10-QPeriod: Q1 FY2024

HOME DEPOT, INC. Quarterly Report for Q1 Ended Apr 30, 2023

Filed May 23, 2023For Securities:HD

Summary

Home Depot reported first-quarter fiscal year 2023 results showing a year-over-year decrease in net sales and net earnings. Net sales declined by 4.2% to $37.3 billion, primarily due to a 4.5% decrease in comparable sales, driven by fewer customer transactions and some deflationary pressures, particularly in building materials. Net earnings fell to $3.9 billion, or $3.82 per diluted share, down from $4.2 billion, or $4.09 per diluted share, in the prior year. Despite the top-line and bottom-line decline, the company demonstrated strong operational cash flow generation, with $5.6 billion in net cash provided by operating activities. This robust cash flow supported significant capital returns to shareholders, including $2.1 billion in dividends and $2.9 billion in share repurchases. The company also maintained a strong return on invested capital (ROIC) of 43.6%, underscoring effective capital deployment. Management anticipates future capital expenditures of approximately $3 billion for fiscal year 2023, aligning with its strategy to invest in the business, followed by returning excess cash to shareholders.

Financial Highlights

48 data points
Beta

Revenue

$37.26B

33.7% Gross Margin

Net Income

$3.87B

10.4% Net Margin

EPS (Diluted)

$3.82

Total Assets

$76.39B

Cash & Equivalents

$1.26B

Free Cash Flow

$5.61B

Financial Statements
Beta
Revenue$37.26B
Cost of Revenue$24.70B
Gross Profit$12.56B
SG&A Expenses$6.36B
Operating Expenses$7.01B
Operating Income$5.55B
Interest Expense$474.00M
Net Income$3.87B
EPS (Basic)$3.83
EPS (Diluted)$3.82
Shares Outstanding (Basic)1.01B
Shares Outstanding (Diluted)1.01B

Key Highlights

  • 1Net sales decreased by 4.2% to $37.3 billion in Q1 FY2023 compared to Q1 FY2022.
  • 2Diluted earnings per share (EPS) declined to $3.82 from $4.09 year-over-year.
  • 3Comparable sales decreased by 4.5%, driven by a 5.0% drop in customer transactions, partially offset by a 0.2% increase in average ticket.
  • 4Gross profit margin remained relatively stable at 33.7% compared to 33.8% in the prior year, with higher costs offset by higher retail prices.
  • 5Operating cash flow increased significantly to $5.6 billion, up from $3.8 billion in the prior year.
  • 6The company returned $5.0 billion to shareholders through dividends ($2.1 billion) and share repurchases ($2.9 billion).
  • 7Return on Invested Capital (ROIC) stood at 43.6% for the trailing twelve months ended April 30, 2023.

Frequently Asked Questions

The decrease in net sales and earnings was primarily driven by a challenging macroeconomic environment, including inflationary pressures and moderating consumer demand, which led to a 4.5% decline in comparable sales. This decline was largely due to a 5.0% decrease in comparable customer transactions. Additionally, deflationary pricing in certain product categories, such as lumber, impacted average ticket size and overall sales performance.

The company's inventory turnover ratio decreased to 3.9 times in Q1 FY2023 from 4.4 times in Q1 FY2022. This was attributed to lower sales on higher average inventory levels during the quarter. Management appears to be adjusting inventory levels, as evidenced by the significant increase in operating cash flow, partly due to lower inventory purchases compared to the prior year.

Home Depot follows a disciplined capital allocation strategy that prioritizes investing in the business, followed by paying dividends, and then returning excess cash to shareholders through share repurchases. For fiscal year 2023, the company plans to invest approximately $3 billion in capital expenditures. They also recently announced a 10% increase in their quarterly cash dividend and continue to execute share repurchases under a substantial authorization.

While the company reported a sales decline, management highlighted strong operating cash flow and a continued commitment to capital returns. The decrease in comparable sales was attributed to macroeconomic factors and moderating demand. The company plans continued capital expenditures to support business operations and strategic positioning, and they believe their current financial position and cash flow generation are sufficient for operating requirements and shareholder returns over the next several years.