Home Depot Inc Q3 2024 Earnings Call Summary

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

Question: Scot Ciccarelli - Truist Securities, Inc. - Analyst : Morning, everyone. (technical difficulty)

Question: Scot Ciccarelli - Truist Securities, Inc. - Analyst : Sales were better than then we would have expected. I know you guys outlined (technical difficulty)

Question: Zach Fadem - Wells Fargo Securities, LLC - Analyst : Hey, good morning. So, starting with the hurricane impact, Richard, you called out about 55 basis points in Q3. Any color on category impacts and if those sales skewed more DIY versus pro? And then as you think about Q4, how would you characterize the implied down 2.5% comp guide between hurricane driven and the underlying business? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 12, 2024 / 2:00PM, HD.N - Q3 2024 Home Depot Inc Earnings Call

Question: Zach Fadem - Wells Fargo Securities, LLC - Analyst : Got it. Appreciate the color. And just taking a step back, how much of your business would you categorize as needs based versus discretionary today? And is it still fair to say that the larger and bigger ticket projects are being deferred while needs based break fix type projects are getting done? And also, any color on how those two buckets have been trending through the year?

Question: Chuck Grom - Gordon Haskett Research Advisors - Analyst : Hey, good morning. Thanks very much. Can you discuss SRS and the progress you've made in cross-selling products and services across the two businesses? And then can you also touch on the volume contribution specifically in the third quarter?

Question: Chuck Grom - Gordon Haskett Research Advisors - Analyst : Okay, great. Thanks very much. And then one for you, Richard, on gross margins, down 40 basis points. It sounds like SRS was the lion share. Is there any way to double click on that and just unpack? I think it was about 35 basis points of pressure last quarter. And then just looking out, can we think about broader puts and takes for gross margins? I mean relative to where you were pre-COVID which was north of 34%. How do we think about the gross margin trajectory over the next few years? Thanks.

Question: Seth Sigman - Barclays Bank PLC - Analyst : Hey, good morning, everyone. Nice progress in the quarter. My main question is around market share. Obviously, macro and housing matters a lot here, but you're also doing a lot to better serve your customer and all the different types of customers. I guess, in that context, it does seem like Home Depot's performance improved relative to the industry this quarter. Can you speak to that? And any specific categories you would call out where you do think you're gaining more share? Thanks.

Question: Seth Sigman - Barclays Bank PLC - Analyst : Okay. That's helpful. I guess a follow-up question would be around big ticket more specifically. It does seem like it took a step down this quarter even in light of hurricane, certain categories you mentioned like generators. How do you categorize that? I mean, you mentioned interest rates. Do you think there was some election noise? I mean, I guess ultimately, we're trying to think about what needs to change in your view to really get those categories inflecting?

Question: Steven Zaccone - Citigroup Inc - Analyst : Great. Good morning. Thanks very much for taking my question. I wanted to follow-up on gross margin briefly. So in the quarter, was there any mix pressure on gross margin from the higher hurricane related sales? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 12, 2024 / 2:00PM, HD.N - Q3 2024 Home Depot Inc Earnings Call And then just to follow-up on the longer-term, there's a good amount of discussion around shrink. You've made a lot of progress there. Can you help us understand how much of an opportunity that is over the medium-term? Is this something that's in the 10 basis points to 20 basis points, or could it be something more meaningful over time?

Question: Steven Zaccone - Citigroup Inc - Analyst : Yeah. Understood. My follow-up question, I know there's no 2025 guidance today, but I think as we -- I'm curious like as you look at the backdrop, right, the view for 2024 was like housing was going to be net neutral. As you sit here today, it's tough to call rates. But as you think about '25 would you think the housing backdrop turns a little bit more favorable for you, or is it still like think about housing as net neutral as kind of the base case scenario?

Question: Scot Ciccarelli - Truist Securities, Inc. - Analyst : Thanks, guys. I apologize for the tech issues. Richard, I know you outlined the impact of hurricane related sales, but is there a broader estimate for the weather impact in the quarter? And then second, can you guys give us an idea of the magnitude of difference in performance in the 17 markets where you rolled out incremental pro capabilities versus the rest of the base just so we can better understand the impact that those capabilities are having? Thanks. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 12, 2024 / 2:00PM, HD.N - Q3 2024 Home Depot Inc Earnings Call

Question: Michael Lasser - UBS Investment Bank - Analyst : Good morning. Thank you so much for taking my question. Ted, are you looking at the multi-year home improvement outlook as the longer that rates remain elevated, the more that homeowners are deferring projects and as soon as rates come down, that will lead to a more robust recovery. So there's a relationship between what's happening right now and the magnitude of the recovery. And I guess as part of that, if rates don't come down next year, can the home improvement industry grow in 2025?

Question: Michael Lasser - UBS Investment Bank - Analyst : Got you. It's very helpful. My follow-up question is I want to get the team's perspective on tariffs. So as part of that, what percentage of sales for the Home Depot could be subject to tariffs in China, and what about from other countries? And is the bigger risk from tariffs related to the sheer increase in merchandise costs or the indirect impact of potentially reaccelerating inflation and that impact on consumer spending? Thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 12, 2024 / 2:00PM, HD.N - Q3 2024 Home Depot Inc Earnings Call

Question: Simeon Gutman - Morgan Stanley - Analyst : Hi. Good morning, everyone. First a short-term question on Q3 to Q4. You mentioned Q3 exceeded expectations ex the hurricanes. There was weather and you mentioned that weather helped as well. And thinking about the movement to Q4, it looks like it's a decel on stacks and obviously the absolute number. So is the assumption that weather is less helpful? Is there some conservatism or any other things that change into the fourth quarter?

Question: Simeon Gutman - Morgan Stanley - Analyst : Okay, fair enough. Then second on the macro, this is trying to get a sense of how you're thinking, and I know a lot of it this call was helpful in that regard. The weight that you're thinking about in terms of tappable equity, which we've talked about recently versus something like housing turnover, both are impacted by rates. But could this tappable equity idea become like a lock-in effect at some point? When does that kick in? Can it kick in even with rates being higher?

Question: Steven Forbes - Guggenheim Securities, LLC - Analyst : Good morning. Ted, appreciate the color around cross-selling opportunities at SRS. But I wanted to explore maybe some of the learnings you're gaining from monitoring the sales force over there. So can you remind us on how large the sales force is today at SRS and what you're tracking to maybe inform your decision on how you're thinking about scaling the sales force at HD? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 12, 2024 / 2:00PM, HD.N - Q3 2024 Home Depot Inc Earnings Call

Question: Steven Forbes - Guggenheim Securities, LLC - Analyst : And then, maybe just a quick follow-up on that. Can you maybe just update us on the current timeline or thinking behind the full rollout of bill upon delivery capabilities within the order management system?