

Well, if maybe I'll just step back on how we look at this overall

I mean clearly our sales related demand related demand. And don't forget on weather, it's not just that you're doing garden because the weather is nice. Think of limited days loss from a pro because they can be out of the job site through virtually every day in October. It was dry throughout the country. The issue we continue to watch are the macroeconomic uncertainties in the higher rate environment that continues to pressure larger remodeling projects.

So we look at the reversion of personal consumption from goods to services. That's largely worked its way out and we've largely navigated our way through the pull forward of demand that we saw during the pandemic. So again today this higher rate environment is pressuring the larger normally debt financed remodeling projects as well as existing home sales. So we all know that the Fed's cut interest rates 2 cycles here. But from the cut in September, mortgage rates have actually increased about 60 basis points.

So, 2 rate cuts combined 75 basis points, yet the 10 year and then therefore the mortgage rates are up about 60 basis points. That continues to impact housing turnover, which were just about 3% of homes turning over, which is a 40 year low at this point. And you might say that the worst is behind us, how much lower are we going to go? Usually we're at about 4.5%, 5% turnover. I think we actually touched on sort of 2.99%.

So one could argue we're near the low there. But then the larger projects often require financing, whether it's cash out financing or home equity lines of credit, those are down. So our HELOCs, those track more directly the drop in short term rates. So those are down 75 basis points, but still historically high at over 8%. So with that, we're encouraged with certain green shoots if you will in the business with the pull forward working its way through the categories that Billy just went through.

But what we're looking for is just when is the timing of homeowners starting those larger remodeling projects. So we remain super bullish on the outlook for home improvement. We'll have to work our way through this current macro uncertainty and the interest rates pressuring home improvement demand. But this is a market after all and markets return to equilibrium and remodeling will as well. We just don't think we're quite there yet.

Our next question comes from the line of Steven Zaccone with Citi. Please proceed with your question.

Great. Good morning. Thanks very much for taking my question. I wanted to follow-up on gross margin briefly. So in the quarter, was there any mix pressure on gross margin from the higher hurricane related sales?

And then just to follow-up on the longer term, there's a good amount of discussion around shrink. You've made a lot of progress there. Can you help us understand how much of an opportunity that is over the medium term? Is this something that's in the 10 to 20 basis points? Or could it be something more meaningful over time?

Right. Yes. So as far as gross margin goes for the quarter, there was a slight amount of mix pressure to margin. And just think about how Billy characterizes at the beginning of hurricane prep and then through cleanup, you're just selling higher volumes of lower gross margin goods. And so there was some slight pressure there.

And as far as shrink goes, look, we are frankly just head down and the teams are working so hard every single day. They have made major investments, not just financially, but also in the amazing number of initiatives they've brought forward to combat in essence the results of organized retail theft and other crime. This is a problem for all of retail. It's hard to quantify. What we can tell you is that our investments are paying off.

They've led now to multiple quarters of benefits year over year tangible results from investments we've made. That does not mean that the operating environment is getting any easier. In fact, it's getting harder and harder. So our hats are off to our teams and it's an everyday initiative that our teams are fighting every single day.

Yeah, understood. My follow-up question, I know there's no 2025 guidance today, but I think as we I'm curious like as you look at the backdrop, right, the view for 2024 was like housing was going to be net neutral. As you

call rates. But as you think about 2025, would you think the housing backdrop turns a little bit more favorable for you? Or is it still like think about housing as net neutral as kind of the base case scenario?

Settling down in turnover certainly even under 3% last reported period would be at a low, but just don't know and not obviously ready to talk about 25% and not ready as we sit here today to call that this is a turn on larger remodeling projects.

Our next question comes from the line of Scot Ciccarelli with Trowess. Please proceed with your question.

Thanks, guys. I apologize for the tech issues. Richard, I know you outlined the impact of hurricane related sales, but is there a broader estimate for the weather impact in the quarter? And then second, can you guys give us an idea of the magnitude of difference in performance in the 17 markets where you've rolled out incremental pro capabilities versus the rest of the base, just so we can better understand the impact that those capabilities are having? Thanks.

So the first part of your question, Scott, look, we had outstanding weather across the country. So it becomes harder to parse out what the weather impact is when you literally don't have a control group. However, we know when the sun was shining, our customers were engaged and that's huge testament to our merchants and our operators for inspiring them to do outdoor projects and the like. So it's hard to parse out weather. And therefore, we're cautious with respect to extrapolating Q3 just given how favorable the weather truly was across the country.

And Anne Chip, maybe we'll talk about pro markets.

Home Depot (HD) Q3 2025 Earnings Call Transcript

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