Australia/Asia July Diane Dayhoff Vice President, Investor Relations. Lyndsey Burton Senior Manager, Investor Relations

Transcription

1 Australia/Asia July 2017 Diane Dayhoff Vice President, Investor Relations Lyndsey Burton Senior Manager, Investor Relations

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, including those related to the 2014 data breach; 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; store openings and closures; guidance for fiscal 2017 and beyond; financial outlook; and the integration of Interline Brands, Inc. into our organization and the ability to recognize the anticipated synergies and benefits of the acquisition. 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 forward-looking 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 by providing them with meaningful information relevant to events of unusual nature or frequency that impact the comparability of underlying business results from period to period. 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

3 Discussion Overview Financial Results & Targets Our View of the U.S. Home Improvement Market Strategic Framework 3

4 First Quarter Fiscal 2017 Results ($ Millions USD, except per share data) Q Q V% Sales $23,887 $22, % Comp Sales 5.5% 6.5% Gross Profit $8,154 $7, % Gross Profit Margin 34.14% 34.23% -9 bps Total Operating Expenses $4,805 $4, % Operating Profit $3,349 $3, % Operating Profit Margin 14.02% 13.52% 50 bps Net Earnings $2,014 $1, % Diluted Earnings Per Share $1.67 $ % 16% Earnings Per Share Growth in Q

5 Fiscal 2017 Outlook (1) (As of May 16, 2017) New store openings ~6 Sales growth ~4.6% Comp store sales growth ~4.6% (2) Diluted EPS growth ~11.0% to $7.15 Capital expenditures ~$2 billion (1) All guidance based on GAAP (2) EPS growth guidance includes ~$5 billion of share repurchases using excess cash in FY

6 2018 Financial Targets (1) Sales Revenue of $101 billion Operating Margin of ~14.5% Return on Invested Capital of 35% (2) (1) Established December 2015 (2) Return on invested capital is defined as net operating profit after tax for the trailing twelve months divided by the average of beginning and ending long-term debt, including current installments, and equity. Assumes excess cash used to repurchase shares. 6

7 Solid Liquidity and Conservative Financial Risk Profile We continue to generate strong cash flow Debt Maturity Profile ($B) $2.5 $1.6 Weighted Average Maturity: 14.3 years Weighted Average Coupon: 3.66% 3.0 $9.8 $ $ $2.2 $ FYE 2015 Cash Flow from the Business Net Debt Issuance Cap Ex Dividends Share FYE 2016 Repurchases Fixed Floating 7

8 Committed to Dividend Payout Annualized Dividend Paid $3.56 $2.76 $2.36 $1.56 $1.88 $0.95 $1.04 $ F Increased Targeted Dividend Payout Ratio from 50% to 55% in February

9 Shareholder Return Principals Return on Invested Capital Principle Maintain high return on invested capital, benchmarking all uses of excess liquidity against value created for shareholders through repurchases Adjusted debt/ebitdar ratio not to exceed 2x Dividend Principle Targeting payout at approximately 55% of earnings. Intend to increase dividend every year Share Repurchase Principle After meeting the needs of the business, use excess liquidity to repurchase shares, as long as value creating 9

10 Discussion Overview Financial Results & Targets Our View of the U.S. Home Improvement Market Strategic Framework 10

11 Q Q Q Q PFRI Still Below Historical Mean Private Fixed Residential Investment (PFRI) as a Percentage of GDP 8% PFRI as % of GDP (Nominal $) 60-year Avg. (Nominal) 7% 6% 5% 4% 4.5% 4.0% 3% 2% Source: BEA, Moody s Economy.com 11

12 Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Mar-17 Home Price Recovery Home Price Index by City 35% 25% 15% 5% (5%) (15%) (25%) (35%) (45%) (55%) (65%) National Index 20-City Composite 10-City Composite Atlanta, GA Boston, MA Charlotte, NC Chicago, IL Cleveland, OH Dallas, TX Denver, CO Detroit, MI Las Vegas, NV Los Angeles, CA Miami, FL Minneapolis, MN New York, NY Phoenix, AZ Portland, OR San Diego, CA San Francisco, CA Seattle, WA Tampa, FL Washington, DC Market Indexed to Q (Mar 2017) Dallas, TX 42.3% Denver, CO 41.7% Seattle, WA 25.5% Portland, OR 23.2% Charlotte, NC 17.8% Boston, MA 13.1% San Francisco, CA 9.8% Atlanta, GA 3.2% National Index 2.7% 20-City Composite (3.8%) Los Angeles, CA (4.7%) San Diego, CA (5.0%) Cleveland, OH (5.7%) 10-City Composite (6.2%) Minneapolis, MN (7.2%) Detroit, MI (9.5%) Washington, DC (11.8%) New York, NY (12.3%) Chicago, IL (16.0%) Tampa, FL (19.5%) Miami, FL (20.3%) Phoenix, AZ (26.4%) Las Vegas, NV (32.7%) Source: S&P Case-Shiller, Moody s Economy.com (Hist.) 12

13 E 2018E Household Formation and Aging U.S. Housing Stock Supportive of Home Improvement Spend Household Formation Aging Housing Stock Household Formation (m) Long-term Avg yrs yrs yrs yrs 0-9 yrs 0% 10% 20% 30% 40% 50% 60% 70% 80% 90%100% Source: Census, Moody s Economy.com (Hist.) Moody s Economy.com (Est.); John Burns Real Estate Consulting (Housing Stock) 13

14 Discussion Overview Financial Results & Targets Our View of the U.S. Home Improvement Market Objectives & Strategy 14

15 Our Objectives Grow Market Share Pro and Consumer Deliver Shareholder Value 15

16 The Power of The Home Depot Customer Experience Connect Associates to Customer Needs Interconnected Experience: Store to Online, Online to Store Product Authority Connect Products and Services to Customer Needs Connect Product to Shelf, Site and Customer Capital Allocation Driven By Productivity And Efficiency Innovate Our Business Model and Value Chain 16

17 Opportunities for Growth Sources: 2014 HIRI Reference Guide; 2015 Harvard University Emerging Trends in the Remodeling Market ; NAICS; and external market analysis 17

18 Growth: Professional Customer 18

19 Growth: Interconnected Retail 19