2018 Raymond James Conference

Transcription

1 Richard McPhail Senior Vice President, Finance December 6, Raymond James Conference 1

2 Forward Looking Statements and Non- GAAP Financial Measurements Certain statements contained in today s presentations constitute "forward-looking statements" as defined in the Private Securities Litigation Reform Act of Forward-looking statements may relate to, among other things, the demand for our products and services; net sales growth; comparable store sales; effects of competition; state of the economy; state of the residential construction, housing and home improvement markets; state of the credit markets, including mortgages, home equity loans and consumer credit; demand for credit offerings; inventory and in-stock positions; implementation of store, interconnected retail, supply chain and technology initiatives; management of relationships with our suppliers and vendors; the impact and expected outcome of investigations, inquiries, claims and litigation; issues related to the payment methods we accept; continuation of share repurchase programs; net earnings performance; earnings per share; dividend targets; capital allocation and expenditures; liquidity; return on invested capital; expense leverage; stock-based compensation expense; commodity price inflation and deflation; the ability to issue debt on terms and at rates acceptable to us; the effect of accounting charges; the effect of adopting certain accounting standards; the impact of the Tax Cuts and Jobs Act of 2017; store openings and closures; guidance for fiscal 2018 and beyond; financial outlook; and the integration of acquired companies into our organization and the ability to recognize the anticipated synergies and benefits of those acquisitions. These forward-looking statements are based on currently available information and current assumptions, expectations and projections about future events, and actual results could differ materially from our expectations and projections. You should not rely on our forwardlooking statements as they speak only as of the date hereof, and we undertake no obligation to update these statements to reflect subsequent events or circumstances except as may be required by law. Additional information regarding risks and uncertainties is described in Item 1A, "Risk Factors," and elsewhere in our Annual Report on Form 10-K for our fiscal year ended January 29, 2017 and our subsequent Quarterly Reports on Form 10-Q. Today s presentations are also supplemented with certain non-gaap financial measures. We believe these non-gaap financial measures better enable management and investors to understand and analyze our performance. However, this supplemental information should not be considered in isolation or as a substitute for the related GAAP measures. Reconciliations of the supplemental information to the comparable GAAP measures can be found on our Investor Relations website at ir.homedepot.com. 2 2

3 Discussion Overview Fiscal 2017 Results Our View of the Economy and State of the U.S. Housing Market and Fiscal 2018 Guidance Company Initiatives and Long-term Targets 3

4 Fiscal 2017 Results ($ Millions USD, except per share data) FY 2017 FY 2016 V% Sales $100,904 $94, % Comp Sales 6.8% 5.6% Gross Profit $34,356 $32, % Gross Profit Margin 34.05% 34.16% (11) bps Total Operating Expenses $19,675 $18, % Operating Profit $14,681 $13, % Operating Profit Margin 14.55% 14.19% 36 bps Net Earnings $8,630 $7, % Diluted Earnings Per Share $7.29 $ % 13.0% Earnings Per Share Growth in

5 Discussion Overview Fiscal 2017 Results Our View of the Economy and State of the U.S. Housing Market and Fiscal 2018 Guidance Company Initiatives and Long-term Targets 5

6 Our View of the Economy Real U.S. GDP is expected to grow, supported by improved job market and higher consumer spending Drivers of home improvement related spending expected to trend positively and support economic growth Anticipating favorable economic conditions in Canada & Mexico 6

7 Real U.S. GDP is Expected to Grow, Making This the Longest Economic Recovery in History Real U.S. GDP (Year Over Year Percentage Change) Average: 2.3% 2.5% 2.2% 2.6% 2.9% 2.3% 2.7% 2.2% 2.1% 1.6% 1.7% 1.5% E 2018E 2019E 2020E Source: Bureau of Economic Analysis (Hist.), Composite average from various sources (Est.) 8

8 Drivers of Home Improvement Spend Household Formation Home Price Appreciation Housing Turnover Age of Housing Stock Impact on HI Spend Increases Demand Supports Incremental Investments Drives Spending Both Pre And Post Sale Demands Ongoing Repairs And Major Repairs Recent Impact Forward View Acceleration Continued Appreciation Stays At Current Rate Per Unit Spend Increases Expected Future Impact 8

