Richard McPhail: Thank you, Billy, and good morning, everyone. In the fourth quarter, total sales were $34.8 billion, a decrease of 2.9% from last year. During the fourth quarter, our total company comps were negative 3.5% with comps of negative 2.5% in November, positive 1.1% in December and negative 8.5% in January. Comps in the U.S. were negative 4% for the quarter with comps of negative 2.7% in November, positive 0.6% in December and negative 9.1% in January. In local currency, Mexico and Canada posted comps above the company average with Mexico posting positive comps. It is important to note that adjusting for holiday shifts and weather-related impacts in January, monthly comps relatively consistent across the quarter. For the year, our sales totaled $152.7 billion, a decrease of 3% versus fiscal 2022. For the year, total company comp sales decreased 3.2% and U.S. comp sales decreased 3.5%. In the fourth quarter, our gross margin was approximately 33.1%, a decrease of 20 basis points from last year. For the year, our gross margin was approximately 33.4%, a decrease of 15 basis points from last year, which was in line with our expectations. During the fourth quarter, operating expenses as a percentage of sales increased approximately 115 basis points to 21.2% compared to the fourth quarter of 2022. Our operating expense performance during the fourth quarter reflects our previously executed compensation increases for hourly associates as well as deleverage from our top line results. For the year, operating expenses were approximately 19.2% of sales, representing an increase of approximately 90 basis points from fiscal 2022. Our operating margin for the fourth quarter was approximately 11.9% and for the year was approximately 14.2%. Interest and other expense for the fourth quarter increased by $50 million to $458 million. In the fourth quarter and for fiscal 2023, our effective tax rate was 24%. Our diluted earnings per share for the fourth quarter were $2.82, a decrease of 14.5% compared to the fourth quarter of 2022. Diluted earnings per share for fiscal 2023 were $15.11, a decrease of 9.5% compared to fiscal 2022. At the end of the quarter, merchandise inventories were $21 billion, down $3.9 billion or approximately 16% versus last year, and inventory turns were 4.3x, up from 4.2x from the second period last year. Moving on to capital allocation. During the fourth quarter, we invested approximately $860 million back into our business in the form of capital expenditures. This brings total capital expenditures for fiscal 2023 to approximately $3.2 billion. During the year, we opened 13 new stores, bringing our store count to 2,335 at the end of fiscal 2023. Retail selling square footage was approximately 242 million square feet and total sales per retail square foot were approximately $605 in fiscal 2023. Additionally, we invested approximately $1.5 billion on three acquisitions during fiscal 2023, accelerating our strategic initiatives and providing us with better capabilities to serve our customers. During the year, we paid approximately $8.4 billion of dividends to our shareholders. Today, we announced our Board of Directors increased our quarterly dividend by 7.7% to $2.25 per share, which equates to an annual dividend of $9 per share. And finally, during fiscal 2023, we returned approximately $8 billion to our shareholders in the form of share repurchases, including $1.5 billion in the fourth quarter. Computed on the average of beginning and ending long-term debt and equity for the trailing 12 months, return on invested capital was 36.7% compared to 44.6% at the end of the fourth quarter of fiscal 2022. Now I'll comment on our outlook for 2024. First, let me point out that fiscal 2024 will include a 53rd week, so the fourth quarter of fiscal 2024 will consist of 14 weeks. We will continue to report comps on a 52-week basis, but we will base our overall guidance on 53 weeks. As you heard from Ted, we feel great about the actions we took in 2023 to position us well heading into 2024. And while there are signs that the economy is on the way towards normalization, the home improvement market still faces headwinds as we look ahead to fiscal 2024. We considered several factors that informed our outlook for fiscal 2024. On the positive side, we faced a number of pressures in fiscal 2023 that are unlikely to repeat in fiscal 2024. In 2023, we saw four increases in the Fed funds rate, a sharp decline in existing home sales and approximately 110 basis points of comp pressure from lumber deflation. However, we still expect pressures to our business in fiscal 2024. Personal consumption growth as measured by PCE is expected to decelerate compared to 2023. Our share of PCE also remains slightly elevated relative to 2019 and has been on a glide path towards 2019 levels. Higher interest rates at the beginning of 2024 relative to last year will likely continue to pressure demand for larger projects. And the effects from pull forward of demand during the pandemic as well as some project deferral could impact demand into 2024. As we consider these influences on home improvement demand, we are planning for a year of continued moderation but with slightly less pressure to comp sales than what we faced in fiscal 2023. Our fiscal 2024 outlook is for total sales growth to outpace sales comp with sales growth of approximately positive 1% and comp sales of approximately negative 1% compared to fiscal 2023. Total sales growth will benefit from a 53rd week as well as from the acquisitions we made and the new stores we opened in fiscal 2023 and the stores we plan to open in fiscal 2024. We expect the 53rd week will contribute approximately $2.3 billion in sales. Our gross margin is expected to be approximately 33.9%, an increase of approximately 50 basis points compared to fiscal 2023. This primarily reflects a lower product and transportation cost environment relative to fiscal 2023 as well as benefits from a portion of the approximately $500 million in reduced fixed costs that we will realize in fiscal 2024. Further, we expect operating margin of approximately 14.1%. This reflects deleverage from sales and pressure from targeted incentive compensation as we are overlapping lower incentive compensation paid than planned in 2023. This will be partially offset by the benefits from the approximately $500 million in fixed costs that we will realize in fiscal 2024 in both cost of goods sold and operating expenses. Our effective tax rate is targeted at approximately 24.5%. We expect net interest expense of approximately $1.8 billion. Our diluted earnings per share percent growth is targeted to be approximately 1% compared to fiscal 2023, with the extra week contributing approximately $0.30. We plan to continue investing in our business with capital expenditures of approximately 2% of sales on an annual basis. After investing in our business and paying our dividend, it is our intent to return excess cash to shareholders in the form of share repurchases. We believe we have positioned ourselves to meet the needs of our customers in any environment. The investments we've made in our business have enabled agility in our operating model. As we look forward, we will continue to invest to strengthen our position with our customers, 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.

interest and other expense fourth quarter


Richard McPhail: Thank you, Billy, and good morning, everyone. In the first quarter, total sales were $36.4 billion, a decrease of approximately 2.3% from last year. During the first quarter, our total company comps were negative 2.8% with comps of negative 4% in February, negative 0.8% in March, and negative 3.3% in April. Comps in the U.S. were negative 3.2% for the quarter with comps of negative 4.8% in February, negative 1.3% in March, and negative 3.6% in April. For the quarter, Mexico posted positive comps, whereas Canada was slightly below the company average. In the first quarter, our gross margin was 34.1%, an increase of approximately 45 basis points from the first quarter last year, primarily driven by benefits from lower transportation cost and shrink. During the first quarter, operating expense as a percent of sales increased approximately 140 basis points to 20.2% compared to the first quarter of 2023. The increase was primarily driven by a benefit from a legal settlement that we are overlapping from the first quarter of fiscal 2023, as well as deleverage from our top line results. Our operating expense performance was in line with our expectations. Our operating margin for the first quarter was 13.9% compared to 14.9% in the first quarter of 2023. Interest and other expense for the first quarter decreased by $13 million to $428 million. In the first quarter, our effective tax rate was 22.6% compared to 24.2% in the first quarter of fiscal 2023. Our diluted earnings per share for the first quarter were $3.63, a decrease of 5% compared to the first quarter of 2023. During the first quarter, we opened two new stores, bringing our total store count to 2,337. Retail selling square footage was approximately 242 million square feet. At the end of the quarter, merchandise inventories were $22.4 billion, down approximately $3 billion, or 12% compared to the first quarter of 2023, and inventory turns were 4.5x, up from 3.9x last year. Turning to capital allocation. During the first quarter, we invested approximately $850 million back into our business in the form of capital expenditures. And during the quarter, we paid approximately $2.2 billion in dividends to our shareholders and we returned approximately $600 million to shareholders in the form of share repurchases. As a reminder, in March we announced our intent to acquire SRS Distribution and as a result, we paused share repurchases. As you've heard us say many times, we maintain a disciplined approach to capital allocation and that is not changing. First and foremost, we will invest in the business and expect capital expenditures of approximately 2% of sales on an annual basis. After investing in the business, we plan to pay the dividend and it is our intent to return any excess cash to shareholders in the form of share repurchases. From time to time, we will also invest in the business through acquisitions to enhance our capabilities and to accelerate our strategic objectives. Computed on the average of beginning and ending long-term debt and equity for the trailing 12 months, return on invested capital was 37.1%, down from 43.6% – excuse me, down from 43.6% in the first quarter of fiscal 2023. Now, I will comment on our guidance for fiscal 2024. Today, we are reaffirming our guidance for 2024. As a reminder, our guidance does not currently reflect any impact from the announced acquisition of SRS. The acquisition is currently under regulatory review and we expect it to close by the end of fiscal 2024. We expect total sales growth to outpace sales comp with sales growth of approximately positive 1% and comp sales of approximately negative 1%. Total sales growth will benefit from a 53rd week and we expect the 53rd week will contribute approximately $2.3 billion in sales. Our gross margin is expected to be approximately 33.9%, an increase of approximately 50 basis points, compared to fiscal 2023. We expect operating margin of approximately 14.1%. Our effective tax rate is targeted at approximately 24.5%. We expect net interest expense of approximately $1.8 billion, and our diluted earnings per share percent growth is targeted to be approximately 1% compared to fiscal 2023. It’s our intent to update guidance as appropriate once the SRS transaction closes. We believe that we have positioned ourselves to meet the needs of our customers in any environment. The investments we’ve made in our business have enabled agility in our operating model. As we look forward, we will continue to invest to strengthen our position with our customers, 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.

