Home Depot Inc Q2 2024 Earnings Call Summary

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

Question: Scot Ciccarelli - Truist Securities, Inc. - Analyst : Good morning, everyone. So it sounds like you guys are seeing a bit more of a shift towards, let's call it, broader consumer weakness from what previously seemed to be hesitancy around finance projects. Can you provide a couple of examples, just so we can and kind of the incremental hesitancy on consumer spending patterns?

Question: Scot Ciccarelli - Truist Securities, Inc. - Analyst : So in other words, like it's not necessarily broadening out, but it's increased pressure on, let's call it project-oriented purchases.

Question: Seth Sigman - Barclays Corporate & Investment Bank - Analyst : Hey, good morning, everyone. I wanted to ask about just performance across different channels. So core Home Depot retail, I think that's pretty clear. But Home Depot's HD supply, it seems like it's outperformed, but kind of hard to tell from our side. And then on SRS, if you can maybe just elaborate more on the trends you're seeing there, as you step back and think about, hopefully an eventual recovery you've built up this very diverse business over the last few years. I mean, how do you think about the timing for these different segments and how they come out of this? Thank you.

Question: Seth Sigman - Barclays Corporate & Investment Bank - Analyst : Okay. That's super helpful. And then if we just zoom back in on a core Home Depot and maybe just speak about your relative performance. If there are categories that you may be seeing some widening gap, you called out a number of categories that seem to be under a lot of cyclical pressure, but were cited as bright spots for outdoor power equipment. You mentioned appliances above average. Obviously, that's been a tough category. I think you even mentioned vinyl plank having positive comps. So maybe just speak to some of those categories and where you may be seeing that widening gap. Thanks.

Question: Michael Lasser - UBS Investment Bank - Analyst : Good morning. Thank you so much for taking my question. What do you think the key level for the 30-year fixed rate mortgage needs to fall too in order to drive Home Depot's business higher? And does that rate change or that level change as the decrease in rate is due to an erosion in the labor market rather than just a moderation in inflation?

Question: Michael Lasser - UBS Investment Bank - Analyst : Okay. Thank you very much. My follow up question is the longer that this downturn persists, does Home Depot have an inclination to invest more in price or value as a way to grab market share that it could sustain on an eventual upturn? And maybe as a part of this, could you I pull apart your updated gross margin guidance to reflect the underlying dynamics within core Home Depot versus the influence of SRS on this line item? Thank you so much. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 13, 2024 / 1:00PM, HD.N - Q2 2024 Home Depot Inc Earnings Call

Question: Simeon Gutman - Morgan Stanley - Analyst : Morning, everyone. I have a question related to reversion. One way to look at it since 2019, if we look at transactions, they looked like they're flat to down a little bit. So to Ted's point earlier, most of that looks like it's given back on transactions. Ticket, though, is still up about 30%-ish, 34%. So I think that's a function of the number of items, consumers reporting in the basket because there was inflation. My question is if we look at just the inflation, are there any signs of product prices either deflating this inflating non-commodity stuff, non-lumber, any signs of pricing changing in the channel? Thank you.

Question: Simeon Gutman - Morgan Stanley - Analyst : Okay. Follow up, trying to think about the core business is doing in terms of decremental margins in the second half. I think some of Richard's comments before gave us some more clues. But it looks like the EBITDA guidance for the whole business dollars are roughly the same, and we have a midpoint now we had a one single point before. So whatever we're losing from the core, it seems like we're picking back up in SRS and it looks like the decremental are somewhere around 20% to 25%. Is that right? Is that the right run rate if this sort of negative comp or low negative comp environment?

Question: Simeon Gutman - Morgan Stanley - Analyst : Got it. Makes sense. Thank you.

Question: Chuck Grom - Gordon Haskett Research Advisors - Analyst : Thanks. Good morning. You just talked about as SRS revenue growth in the high single digit range year to date, which is really strong in this environment. I'm curious, you know, what's driving that success? Was there some acquisitions made by SRS or has it been all organic? And I guess, how do we think about that growth rate as we move into '25?

Question: Chuck Grom - Gordon Haskett Research Advisors - Analyst : That's helpful. And then, Richard, you've talked about the consumer deferring projects over the past few quarters, but as the prospects for lower rates begin to materialize and we can start to see the line of sight for maybe a 6% mortgage rate. Is it possible that the pace of deferrals begins to ramp higher over the next couple of quarters? And if that's the case, what parts of your business do you think could be most exposed?

Question: Brian Nagel - Oppenheimer & Co. Inc. - Analyst : Good morning. Thanks for taking my questions. So my first question was just with respect to the pace of comps. So there was just the numbers you gave in your prepared comments that there was a marked slowdown from June to July. Is there anything that's notable there? Or was it just that growing the ways we talked about?

Question: Brian Nagel - Oppenheimer & Co. Inc. - Analyst : That's very helpful. I appreciate that. And the second question, I have, I guess, the bigger picture, but we're talking a lot about SRS. The acquisition, now it's close, you're working on the integration. Because we're watching Home Depot, there's continued push into the professional market. I mean, should we be expecting you to be exploring other acquisition opportunities there?

Question: Zach Fadem - Wells Fargo Securities, LLC - Analyst : Hey, good morning. It sounds like the pro spread widened versus DIY relative to Q1, curious if there's any call out there. And then you mentioned positive comps for pros engaging in your new ecosystem. And I'm curious what percent of pros this now represents and how you'd expect this trajectory to trend now that SRS is under your belt?

Question: Zach Fadem - Wells Fargo Securities, LLC - Analyst : Got you. And then, Richard, two quick ones. First on buybacks and how we should think about the timeline around the return. And then second, on the long-term structural margins, you gave some good detail around the impact of SRS. Curious how we should think about the new high watermark in recovery over time?

Question: Steven Forbes - Guggenheim Securities, LLC - Analyst : Thanks, everyone. Good morning. Maybe just a quick follow-up on SRS. Ted, you mentioned the growth rate and broke it down 50-50 between comp and I think you said lapping acquisitions. So maybe just give us an update on where the branch count is today. And then how would you sort of summarize the capital spending needs of that business to fund both greenfield and acquisition-related expansion as included in the CapEx guidance? Thank you.

Question: Steven Forbes - Guggenheim Securities, LLC - Analyst : And maybe, Richard, maybe just a very quick follow-up. As we think about sort of restating last year's numbers for intangible amortization, the full year amount of a for last year, we're looking at 15 basis points as a percentage of sales or maybe correct me if I'm off there? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 13, 2024 / 1:00PM, HD.N - Q2 2024 Home Depot Inc Earnings Call