9 E 2019E 2020E E 2018E 2019E 2020E Household Formation Growing Household Formation Percentage of Young Adults Living at Home Change Ann. Avg. Households (MM) 60-year Avg. (MM) Young Adults Living at Home Long-term Avg % 32% 30% 28% 26% 24% 22% 20% 32% 30% Source: US Census Bureau, Moody s Analytics (Est.), Pew Research Center, United Nations Department of Economic and Social Affairs, Internal analysis 9

10 Home Price Appreciation and Value of the Housing Stock Home Price Appreciation Value of Housing Stock and Home Equity 14.2% 9.6% 5.9% Value of Home Equity ($tn) $30 $25 $20 Single-Family Mortgage Debt ($tn) $24.2tn $14.2tn -9.5% $15 $10 $5 $6.3tn $9.8tn 125% increase in U.S. home equity since 2011 $10.0tn $ Q Q Q Source: Case-Shiller U.S. National Home Price Index, Federal Reserve Board 10

11 Inventory Constraints and High Affordability Should Drive Home Price Appreciation Months of Supply Affordability Mos. Supply (Existing Homes) Healthy Balance Affordability Index Equilibrium Long-term Avg Source: National Association of Realtors, Moody s Economy.com 11

12 Aging Housing Stock Creates Additional Demand for Projects Age of Housing Stock Home Age Spend per House 40+ yrs yrs yrs yrs 0-9 yrs % 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% E % 15% 8% 6% % 15% 14% 13% % 16% 13% 13% % 15% 14% 14% >40 33% 40% 51% 54% $ $ $$ $$ $$$ Source: John Burns Real Estate Consulting 12

13 Favorable Trends in Home Improvement Expected to Continue Average Spend per Large Home Improvement Project Remodeling Index $ in thousands $ % $8.2 11% $ NAHB Remodeling Index Equilibrium Source: NAHB, John Burns Real Estate Consulting 13

14 Fiscal 2018 Guidance 1) (As of February 20, 2018) Sales growth Comp store sales growth New store openings ~6.5% (53 rd week adding ~$1.6 billion in sales) ~5.0% (based on 52-week comparison) 3 new stores Operating margin ~14.5% Diluted EPS growth $9.31, or an increase of ~28% (53 rd week contributing ~19 cents) Share repurchases Targeting $4 billion 1) All guidance based on GAAP; includes 53 rd week 14

15 Discussion Overview Fiscal 2017 Results Our View of the Economy and State of the U.S. Housing Market and Fiscal 2018 Guidance Company Initiatives and Long-term Targets 15

16 Retail Customers Expect More Improved Delivery Seamless Checkout Personalized Experiences HD Must Continue to Keep Pace with Changing Environment 16

17 Strategic Investments for the Future Investments (1) ($ in billions) $11.1B Other 1.8 Investment New Stores 0.6 $5.7B BAU Supply Chain Stores Other 0.8 New Stores 0.6 Supply Chain IT / Online Stores 2.9 BAU Target IT 1.7 (1) Investments: Capital and Expense, excludes incremental depreciation 17

18 Investing in Stores & Associates 18

19 Investing in Product & Innovation 19

20 Investing in Personalized Experiences Takeaway Bar 20

21 Investing in Pro & Services 21

22 Investing in Supply Chain & Delivery Upstream Downstream Direct Fulfillment Centers Vendors DC Network (Bulk / Stocking / Flow) Stores Customers Leverage our Competitive Advantage Build a Competitive Advantage 22

23 Continued Focus on Productivity Cost of Goods Sold Operating Expenses Productivity is Our Virtuous Cycle 23

24 Enhancing the Customer Experience, Investing for the Future, Creating Value Sales Operating Margin ROIC ~$120B ~15.0% ~40%+ ~$115B ~14.6% ~14.4% ~34.2% $101B T T T $ in Billions One Home Depot 24