Interest and other expense first quarter

interest and other expense first quarter


Richard McPhail: Thank you, Billy, and good morning, everyone. In the third quarter, total sales were $40.2 billion, an increase of approximately 6.6% from last year. During the third quarter, our total company comps were negative 1.3% 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% 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 third quarter include a net contribution of approximately $200 million 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 third quarter, our gross margin was approximately 33.4%, a decrease of approximately 40 basis points from the third quarter last year, primarily driven by mix as a result of the SRS acquisition, partially offset by benefits from lower shrink. During the third quarter, operating expense as a percent of sales increased approximately 45 basis points to 19.9% compared to the third quarter of 2023. Our operating expense performance was in-line with our expectations. Our operating margin for the third quarter was 13.5% compared to 14.3% in the third quarter of 2023. In the quarter, pre-tax intangible asset amortization was $138 million including $86 million related to SRS. Excluding the intangible asset amortization in the quarter, our adjusted operating margin for the third quarter was 13.8% compared to 14.5% in the third quarter of 2023. Interest and other expense for the third quarter increased by $157 million to $595 million due primarily to higher debt balances than a year ago. In the third quarter, our effective tax rate was 24.4% compared to 23.3% in the third quarter of fiscal 2023. Our diluted earnings per share for the third quarter were $3.67, a decrease of approximately 4% compared to the third quarter of 2023. Excluding intangible asset amortization, our adjusted diluted earnings per share for the third quarter were $3.78, a decrease of approximately 2% compared to the third quarter of 2023. During the third quarter, we opened five new stores, bringing our total store count to 2, 345. Retail selling square footage was approximately 243 million square feet. At the end of the quarter, merchandise inventories were $23.9 billion up approximately $1.1 billion compared to the third quarter of 2023, and inventory turns were 4.8 times, up from 4.3 times last year. Turning to capital allocation. During the third quarter, we invested approximately $820 million back into our business in the form of capital expenditures. And during the quarter, we paid approximately $2.2 billion 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%, down from 38.7% in the third quarter 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 third quarter was better than expected. Our performance reflects hurricane related sales in the third quarter, and we expect some hurricane related sales in the fourth quarter. Given the better than expected performance in the third quarter 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 $2.3 billion to total sales and SRS is expected to contribute approximately $6.4 billion in incremental sales. Comparable sales are expected to decline approximately 2.5% for the 52 week period. We expect to open approximately 12 new stores. Our gross margin is expected to be approximately 33.5%. 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 $2.1 billion. 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.

Interest and other expense third quarter

interest and other expense third quarter


Richard McPhail: Thank you, Ann, and good morning, everyone. In the first quarter, total sales were $37.3 billion a decrease of approximately $1.7 billion or 4.2% from last year. During the first quarter, our total company comps were negative 4.5% with comps of negative 2.5% in February, negative 7.5% in March and negative 3.7% in April. Comps in the U.S. were negative 4.6% for the quarter with comps of negative 2.8% in February, negative 7.5% in March and negative 3.7% in April. Our first quarter comp sales missed our own expectations, particularly in the months of March and April, driven primarily by 2 notable factors. First, lumber deflation drove a negative comp impact of approximately 220 basis points versus the first quarter of 2022. Second, unfavorable weather, particularly in our Western division further impacted our results. In the first quarter, our gross margin was 33.7% a decrease of 8 basis points from the first quarter last year, primarily driven by increased pressure from shrink. We continue to successfully offset supply chain and product cost pressures while maintaining our position as the customer’s advocate for value. During the first quarter, operating expense as a percent of sales increased approximately 25 basis points to 18.8% compared to the first quarter of 2022. Our operating expense performance during the first quarter reflects the planned compensation increases announced during our fourth quarter 2022 call as well as a onetime benefit from a legal settlement. Our operating margin for the first quarter was 14.9% compared to 15.2% in the first quarter of 2022. Interest and other expense for the first quarter increased by $72 million to $441 million due primarily to interest on our floating rate debt as well as higher debt balances than a year ago. In the first quarter, our effective tax rate was 24.2%, up from 23.9% in the first quarter of fiscal 2022. Our diluted earnings per share for the first quarter or $3.82, a decrease of 6.6% compared to the first quarter of 2022. During the first quarter, we opened 2 new stores, bringing our total store count to 2,324. Retail selling square footage was approximately 241 million square feet. At the end of the quarter, merchandise inventories were $25.4 billion, essentially flat compared to the first quarter of 2022 and inventory turns were 3.9x down from 4.4x last year. Turning to capital allocation. After investing in our business and paying our dividend, it is our intent to return excess cash to shareholders in the form of share repurchases. During the first quarter, we invested approximately $900 million back into our business in the form of capital expenditures. And during the quarter, we paid approximately $2.1 billion in dividends to our shareholders, and we returned approximately $3 billion to shareholders in the form of share repurchases. Computed on the average of beginning and ending long-term debt and equity for the trailing 12 months, return on invested capital was approximately 43.6%, down from 45.3% and in the first quarter of fiscal 2022. Now I will comment on our guidance for fiscal 2023. As you may recall, last quarter, we provided flat sales and comp guidance for fiscal 2023. As we mentioned last quarter, our guidance did not include potential impacts from lumber deflation, which we noted could negatively impact our performance for the quarter and the year. As a result, lumber negatively impacted comps by approximately 220 basis points in the first quarter. Given the negative impact of the first quarter sales from lumber and weather, further softening of demand relative to our expectations and continued uncertainty regarding consumer demand patterns, we are updating our guidance to reflect a range of potential outcomes. We now expect fiscal 2023 sales and comp sales to decline between 2% and 5%. As a result of the change in our sales outlook, we are now targeting an operating margin between 14.3% and 14.0% for the year. Our effective tax rate is targeted at approximately 24.5%. We expect interest expense of approximately $1.8 billion, and we are anticipating between a 7% and 13% decline in diluted earnings per share compared to fiscal 2022. As Ted mentioned, we expected 2023 to be a year of moderation in the home improvement market, driven by monetary policy actions to dampen overall consumer demand. In our view, we are in a transitional period in the consumer economy. Setting the short-term impacts of monetary policy aside, we know that the home improvement customer is healthy and we believe the medium to long-term underlying fundamentals of home improvement make it one of the most attractive markets in retail and the economy as a whole. We believe that we are well positioned to meet the needs of our customers with a broad assortment of products, strong in-stock levels and knowledgeable associates. The investments we’ve made in our business have enabled agility in our operating model. As we look forward, we will continue to prudently invest to strengthen our competitive position, leverage our scale and low-cost position to outperform our market and deliver shareholder value. Thank you for your participation in today’s call. And Christine, we are now ready for questions.


