Home Depot Inc Q2 2003 Earnings Conference Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Bill Sims - Salomon Smith Barney - Analyst : Good morning, and congratulations on a solid quarter.

Question: Bill Sims - Salomon Smith Barney - Analyst : Two questions, if I may. The first is in regard to new store productivity. Based on my own calculations, I believe you saw a lift in the second quarter over the first quarter, as well as last year. If that is correct, if you could confirm that, can you indicate what is driving, you know, what initiatives you think are key to driving the new store productivity relative to last quarter? And the second question is, Carol mentioned that the Type A remodels were seeing mixed results. If you wouldn't mind commenting on some of the underperformers and what you think is driving the underperformance and what changes you're making. Thank you.

Question: Bill Sims - Salomon Smith Barney - Analyst : Okay. One quick follow-up on cannibalization. Are you still expecting a 4% impact in cannibalization in the back year, or has that number changed?

Question: Bill Sims - Salomon Smith Barney - Analyst : Thank you.

Question: David Schick - Legg Mason - Analyst : Hi, good morning.

Question: David Schick - Legg Mason - Analyst : A couple of questions. Could you -- you discussed self checkout and that you're adding labor back to the floor. Could you talk about whether that is one for one, or what your experience has been in those stores, overall? So, not just what is happening at the self checkout, but what is happening in those stores where you've rolled that out? And then secondly, any more details you could give on financial impacts of the switch to Citigroup credit. LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies.

Question: David Schick - Legg Mason - Analyst : Thanks a lot.

Question: Matthew Fassler - Goldman Sachs & Company - Analyst : Thanks a lot. Good morning. LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies.

Question: Matthew Fassler - Goldman Sachs & Company - Analyst : I've got two questions. First of all, Carol, if you could revisit the gross margin comment that you made, talking to this third quarter's difficult comparison. If you can just look back to the year-ago period and talk about any unique or unusual dynamics that might have driven an unusually high third quarter gross margin. And as you think about the fourth quarter, as well, it sounds like you feel that that comparison is not quite as daunting, if you could give us some similar insights on the year-ago numbers and your expectations for later in the year?

Question: Matthew Fassler - Goldman Sachs & Company - Analyst : Right.

Question: Matthew Fassler - Goldman Sachs & Company - Analyst : Not to put too fine a point on it, but do you think it is feasible, now thinking about the back half and the aggregate, that you hold margin, or would there be things that you did last year that you might do this year that would cause market to come in against those levels?

Question: Matthew Fassler - Goldman Sachs & Company - Analyst : Yes, is it -- given that the -- given the tough comparisons, do you think it is feasible to hold margin with year-ago levels, or would you expect that margin would actually need to come down from year-ago levels against those comparisons? LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies.

Question: Matthew Fassler - Goldman Sachs & Company - Analyst : Gotcha. Second question relates to the timing of openings, and remodels. It seems like you have a slightly greater proportion of stores than I had forecast opening in the fourth quarter than in the third quarter, and similarly, it sounds like the remodels will be finished later in the year. How much of that is intentional and premeditated, if you will, and how much of that reflects, you know, just pure slippage in terms of execution, if any?

Question: Matthew Fassler - Goldman Sachs & Company - Analyst : That's helpful. Thank you so much.

Question: Alan Rifkin - Lehman Brothers - Analyst : Couple of questions, if I may. With respect to the resets and the remodels, can you maybe provide some color on the costs associated, and that whether or not they are coming in at plan or maybe slightly below? And do you feel like you're becoming more efficient in the remodel and reset process? LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies. And then secondly, Carol, you mentioned that your cap ex for this year is going to decline by $200 to $400 million. Where is that incremental decline coming from?

Question: Alan Rifkin - Lehman Brothers - Analyst : Okay. And then one more follow-up, if I may. What is the size of the GSA contract? What potential do you think it holds?

Question: Alan Rifkin - Lehman Brothers - Analyst : Okay. Thank you very much. LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies.

Question: Wayne Hood - Prudential Securities, Inc. - Analyst : Yeah, Carol, I actually had a question for you and Bob. If you looked at the second quarter and were you to strip out the increase in the worker's comp increase that you pointed to, what happened to the selling store expense rate and payroll rate? Were you able to lever that or no? And because you think about the third quarter, why do you think those -- that worker's comp is going to moderate? Because you're going to need some leverage there to offset that gross margin comparison. And a question for Bob about the cash balance.

Question: Wayne Hood - Prudential Securities, Inc. - Analyst : Is this mostly California driven?

Question: Wayne Hood - Prudential Securities, Inc. - Analyst : And then Bob, I had a question for you. Just how long do you -- are you willing to sit there with that amount of cash on the balance sheet? Because some could argue that it is good that have you it there but it has been there for a while, and there's really nothing come along that you, you know, other than maybe something small, you could acquire, the balance sheet is underleveraged. You own over 80% of the real estate. That's good news but it doesn't point to a necessarily good balance sheet management. How long are you willing tosit with that amount of cash in the balance sheet? LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies.

Question: Wayne Hood - Prudential Securities, Inc. - Analyst : Great. Thank you guys.

Question: Greg Mallick - Morgan Stanley - Analyst : Hi, thanks. A couple questions. One is on the promotion side. Were you guys doing more, sort of, promotional activity in terms of advertising or 0% financing during the quarter? And if so, where do you see that directionally going forward? And then a follow-up on the worker's comp. Is it fair to say that it was such a big change versus a year ago that it was the entire SG&A increase? That there may have been some over provisioning or some catch-up there and that's why it may come down the second half? Are we thinking about that the right way?

Question: Greg Mallick - Morgan Stanley - Analyst : Okay.