Richard McPhail: Thank you, Ann, and good morning, everyone. In the second quarter, total sales were $42.9 billion, a decrease of approximately $900 million or 2% from last year. During the second quarter, our total company comps were negative 2% with comps of negative 2.6% in May, negative 3.3% in June and negative 0.2% in July. Comps in the U.S. were negative 2% for the quarter with comps of negative 2.6% in May, negative 3.3% in June and negative 0.4% in July. As you heard from Billy, during the second quarter, we continued to experience lumber deflation compared to the prior year. While lumber prices were down, we saw an improvement in unit productivity, resulting in a net negative comp impact of approximately 85 basis points versus the second quarter of 2022. In the second quarter, our gross margin was 33%, a decrease of 8 basis points from the second quarter last year, primarily driven by pressure from shrink. During the second quarter, operating expense as a percent of sales increased approximately 100 basis points to 17.6% compared to the second quarter of 2022. Our operating expense performance during the second quarter reflects our previously executed compensation increases for hourly associates as well as deleverage from our top line results. Our operating margin for the second quarter was 15.4% compared to 16.5% in the second quarter of 2022. Interest and other expense for the second quarter increased by $49 million to $428 million due primarily to interest on our floating rate debt as well as higher debt balances than a year ago. In the second quarter, our effective tax rate was 24.4%, up from 24.3% in the second quarter of fiscal 2022. Our diluted earnings per share for the second quarter were $4.65, a decrease of 7.9% compared to the second quarter of 2022. During the second quarter, we opened two new stores, bringing our total store count to 2,326. Retail selling square footage was approximately 241 million square feet. At the end of the quarter, merchandise inventories were $23.3 billion, down $2.8 billion compared to the second quarter of 2022. And inventory turns were 4.4x, down from 4.5x last year. Turning to capital allocation. After investing in our business and paying our dividend, it is our intent to return excess cash to shareholders in the form of share repurchases. During the second quarter, we invested approximately $800 million back into our business in the form of capital expenditures. And during the quarter, we paid approximately $2.1 billion in dividends to our shareholders, and we returned approximately $2 billion to shareholders in the form of share repurchases. Computed on the average of beginning and ending long-term debt and equity for the trailing 12 months, return on invested capital was approximately 41.5%, down from 45.6% in the second quarter of fiscal 2022. Now I’ll comment on our guidance for fiscal 2023. Today, we are reaffirming our guidance for 2023. We expect fiscal 2023 sales and comp sales to decline between 2% and 5%. We are targeting an operating margin between 14.3% and 14% for the year. Our effective tax rate is targeted at approximately 24.5%. We expect interest expense of approximately $1.8 billion and we are anticipating between a 7% and 13% decline in diluted earnings per share compared to fiscal 2022. In addition, we continue to focus on driving productivity in the business and feel confident that we will realize the previously announced $500 million in annualized cost savings in 2024. We also remain focused on meeting the needs of our customers with our leading product authority in home improvement, strong in-stock levels and knowledgeable associates. We will continue to prudently invest to strengthen our competitive position and leverage our scale and low-cost position to outperform our market and deliver shareholder value. Thank you for your participation in today’s call. And Christine, we are now ready for questions.


Richard McPhail: Thank you, Billy, and good morning, everyone. In the third quarter, total sales were $37.7 billion, a decrease of approximately $1.2 billion or 3% from last year. During the third quarter, our total company comps were negative 3.1% with comps of negative 2.1% in August, negative 3.4% in September and negative 3.7% in October. Comps in the U.S. were negative 3.5% for the quarter with comps of negative 2.5% in August, negative 3.8% in September and negative 4.1% in October. In local currency, Mexico and Canada posted comps above the company average. It is important to note that adjusting for storm-related overlaps and some seasonal shift, monthly comps were relatively consistent across the quarter. In the third quarter, our gross margin was 33.8%, a decrease of approximately 20 basis points from the third quarter last year, which was in line with our expectations. During the third quarter, operating expense as a percent of sales increased approximately 120 basis points to 19.4% compared to the third quarter of 2022. Our operating expense performance during the third quarter reflects our previously executed compensation increases for hourly associates as well as deleverage from our top line results. Our operating margin for the third quarter was 14.3% compared to 15.8% in the third quarter of 2022. Interest and other expense for the third quarter increased by approximately $30 million to $438 million. In the third quarter, our effective tax rate was 23.3%, down from 24.4% in the third quarter of fiscal 2022. Our diluted earnings per share for the third quarter were $3.81, a decrease of 10.1% compared to the third quarter of 2022. During the third quarter, we opened 7 new stores, bringing our total store count to 2,333. Retail selling square footage was approximately 242 million square feet. At the end of the quarter, merchandise inventories were $22.8 billion, down $2.9 billion or 11% compared to the third quarter of 2022. And inventory turns were 4.3x flat to 1 year ago. Turning to capital allocation. After investing in our business and paying our dividend, it is our intent to return excess cash to shareholders in the form of share repurchases. During the quarter, we invested approximately $670 million back into our business in the form of capital expenditures. And during the quarter, we paid approximately $2.1 billion in dividends to our shareholders, and we returned approximately $1.5 billion to shareholders in the form of share repurchases. Computed on the average of beginning and ending long-term debt and equity for the trailing 12 months, return on invested capital was approximately 38.7%, down from 43.3% in the third quarter of fiscal 2022. Now I will comment on our guidance for fiscal 2023. As you heard from Ted, with one quarter remaining in fiscal 2023, we no longer expect the end points of our previous guidance range as likely outcomes, and therefore, we are narrowing our guidance for 2023. We expect fiscal 2023 sales and comp sales to decline between 3% and 4%. We are targeting an operating margin between 14.2% and 14.1% for the year. Our effective tax rate is targeted at approximately 24.5%. We expect interest expense of approximately $1.8 billion. And we are anticipating between a 9% and 11% decline in diluted earnings per share compared to fiscal 2022. In addition, as you heard from Ann, we continue to focus on driving productivity in the business. We have taken a number of actions that will help us realize the previously announced $500 million in annualized cost savings in 2024 and are fully confident that we will deliver on this commitment. We also remain focused on meeting the needs of our customers with our leading product authority in home improvement, strong in-stock levels and knowledgeable associates. We will continue to prudently invest to strengthen our competitive position and leverage our scale and low-cost position to outperform our market and deliver shareholder value. Thank you for your participation in today's call. And Christine, we are now ready for questions.


merchandise inventories end of the quarter


Richard McPhail: Thank you, Billy, and good morning, everyone. In the second quarter, Total sales were $43.2 billion, an increase of approximately 0.6% from last year. Total sales include $1.3 billion from the recent acquisition of SRS, which represents approximately six weeks of sales in the quarter. During the second quarter, our total company comps were negative 3.3%, with comps of negative 3.7% in May, negative 0.9% in June and negative 4.9% in July. Comps in the U.S. were negative 3.6% for the quarter, with comps of negative 4.1% in May, negative 1.4% in June and negative 5% in July. In the second quarter, our gross margin was approximately 33.4%, an increase of 40 basis points from the second quarter last year, primarily driven by benefits from lower transportation costs and shrink, partially offset by mix as a result of the SRS acquisition. During the second quarter, operating expense as a percent of sales increased approximately 65 basis points to 18.3% compared to the second quarter of 2023. Our operating expense performance was in line with our expectations. Beginning this quarter, in addition to our GAAP measures, we are providing the following non-GAAP measures: adjusted operating income, adjusted operating margin and adjusted diluted earnings per share, which excludes noncash amortization of acquired intangible assets. We believe these supplemental measures will help investors better understand and analyze our performance. Our operating margin for the second quarter was 15.1% compared to 15.4% in the second quarter of 2023. In the quarter, pretax intangible asset amortization was $90 million, including $39 million related to SRS. Excluding the intangible asset amortization in the quarter, our adjusted operating margin for the second quarter was 15.3% and compared to 15.5% in the second quarter of 2023. Interest and other expense for the second quarter increased by $61 million to $489 million due primarily to higher debt balances than a year ago. In the second quarter, our effective tax rate was 24.5%, compared to 24.4% in the second quarter of fiscal 2023. Our diluted earnings per share for the second quarter were $4.60, a decrease of approximately 1% compared to the second quarter of 2023. Excluding intangible asset amortization, our adjusted diluted earnings per share for the second quarter were $4.67, essentially flat compared to the second quarter of 2023. During the second quarter, we opened three new stores, bringing our total store count to 2,340. Retail selling square footage was approximately 243 million square feet. At the end of the quarter, merchandise inventories or $23.1 billion, down approximately $200 million compared to the second quarter of 2023, and inventory turns were 4.9x, up from 4.4x last year. Turning to capital allocation. During the second quarter, we invested approximately $720 million back into our business in the form of capital expenditures. And during the quarter, we paid approximately $2.2 billion in dividends to our shareholders. Our disciplined approach to capital allocation remains unchanged. First and foremost, we will invest in the business and expect capital expenditures of approximately 2% of sales on an annual basis. After investing in the business, we plan to pay the dividend and it is our intent to return any excess cash to shareholders in the form of share repurchases. Computed on the average of beginning and ending long-term debt and equity for the trailing 12 months, return on invested capital was approximately 31.9%, down from 41.5% in the second quarter of fiscal 2023. Now, I will comment on our updated outlook for fiscal 2024. As you heard from Ted, given the softer-than-expected performance in the first half of the year, and reflecting continued uncertainty around underlying consumer demand, we believe a more cautious outlook for the year is warranted. With the recent closing of the SRS acquisition, we are now including their results in our consolidated outlook for the year. For the period matching our first half, which includes periods prior to the acquisition and not fully reflected in our financial statements, SRS generated high single-digit percentage sales growth with operating income growing largely in line with sales. We believe that over the next several years, SRS on its own, and through our combined Pro efforts, will help accelerate sales and earnings growth for our company. Updating our fiscal 2024 guidance for the factors we just discussed. We now expect total sales growth between 2.5% and 3.5%, including the SRS acquisition and the 53rd week. The 53rd week is projected to add approximately $2.3 billion to total sales. SRS is expected to contribute approximately $6.4 billion in incremental sales. Comparable sales are expected to decline between negative 3% and negative 4% for the 52-week period. The high end of our range implies a consumer demand environment consistent with the first half of fiscal 2024. While comparable sales for the Company are not currently on the trajectory for the low end of the range, a negative 4% comp implies incremental pressure on consumer demand beyond what we are seeing today. We expect to open approximately 12 new stores. Our gross margin is expected to be approximately 33.5%. We expect operating margin to be between 13.5% and 13.6%, and adjusted operating margin to be between 13.8% and 13.9%. Our effective tax rate is targeted at approximately 24%. We expect net interest expense of approximately $2.2 billion. Our diluted earnings per share percent will decline between negative 2% and negative 4% compared to fiscal 2023, with the extra week contributing approximately $0.30. We expect our adjusted diluted earnings per share percent to decline between negative 1% and negative 3%, compared to fiscal 2023, with the extra week contributing approximately $0.30. We believe that we have positioned ourselves to meet the needs of our customers in any environment. The investments we've made in our business have enabled agility in our operating model. As we look forward, we will continue to invest to strengthen our position with our customers, 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.


Richard McPhail: Yes, Zach. Thanks for the question. So let’s first walk from 15.3%, which is our actual operating margin in 2022 to our original guide of 14.5% margin. At a flat comp, particularly in an inflationary environment, our business will see a degree of deleverage in expenses. And so there are really three factors. Natural deleverage in the business, a $1 billion investment in wage, which has proven to, as Ann said, provide real benefit from a customer experience point of view. And then productivity initiatives designed to offset some of that deleverage. And so when you net all those three against each other, that led to our guide of 14.5% at a flat comp. As we reflect on the revision to guidance, the range of operating margin that we have guided toward reflects the natural operating margin at these negative comp levels. In other words, there is – there are levers that help blunt de-leverage, but there is de-leverage still in our model. The greatest mitigator is that we have an activity-based payroll model. And so as activity in our stores decreases, so does our lever – sorry, our level of payroll. So you do have a natural buffer there. Began, the 14.3% to the 14.0% would be the natural operating margin at the negative 2 and the negative 5. When we think about the one-time legal settlement, so we did realize a large one-time benefit from a legal settlement our guidance assumes this benefit will be offset during the remainder of the year. And so that’s just a simplified assumption. We will protect that 14% operating margin, we’d agree with – operate with a degree of financial flexibility. And as the year progresses, we will be evaluating the levers available to us against the backdrop of the environment.

actual operating margin 2022 original guide


Scot Ciccarelli: Good morning guys. So, Richard, you talked about protecting a 14% operating margin even with the wage investments that you guys have made this year at this point. What other – I mean, how much flexibility do you think you have on the SG&A line, because I know labor is your biggest kind of plus bucket, but you are actually investing more in labor, not less. So, like how should we think about how you guys are managing that component?


Richard McPhail: And just to tie it all up together, that 13.6% corresponds with our adjusted operating margin of 13.9%. So, for the year, when we eliminate non-cash amortization expense on intangible assets, we expect to report operating margin of 13.9% on a comp of negative 3%.

expect adjusted operating margin for the year


Billy Bastek: Well, thanks, Steven. It's Billy. Listen. As it relates to the just the general pricing environment, and then I'll talk for a minute about tariffs. Mean, we are in a very rational Market just by definition. And, you know, prices, as we've mentioned on the last couple of calls really have settled to your point. And the promotional activity is is the same as it's been, you know, kind of pre COVID as well. So no differences in that. And and as I mentioned, again, the last couple quarters pricing is is settled into the market accordingly. As it relates to to tariffs, and we've spoken a little bit about it this morning. I mean, listen. We've been through this before. We'll continue to assess, you know, just you know, how these impact our business from a go forward standpoint. We've been focused on diversifying sourcing for several years. So we'll continue to assess that going forward. But our number one job in merchandising is to be the customer's advocate for value. We have great, great vendor relationships. And with our scale, we feel that we're as well or better positioned to than anyone in the market place to navigate the environment going forward. And, actually, I wanna go back one question and just follow-up on Steven's question. So Steven, just to to put a a year over year comparison together for you and and talk about how SRS impacts year over year from an operating margin perspective. So as you can as you've seen our guidance, we're guiding to a thirteen point four percent adjusted operating margin from a thirteen point eight that's a forty basis point decrease. Here's how that forty basis points breaks down. Coincidental to the pro form a impact, but the year over year is different. So that forty reflects twenty basis points of natural deleverage. And recall, we think this business leverages about a three percent comp. At a one percent comp, we're getting about two comp points of deleverage. So two times about ten basis points per is twenty basis points. Then the inclusion of twelve months of ownership of SRS compared to seven months of ownership, is reflected in fifteen basis points of mix shift. So you've got about a fifteen basis point impact of that year over year comparison of twelve months versus seven months. And then finally, the comparison versus a fifty-three week year also shifts margin by five basis points. So you've got twenty bps from naturally leverage, You've got fifteen from SRS, impact, and you've got five from the fifty-third week comparison. Within that, I think it's worth saying, but we are leaning into investments We're paying for those investments through productivity. And so that's also within that operating margin guidance. There's there's productivity inside it as well as as leaning into investment. And I hope that makes it a little bit more clear.

adjusted operating margin guiding year over year


Ted Decker: I mean broadly on the inflation piece, well, we still expect that the overall year will have a net inflationary impact on our costs in retails. But as we go into the second half, it is moderating. And when you look at just the activity of cost increase requests, I mean they are negligible. I mean there are a couple. And we were in the billions of dollars at one point of cost in. And so net new requests for cost and certainly cost increases in the supply chain, that’s all completely abated. As we go into the second half, when you think of product cost, transportation, overall transportation costs and then what would ultimately do in retails, inflation has certainly abated. Commodity is certainly down meaningfully from the peak as well as year-over-year as well as even shorter term. But beyond commodity and the fact that we don’t have increased inflation, we are not expecting a deflationary environment. I think Richard used the term settling. We are kind of settling into these non-commodity price levels. And as the Pro and consumer customer has gotten used to those over the last few years, you are seeing the normalization in transactions, as Richard called out. So, we are encouraged that the cycle of inflation is essentially behind us. And Richard, I don’t know if you – or Billy, if you have anything else to add to that.


Richard McPhail: Thanks, Michael. Well, first, I certainly want to center you back to the comments we made at the Investor Conference in June where we call out a base case once we return to market normalization, a base case of 3% to 4% sales growth, flat gross margin, an assumption of operating expense and operating margin leverage and growth and EPS growth of mid- to high single-digit percentages. Within that, obviously, is sort of an implied leverage per comp point on our OpEx. I'm giving you a, what I would call, loose rule of thumb. It would apply for the most part to our sort of business model today, it certainly applies in the past and I would expect it to apply it loosely in the future. Embedded in that is a normal rate of productivity and efficiency that our teams delivered every single year. I mean underneath all this guidance and our results for 2023, which we were so pleased with, is an enormous amount of work on behalf of our team, think about the efficiency in our supply chain, you think about the efficiencies that our merchants bring every year in product cost. Of particular note, the productivity in our stores with some of the tools that are unleashing the power of AI and putting that in the hands of our associates, those are standard fair for us. They feed into what I would call normal operating leverage for the Home Depot, and it’s something that we’ve come to expect of ourselves. So that’s a long way of saying, we always intend to lever OpEx at a certain point of sales growth. And I would stick with the basic rule of thumb, maybe higher, maybe slightly lower in some periods from time to time. On the question about what actions there may be, but we always operate with a degree of financial flexibility in the P&L. Although, I would tell you that we did our very best, and I think we accomplished our objective of reducing fixed costs towards the end of ‘23 that had built up during the pandemic, hence the $500 million in cost savings implied in our guide. There are always levers. We have to determine what environment we are operating in before we decide what levers to pull. And so for now, we’ve provided what we would call our central case for 2024, but we’re going to manage the business with the best interest of our long-term shareholders in mind.


Richard McPhail: Well, let's talk about share repurchases. So, as we announced, as part of the SRS acquisition, we financed the acquisition with $10 billion in bond issuances and then some short-term commercial paper raising. We are currently at a 2.6x debt-to-EBITDA ratio. We like to see that ratio around 2.0x. It's our intent to delever over time before we restart repurchases. That's going to take us likely into the year 2026, and we will obviously update our investors on how that looks over time. But that would be the kind of the current calculation, sometime in 2026, we have returned. And then from a long-term structural perspective, when we laid out our basin in an accelerated case, we said to the base case. Look, we anticipate, in the base case, that we will always generate some degree of operating leverage. And that will always remain true. We're not going to talk about a high watermark. And we will continue to update you on our views. But for now, we're executing with exceptional expense management, exceptional measurement and cost of goods sold. And we are delivering -- over delivering really on the profitability we would have expected at this top line rate. So, we are happy that we're running the business as it should be run. And we believe that in those base case and accelerated cases that we laid out in June.


retail selling square footage second quarter


retail selling square footage end of the quarter


retail selling square footage third quarter


return on invested capital second quarter


return on invested capital third quarter

return on invested capital trailing 12 months


return on invested capital first quarter


return on invested capital third quarter


Edward Decker : Thank you, Isabel, and good morning, everyone. As you'll hear from the team shortly, the fourth quarter of fiscal 2023 was largely in line with our expectations. For fiscal 2023, sales were $152.7 billion, down 3% from the prior year. Comp sales declined 3.2% versus last year, and our U.S. stores had negative comps of 3.5%. Diluted earnings per share were $15.11 compared to $16.69 in the prior year. After three years of exceptional growth for our business, 2023 was a year of moderation. It was also a year of opportunity. We focused on several operational improvements to strengthen the business, while also staying true to the growth opportunities detailed at our Investor Conference in June. As we reflect on 2023, we are better positioned in four key areas. We invested in our associates, the heartbeat of our company and the storage of customer service, effectively manage disinflation, while maintaining a strong value proposition for our customers, right sized our inventory position in increased in-stock and on-shelf availability levels, and we reduced fixed costs in the business that were introduced during the pandemic. As you know, at the beginning of 2023, we announced an approximately $1 billion investment in increased annualized compensation for our frontline hourly associates. This allowed us to improve customer service, position ourselves favorably in the market, attract and retain the most qualified talent, drive greater efficiency and productivity across the business, and improve safely broadly. We also navigated a unique disinflationary environment. We did this by leveraging our best-in-class cost finance team in merchants to effectively manage cost movements, while also being our customers advocate for value. And we believe prices have essentially settled in the marketplace. After several years of unprecedented sales growth, we entered 2023 with more inventory than we would've preferred. While the products we sell have low obsolescence, our teams work throughout the year to improve inventory productivity while delivering the highest in-stock and on-shelf availability rates since the pandemic. Today, we feel very good about our inventory position heading into 2024. Productivity and efficiency are hallmarks of the Home Depot, and as you heard at our Investor Conference in June, we announced our commitment to reduce fixed costs by approximately $500 million to be fully realized in 2024. We've now taken the necessary actions to achieve this cost benefit, which Richard will detail in a moment. As we look forward to 2024, we remain focused on our strategic opportunities of creating the best interconnected experience, growing our Pro wallet share through our unique ecosystem of capabilities and building new stores. In December 2023, we made a strategic acquisition of Construction Resources, a leading distributor of design-oriented surfaces, appliances, and architectural specialty products for Pro contractors focused on renovation, remodeling, and residential home building. This acquisition adds to our robust product offering of products and services. It allows our complex Pro’s to easily shop across aesthetic product categories in a showroom setting, which is how they're accustomed to shopping for these types of goods. We are excited to welcome Construction Resources into the Home Depot family. In 2024, we will continue learning and building out new capabilities for the complex Pro. We are expanding our assortments, fulfillment options and our outside sales force and just recently began piloting trade credit options. In addition, we continue to work on new order management capabilities to better manage complex Pro orders. For the complex Pro opportunity, this means that by the end of 2024, we will have 17 of our top Pro markets equipped with new fulfillment options, localized product assortment and expanded sales force and enhanced digital capabilities with trade credit and order management in pilot for development. What I hope you take away today is how great we feel about our business and how well we are positioning the business for the future. We remain excited about the opportunity to grow our share of a fragmented $950 billion-plus market. Our associates and supplier partners have continually demonstrated agility and resilience, and I want to thank them for their hard work and dedication to serving our customers and communities. And with that, I'd like to turn the call over to Ann.


Ted Decker: Thank you, Isabel and good morning everyone. Sales for the second quarter were $42.9 billion, down 2% from the same period last year. Comp sales for the total company as well as our U.S. stores also declined 2% from the same period last year. Diluted earnings per share were $4.65 in the second quarter compared to $5.05 in the second quarter last year. All three of our U.S. divisions posted low single-digit negative comps in the quarter. Our geographic variability narrowed significantly on a sequential basis as weather normalized, particularly in our Western division and spring-related categories rebounded relative to the first quarter. While there was strength in project-related categories like building materials, hardware and plumbing, we continue to see pressure in certain big ticket discretionary categories. Pro sales performance was slightly negative in the second quarter and outperformed the DIY customer. While surveys suggest that Pro backlogs are lower than they were a year ago, they are still healthy and elevated relative to historical norms. Additionally, projects in these backlogs are generally smaller in scale and scope. In the second quarter, we are pleased with the consumers’ engagement with home improvement, particularly across small projects, which Billy will discuss in greater detail. Going forward, as we continue to navigate a unique and uncertain environment, our focus continues to be on operating with agility as we respond to evolving customer dynamics while also driving productivity and efficiency throughout the business. In addition and as we mentioned at our investor conference in June, we operate in a large and fragmented $950 billion plus addressable market. We remain committed to growing the business and believe we are well positioned to continue capturing market share. To that end, I am pleased to announce HD Supply’s acquisition of Redi Carpet, a national MRO flooring provider with a proven track record. This acquisition, which closed at the beginning of the third quarter, extends our current product offering in the multifamily customer vertical with 34 locations strategically located throughout the U.S. Our team will continue to focus on what is most important: our associates and customers. Our merchants, store and met teams, supplier partners and supply chain teams did an outstanding job delivering value and service to our customers throughout the quarter. And I’d like to thank them for their dedication and hard work. Before I close, I would like to send our thoughts and prayers to the people of Maui. While we are thankful that our people on the island are all accounted for, we are heartbroken by the loss of life and extreme devastation that the community must now navigate and we stand ready to help in the days, months and years ahead. And with that, I’d like to turn the call over to Billy.


Edward Decker: Thank you, Isabel, and good morning, everyone. Sales for the third quarter were $37.7 billion, down 3% from the same period last year. Comp sales declined 3.1% from the same period last year and our U.S. stores had negative comps of 3.5%. Diluted earnings per share were $3.81 in the third quarter compared to $4.24 in the third quarter last year. The third quarter was in line with our expectations. Similar to the second quarter, we saw continued customer engagement with smaller projects and experienced pressure in certain big-ticket discretionary categories. In addition, lumber and copper and wire deflation and storm-related overlaps negatively impacted results in the quarter. Billy will discuss these and other business trends shortly. During the third quarter, our Pro customer outperformed our DIY customer. While internal and external surveys suggest that Pro backlogs are lower than they were a year ago, they are still healthy and elevated relative to historical norms. There is only 1 quarter left in the year, we believe the endpoints for our previous guidance range are no longer likely outcomes. As a result, and as we announced in this morning's press release, we narrowed our guidance range for fiscal 2023. Richard will take you through the details in a moment. As we've discussed, this year reflects a period of moderation. However, we are confident in our ability to navigate through this unique environment. We remain very excited about our strategic initiatives and are committed to investing in the business to deliver the best interconnected shopping experience, capture wallet share with the Pro and grow our store footprint. As we discussed at the investor conference in June, we continue to invest and focus on creating a frictionless interconnected shopping experience for our customers. We are pleased with the progress we are making. homedepot.com is one of the largest retail websites in the United States, and our digital app is one of the most highly rated in all of retail. And yet, we believe there is still opportunity to reduce pain points across the shopping journey. Our teams are identifying areas of improvement like better communication throughout the shopping journey and an easier returns process and the ability to seamlessly and intuitively make changes to an order once placed. For our Pros, we're investing in a multitude of initiatives. We remain focused on building out our unique ecosystem of products and services. As a result, we are evolving our organizational structure and recently elevated Ann-Marie Campbell to Senior Executive Vice President, better aligning our outside sales and service business in the global stores organization. Pro is one of our biggest growth opportunities, and this organizational change will allow us to better serve them by leveraging our full ecosystem of expertise, product assortment, fulfillment and operations. Our merchants, store MET teams, supplier partners and supply chain teams did an outstanding job delivering value and service to our customers throughout the quarter, and I'd like to close by thanking them for their dedication and hard work. In addition, the Home Depot is proud to have tens of thousands of veterans, service members and military spouses and orange aprons. Last week, we announced The Home Depot Foundation surpassed the goal of $500 million invested in veterans causes and also increased the total commitment to $750 million by 2030. And with that, I'd like to turn the call over to Anne.


Richard McPhail: Thank you, Billy, and good morning, everyone. In the fourth quarter, total sales were $34.8 billion, a decrease of 2.9% from last year. During the fourth quarter, our total company comps were negative 3.5% with comps of negative 2.5% in November, positive 1.1% in December and negative 8.5% in January. Comps in the U.S. were negative 4% for the quarter with comps of negative 2.7% in November, positive 0.6% in December and negative 9.1% in January. In local currency, Mexico and Canada posted comps above the company average with Mexico posting positive comps. It is important to note that adjusting for holiday shifts and weather-related impacts in January, monthly comps relatively consistent across the quarter. For the year, our sales totaled $152.7 billion, a decrease of 3% versus fiscal 2022. For the year, total company comp sales decreased 3.2% and U.S. comp sales decreased 3.5%. In the fourth quarter, our gross margin was approximately 33.1%, a decrease of 20 basis points from last year. For the year, our gross margin was approximately 33.4%, a decrease of 15 basis points from last year, which was in line with our expectations. During the fourth quarter, operating expenses as a percentage of sales increased approximately 115 basis points to 21.2% compared to the fourth quarter of 2022. Our operating expense performance during the fourth quarter reflects our previously executed compensation increases for hourly associates as well as deleverage from our top line results. For the year, operating expenses were approximately 19.2% of sales, representing an increase of approximately 90 basis points from fiscal 2022. Our operating margin for the fourth quarter was approximately 11.9% and for the year was approximately 14.2%. Interest and other expense for the fourth quarter increased by $50 million to $458 million. In the fourth quarter and for fiscal 2023, our effective tax rate was 24%. Our diluted earnings per share for the fourth quarter were $2.82, a decrease of 14.5% compared to the fourth quarter of 2022. Diluted earnings per share for fiscal 2023 were $15.11, a decrease of 9.5% compared to fiscal 2022. At the end of the quarter, merchandise inventories were $21 billion, down $3.9 billion or approximately 16% versus last year, and inventory turns were 4.3x, up from 4.2x from the second period last year. Moving on to capital allocation. During the fourth quarter, we invested approximately $860 million back into our business in the form of capital expenditures. This brings total capital expenditures for fiscal 2023 to approximately $3.2 billion. During the year, we opened 13 new stores, bringing our store count to 2,335 at the end of fiscal 2023. Retail selling square footage was approximately 242 million square feet and total sales per retail square foot were approximately $605 in fiscal 2023. Additionally, we invested approximately $1.5 billion on three acquisitions during fiscal 2023, accelerating our strategic initiatives and providing us with better capabilities to serve our customers. During the year, we paid approximately $8.4 billion of dividends to our shareholders. Today, we announced our Board of Directors increased our quarterly dividend by 7.7% to $2.25 per share, which equates to an annual dividend of $9 per share. And finally, during fiscal 2023, we returned approximately $8 billion to our shareholders in the form of share repurchases, including $1.5 billion in the fourth quarter. Computed on the average of beginning and ending long-term debt and equity for the trailing 12 months, return on invested capital was 36.7% compared to 44.6% at the end of the fourth quarter of fiscal 2022. Now I'll comment on our outlook for 2024. First, let me point out that fiscal 2024 will include a 53rd week, so the fourth quarter of fiscal 2024 will consist of 14 weeks. We will continue to report comps on a 52-week basis, but we will base our overall guidance on 53 weeks. As you heard from Ted, we feel great about the actions we took in 2023 to position us well heading into 2024. And while there are signs that the economy is on the way towards normalization, the home improvement market still faces headwinds as we look ahead to fiscal 2024. We considered several factors that informed our outlook for fiscal 2024. On the positive side, we faced a number of pressures in fiscal 2023 that are unlikely to repeat in fiscal 2024. In 2023, we saw four increases in the Fed funds rate, a sharp decline in existing home sales and approximately 110 basis points of comp pressure from lumber deflation. However, we still expect pressures to our business in fiscal 2024. Personal consumption growth as measured by PCE is expected to decelerate compared to 2023. Our share of PCE also remains slightly elevated relative to 2019 and has been on a glide path towards 2019 levels. Higher interest rates at the beginning of 2024 relative to last year will likely continue to pressure demand for larger projects. And the effects from pull forward of demand during the pandemic as well as some project deferral could impact demand into 2024. As we consider these influences on home improvement demand, we are planning for a year of continued moderation but with slightly less pressure to comp sales than what we faced in fiscal 2023. Our fiscal 2024 outlook is for total sales growth to outpace sales comp with sales growth of approximately positive 1% and comp sales of approximately negative 1% compared to fiscal 2023. Total sales growth will benefit from a 53rd week as well as from the acquisitions we made and the new stores we opened in fiscal 2023 and the stores we plan to open in fiscal 2024. We expect the 53rd week will contribute approximately $2.3 billion in sales. Our gross margin is expected to be approximately 33.9%, an increase of approximately 50 basis points compared to fiscal 2023. This primarily reflects a lower product and transportation cost environment relative to fiscal 2023 as well as benefits from a portion of the approximately $500 million in reduced fixed costs that we will realize in fiscal 2024. Further, we expect operating margin of approximately 14.1%. This reflects deleverage from sales and pressure from targeted incentive compensation as we are overlapping lower incentive compensation paid than planned in 2023. This will be partially offset by the benefits from the approximately $500 million in fixed costs that we will realize in fiscal 2024 in both cost of goods sold and operating expenses. Our effective tax rate is targeted at approximately 24.5%. We expect net interest expense of approximately $1.8 billion. Our diluted earnings per share percent growth is targeted to be approximately 1% compared to fiscal 2023, with the extra week contributing approximately $0.30. We plan to continue investing in our business with capital expenditures of approximately 2% of sales on an annual basis. After investing in our business and paying our dividend, it is our intent to return excess cash to shareholders in the form of share repurchases. We believe we have positioned ourselves to meet the needs of our customers in any environment. The investments we've made in our business have enabled agility in our operating model. As we look forward, we will continue to invest to strengthen our position with our customers, 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.


Ted Decker: Thank you, Isabelle and good morning everyone. Sales for fiscal 2024 were $159.5 billion an increase of 4.5% from the same period last year. Comp sales declined 1.8% from the same period last year. And our U.S. Stores had negative comps of 1.8%. Adjusted diluted earnings per share were $15.24 compared to $15.25 in the prior year. In the fourth quarter, comp sales increased 0.8% from last year. And comps in our U.S. Stores were up 1.3%. Adjusted diluted earnings per share were $3.13 compared to $2.86 in the prior year. The quarter, we saw broad-based engagement across our geographies. As fifteen of our nineteen U.S. Regions delivered positive comps. In addition, both Canada and Mexico reported positive comps in local currency. Our fourth quarter results exceeded our expectations as we saw greater engagement home improvement spend despite ongoing pressure on large remodeling projects. Throughout the year, we remained steadfast in our investments across our strategic initiatives. Despite uncertain macroeconomic conditions and a higher interest rate environment that impacted home improvement demand. Our strategic priorities remain creating the best interconnected shopping experience, growing our pro wallet share through a unique ecosystem of capabilities, and building new stores. We are always improving our interconnect shopping experience. We know that our customers want faster delivery than ever before. Recall that last quarter I shared the progress we made with our investment in our downstream supply chain. Including an expanded assortment in our DFCs to allow for faster delivery speeds across more products. We also began leveraging our stores to offer more delivery options. Our delivery speeds are now the fastest they've ever been and customers are increasing their spend. Billy will take you through these results in a moment. Growing our share of wallet with our pro customers is a key part of our growth strategy. We've continued investing in our store experience, fulfillment options and sales teams. These investments are delivering incremental sales growth and Anne will discuss this in detail shortly. In June, we completed the acquisition of SRS, And while we've only owned them for seven months, could not be happier with the business. The capabilities that SRS brings are both additive and complementary to our strategic efforts. As expected for fiscal 2024, SRS contributed $6.4 billion in sales for the seven months we owned them. And since we acquired them in June, they have opened over twenty greenfield locations, and completed four tuck-in acquisitions. We're also focusing on many cross-sell opportunities with SRS. As an example, we've talked about the opportunity with QuoteCenter. Our platform that provides real-time quote pricing in different fulfillment options for larger job lot quantities. SRS was already in quote center but not in all markets. Today, they are in nearly every market with their roofing products. And since making this change, have seen SRS's sales and quote center more than triple Going forward, we will continue to support SRS' momentum. We expect their organic sales to grow mid-single digits in fiscal 2025. Our real estate footprint remains one of our distinct competitive advantages. We are expanding that footprint by investing in new stores in areas that have experienced population growth or where it makes sense to relieve pressure on existing high volume stores. In fiscal 2024, we opened twelve new stores. Ten in the US and two in Mexico. We are seeing great results from these stores which are outperforming our expectations. For fiscal 2025, we plan to open thirteen new stores. For fiscal 2025, we expect total sales growth of comparable sales growth of approximately one percent, and adjusted diluted earnings per share to decline approximately two percent. We remain excited about all our growth opportunities. We feel confident that the investments we are making will set us up for continued success. I wanna close by thanking our associates for their hard work and dedication to our customers in the fourth quarter and throughout the year. Our results reflect strong execution by our stores, merchants and supply chain teams. As well as our vendor partners as they remain focused on delivering value and service to our customers. With that, let me turn the call over to Anne.


Ted Decker: Thank you, Isabel, and good morning everyone. Sales for the first quarter were $36.4 billion, down 2.3% from the same period last year. Comp sales declined 2.8% from the same period last year and our U.S. stores had negative comps of 3.2%. Diluted earnings per share were $3.63 in the first quarter compared to $3.82 in the first quarter last year. The team executed a high level in the quarter, continued to grow market share. While the quarter was impacted by a delayed start to spring and continued softness in certain larger discretionary projects, we feel great about our store readiness, product assortment and associate engagement. Our associates are energized and ready to serve our customers as spring breaks across the country. As you will hear from Billy, where weather was favorable, we saw good customer engagement and strength in outdoor projects. In addition, our focus remains on creating the best interconnected experience growing Pro wallet share with a differentiated set of capabilities in building new stores, driving sales growth with our Pro customers remains one of our top focus areas. Remember, we operate in a $45 trillion asset class, which represents the installed base of homes in the United States and we serve a highly fragmented addressable market of approximately $1 trillion. Within that TAM, the greatest opportunity is with the residential Pro contractor, who shops across many categories of home improvement products while working on complex projects. We've defined that specific opportunity as an approximately $250 billion TAM, of which we have relatively little share today. We also know that to effectively serve this TAM, we need an expanded set of capabilities and services that we refer to as our Pro ecosystem. And while the store remains the center of that ecosystem, we are developing more fulfillment options, a dedicated sales force, specific digital assets, trade credit and order management capabilities geared at the residential Pro who shops across categories. As we've shared with you before, our more mature markets with this Pro ecosystem have seen great success, so we're expanding to other markets. As you heard last quarter, we'll have the foundational elements of our ecosystem in 17 markets by the end of the fiscal year. And while these 17 markets are currently at different maturity levels, they are outperforming our other large Pro markets in aggregate. Earlier this quarter, we announced our intent to acquire SRS, a residential, specialty trade distributor with a leading position in three large, highly fragmented specialty trade verticals serving the roofer, the pool contractor and the landscape professional. SRS is complementary to the ecosystem we've been building, giving us another avenue to more effectively serve the complex project occasion. They also give us the right to win with a specialty trade Pro customer. SRS does an exceptional job serving the specialty trade Pro who typically only shops one category and needs specialized capabilities to complete their project. In addition, SRS is an exceptionally well run business with a world-class management team. As we build out our own ecosystem, we can leverage their expertise in deep product catalog in the verticals in which they operate. We have significant growth opportunities in front of us and we are very happy with the operational execution in our core business. And despite pressure in the market, we continue to invest in our business. We are gaining share of wallet with our customers whether they are shopping in our stores, on our digital assets, or through our Pro ecosystem. Our merchants, store and MET teams, supplier partners and supply chain teams are always ready to serve in any environment. They did an outstanding job delivering value and service to our customers throughout the quarter and I'd like to close by thanking them for their dedication and hard work. With that, let me turn the call over to Ann.

Sales first quarter down 2.3% same period last year


Ted Decker: Thank you, Isabel, and good morning, everyone. Sales for the second quarter were $43.2 billion, an increase of 0.6% from the same period last year. Our sales in the quarter include $1.3 billion from SRS. Recall that we closed on the SRS acquisition on June 18, and we've included approximately six weeks of their performance in our consolidated results. Comp sales declined 3.3% from the same period last year, and our U.S. stores had negative comps of 3.6%. Adjusted diluted earnings per share were $4.67 in the second quarter, compared to $4.68 in the second quarter of last year. The team continues to navigate this unique environment while executing at a high level. During the quarter, higher interest rates and greater macroeconomic uncertainty pressured consumer demand more broadly, resulting in weaker spend across home improvement projects. Additionally, we saw continued softness in spring projects, which were also impacted by the extreme weather changes throughout the quarter. When we look at the performance in the first six months of the year, as well as continued uncertainty around underlying consumer demand, we believe a more cautious sales outlook is warranted for the year. Richard will take you through the details in a moment, but we are now guiding to a comp sales decline of approximately 3% to 4% for fiscal 2024. Regardless of the current pressure in the environment, our team remains focused on serving our customers and ensuring we have the right products at the right values. And we remain focused on long-term share growth in the highly fragmented approximately $1 trillion home improvement market. Remember, we operate in one of the largest asset classes which is estimated at approximately $45 trillion, representing the installed base of homes in the United States. Today, we have roughly 17% market share with tremendous growth potential. That is why we have been investing and executing on our strategy to create the best interconnected experience for a Pro wallet share through a differentiated set of capabilities and build new stores. Now I'll take a few moments to comment on our acquisition of SRS Distribution. SRS has an exceptional team with a proven growth track record, and we are thrilled to welcome them into The Home Depot family. While our financials only reflect a portion of their first half performance for the first six-month period matching our first half, they generated high single-digit top line growth while growing operating income largely in line with sales compared to the previous year. We are incredibly excited about what we can achieve together by leveraging our combined assets, capabilities and competitive advantages. We plan to drive incremental growth through several sales and cross synergy opportunities. We'll make their more comprehensive product offering in roofing, pool and landscape available to all our customers through our Pro desk, and we will offer SRS customers a form of credit tied to their account, which will make purchases at Home Depot stores much more convenient. The fundamentals of the home improvement market remain strong, and we have significant growth opportunities in front of us. We are gaining share of wallet with our customers whether they are shopping in our stores, on our digital assets or through our Pro ecosystem. Our merchants, store and MET teams, supplier partners and supply chain teams are always ready to serve in any environment. They did an outstanding job delivering value and service to our customers throughout the quarter, and I'd like to close by thanking them for their dedication and hard work. With that, let me turn the call over to Ann.


Ted Decker: Thank you, Isabel, and good morning, everyone. Sales for the third quarter were $40.2 billion 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 third quarter compared to $3.85 in the third quarter 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 four 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 third quarter, our associates and communities were impacted by two hurricanes. As you’ll hear from Ann, 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 third 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 third quarter as well as expected hurricane related demand in the fourth quarter. 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 in 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 third quarter, 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 first quarter that reflects a full period of SRS in our financials. SRS gives us the right to win with the 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 $6.4 billion in sales for the approximately seven 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. 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 in 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.


Seth Sigman: Thanks. Good morning, everyone. I do want to follow-up on that last point around the flow through you step back and look at your sales over the last several years, I think since twenty nineteen, sales are up maybe forty five percent, s g and a is actually up a similar percent. Along the way, there have been investments and plenty of cost pressures I guess the real question is to the extent that comps start to improve here, they progress throughout twenty twenty five. Are we at that point where sales should grow faster than expenses you can really start to see that flow through come through. Seth, you know what? I would point you back to our investor conference back in twenty twenty three, right, Once this market normalizes, we would expect a base case of three to four percent top line growth We would expect and and and within that, we expect flat gross margin is kind of a base expectation. And then we do expect operating expense leverage. And so that Takes you to the the the earnings per share expectation of mid to high single digit growth once our market is normalized and once we are back to that level of sales growth. And that view hasn't changed since twenty twenty three.

sales forty five percent twenty nineteen


Richard McPhail: Thank you, Ann, and good morning, everyone. In the second quarter, total sales were $42.9 billion, a decrease of approximately $900 million or 2% from last year. During the second quarter, our total company comps were negative 2% with comps of negative 2.6% in May, negative 3.3% in June and negative 0.2% in July. Comps in the U.S. were negative 2% for the quarter with comps of negative 2.6% in May, negative 3.3% in June and negative 0.4% in July. As you heard from Billy, during the second quarter, we continued to experience lumber deflation compared to the prior year. While lumber prices were down, we saw an improvement in unit productivity, resulting in a net negative comp impact of approximately 85 basis points versus the second quarter of 2022. In the second quarter, our gross margin was 33%, a decrease of 8 basis points from the second quarter last year, primarily driven by pressure from shrink. During the second quarter, operating expense as a percent of sales increased approximately 100 basis points to 17.6% compared to the second quarter of 2022. Our operating expense performance during the second quarter reflects our previously executed compensation increases for hourly associates as well as deleverage from our top line results. Our operating margin for the second quarter was 15.4% compared to 16.5% in the second quarter of 2022. Interest and other expense for the second quarter increased by $49 million to $428 million due primarily to interest on our floating rate debt as well as higher debt balances than a year ago. In the second quarter, our effective tax rate was 24.4%, up from 24.3% in the second quarter of fiscal 2022. Our diluted earnings per share for the second quarter were $4.65, a decrease of 7.9% compared to the second quarter of 2022. During the second quarter, we opened two new stores, bringing our total store count to 2,326. Retail selling square footage was approximately 241 million square feet. At the end of the quarter, merchandise inventories were $23.3 billion, down $2.8 billion compared to the second quarter of 2022. And inventory turns were 4.4x, down from 4.5x last year. Turning to capital allocation. After investing in our business and paying our dividend, it is our intent to return excess cash to shareholders in the form of share repurchases. During the second quarter, we invested approximately $800 million back into our business in the form of capital expenditures. And during the quarter, we paid approximately $2.1 billion in dividends to our shareholders, and we returned approximately $2 billion to shareholders in the form of share repurchases. Computed on the average of beginning and ending long-term debt and equity for the trailing 12 months, return on invested capital was approximately 41.5%, down from 45.6% in the second quarter of fiscal 2022. Now I’ll comment on our guidance for fiscal 2023. Today, we are reaffirming our guidance for 2023. We expect fiscal 2023 sales and comp sales to decline between 2% and 5%. We are targeting an operating margin between 14.3% and 14% for the year. Our effective tax rate is targeted at approximately 24.5%. We expect interest expense of approximately $1.8 billion and we are anticipating between a 7% and 13% decline in diluted earnings per share compared to fiscal 2022. In addition, we continue to focus on driving productivity in the business and feel confident that we will realize the previously announced $500 million in annualized cost savings in 2024. We also remain focused on meeting the needs of our customers with our leading product authority in home improvement, strong in-stock levels and knowledgeable associates. We will continue to prudently invest to strengthen our competitive position and leverage our scale and low-cost position to outperform our market and deliver shareholder value. Thank you for your participation in today’s call. And Christine, we are now ready for questions.


Richard McPhail: Thank you, Billy, and good morning, everyone. In the third quarter, total sales were $37.7 billion, a decrease of approximately $1.2 billion or 3% from last year. During the third quarter, our total company comps were negative 3.1% with comps of negative 2.1% in August, negative 3.4% in September and negative 3.7% in October. Comps in the U.S. were negative 3.5% for the quarter with comps of negative 2.5% in August, negative 3.8% in September and negative 4.1% in October. In local currency, Mexico and Canada posted comps above the company average. It is important to note that adjusting for storm-related overlaps and some seasonal shift, monthly comps were relatively consistent across the quarter. In the third quarter, our gross margin was 33.8%, a decrease of approximately 20 basis points from the third quarter last year, which was in line with our expectations. During the third quarter, operating expense as a percent of sales increased approximately 120 basis points to 19.4% compared to the third quarter of 2022. Our operating expense performance during the third quarter reflects our previously executed compensation increases for hourly associates as well as deleverage from our top line results. Our operating margin for the third quarter was 14.3% compared to 15.8% in the third quarter of 2022. Interest and other expense for the third quarter increased by approximately $30 million to $438 million. In the third quarter, our effective tax rate was 23.3%, down from 24.4% in the third quarter of fiscal 2022. Our diluted earnings per share for the third quarter were $3.81, a decrease of 10.1% compared to the third quarter of 2022. During the third quarter, we opened 7 new stores, bringing our total store count to 2,333. Retail selling square footage was approximately 242 million square feet. At the end of the quarter, merchandise inventories were $22.8 billion, down $2.9 billion or 11% compared to the third quarter of 2022. And inventory turns were 4.3x flat to 1 year ago. Turning to capital allocation. After investing in our business and paying our dividend, it is our intent to return excess cash to shareholders in the form of share repurchases. During the quarter, we invested approximately $670 million back into our business in the form of capital expenditures. And during the quarter, we paid approximately $2.1 billion in dividends to our shareholders, and we returned approximately $1.5 billion to shareholders in the form of share repurchases. Computed on the average of beginning and ending long-term debt and equity for the trailing 12 months, return on invested capital was approximately 38.7%, down from 43.3% in the third quarter of fiscal 2022. Now I will comment on our guidance for fiscal 2023. As you heard from Ted, with one quarter remaining in fiscal 2023, we no longer expect the end points of our previous guidance range as likely outcomes, and therefore, we are narrowing our guidance for 2023. We expect fiscal 2023 sales and comp sales to decline between 3% and 4%. We are targeting an operating margin between 14.2% and 14.1% for the year. Our effective tax rate is targeted at approximately 24.5%. We expect interest expense of approximately $1.8 billion. And we are anticipating between a 9% and 11% decline in diluted earnings per share compared to fiscal 2022. In addition, as you heard from Ann, we continue to focus on driving productivity in the business. We have taken a number of actions that will help us realize the previously announced $500 million in annualized cost savings in 2024 and are fully confident that we will deliver on this commitment. We also remain focused on meeting the needs of our customers with our leading product authority in home improvement, strong in-stock levels and knowledgeable associates. We will continue to prudently invest to strengthen our competitive position and leverage our scale and low-cost position to outperform our market and deliver shareholder value. Thank you for your participation in today's call. And Christine, we are now ready for questions.


Richard McPhail: Thank you, Billy, and good morning, everyone. In the first quarter, total sales were $36.4 billion, a decrease of approximately 2.3% from last year. During the first quarter, our total company comps were negative 2.8% with comps of negative 4% in February, negative 0.8% in March, and negative 3.3% in April. Comps in the U.S. were negative 3.2% for the quarter with comps of negative 4.8% in February, negative 1.3% in March, and negative 3.6% in April. For the quarter, Mexico posted positive comps, whereas Canada was slightly below the company average. In the first quarter, our gross margin was 34.1%, an increase of approximately 45 basis points from the first quarter last year, primarily driven by benefits from lower transportation cost and shrink. During the first quarter, operating expense as a percent of sales increased approximately 140 basis points to 20.2% compared to the first quarter of 2023. The increase was primarily driven by a benefit from a legal settlement that we are overlapping from the first quarter of fiscal 2023, as well as deleverage from our top line results. Our operating expense performance was in line with our expectations. Our operating margin for the first quarter was 13.9% compared to 14.9% in the first quarter of 2023. Interest and other expense for the first quarter decreased by $13 million to $428 million. In the first quarter, our effective tax rate was 22.6% compared to 24.2% in the first quarter of fiscal 2023. Our diluted earnings per share for the first quarter were $3.63, a decrease of 5% compared to the first quarter of 2023. During the first quarter, we opened two new stores, bringing our total store count to 2,337. Retail selling square footage was approximately 242 million square feet. At the end of the quarter, merchandise inventories were $22.4 billion, down approximately $3 billion, or 12% compared to the first quarter of 2023, and inventory turns were 4.5x, up from 3.9x last year. Turning to capital allocation. During the first quarter, we invested approximately $850 million back into our business in the form of capital expenditures. And during the quarter, we paid approximately $2.2 billion in dividends to our shareholders and we returned approximately $600 million to shareholders in the form of share repurchases. As a reminder, in March we announced our intent to acquire SRS Distribution and as a result, we paused share repurchases. As you've heard us say many times, we maintain a disciplined approach to capital allocation and that is not changing. First and foremost, we will invest in the business and expect capital expenditures of approximately 2% of sales on an annual basis. After investing in the business, we plan to pay the dividend and it is our intent to return any excess cash to shareholders in the form of share repurchases. From time to time, we will also invest in the business through acquisitions to enhance our capabilities and to accelerate our strategic objectives. Computed on the average of beginning and ending long-term debt and equity for the trailing 12 months, return on invested capital was 37.1%, down from 43.6% – excuse me, down from 43.6% in the first quarter of fiscal 2023. Now, I will comment on our guidance for fiscal 2024. Today, we are reaffirming our guidance for 2024. As a reminder, our guidance does not currently reflect any impact from the announced acquisition of SRS. The acquisition is currently under regulatory review and we expect it to close by the end of fiscal 2024. We expect total sales growth to outpace sales comp with sales growth of approximately positive 1% and comp sales of approximately negative 1%. Total sales growth will benefit from a 53rd week and we expect the 53rd week will contribute approximately $2.3 billion in sales. Our gross margin is expected to be approximately 33.9%, an increase of approximately 50 basis points, compared to fiscal 2023. We expect operating margin of approximately 14.1%. Our effective tax rate is targeted at approximately 24.5%. We expect net interest expense of approximately $1.8 billion, and our diluted earnings per share percent growth is targeted to be approximately 1% compared to fiscal 2023. It’s our intent to update guidance as appropriate once the SRS transaction closes. We believe that we have positioned ourselves to meet the needs of our customers in any environment. The investments we’ve made in our business have enabled agility in our operating model. As we look forward, we will continue to invest to strengthen our position with our customers, 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.