10-QPeriod: Q3 FY2024

HOME DEPOT, INC. Quarterly Report for Q3 Ended Oct 29, 2023

Filed November 21, 2023For Securities:HD

Summary

Home Depot reported its fiscal third quarter 2023 results, showing a slight decrease in net sales to $37.7 billion compared to $38.9 billion in the prior year's third quarter. This decline was attributed to a challenging comparable sales environment, primarily driven by fewer customer transactions and some deflationary pressures, notably in lumber prices. Despite the sales dip, the company demonstrated strong operational execution, generating $16.4 billion in cash flow from operating activities for the first nine months of the fiscal year. Profitability saw a decrease, with net earnings falling to $3.8 billion ($3.81 per diluted share) for the quarter, down from $4.3 billion ($4.24 per diluted share) in Q3 2022. This was influenced by lower gross profit margins and increased operating expenses as a percentage of sales. The company continued its commitment to shareholder returns, repurchasing $6.5 billion of stock and paying $6.3 billion in dividends in the first nine months, while also announcing a 10% increase in its quarterly dividend. The company maintains a strong liquidity position, expecting sufficient resources for operations, debt payments, and strategic investments.

Financial Highlights

49 data points
Beta

Revenue

$37.71B

33.8% Gross Margin

Net Income

$3.81B

10.1% Net Margin

EPS (Diluted)

$3.81

Total Assets

$75.58B

Cash & Equivalents

$2.06B

Free Cash Flow

$4.23B

Financial Statements
Beta
Revenue$37.71B
Cost of Revenue$24.97B
Gross Profit$12.74B
SG&A Expenses$6.65B
Operating Expenses$7.33B
Operating Income$5.41B
Interest Expense$487.00M
Net Income$3.81B
EPS (Basic)$3.83
EPS (Diluted)$3.81
Shares Outstanding (Basic)996.00M
Shares Outstanding (Diluted)999.00M

Key Highlights

  • 1Net sales for Q3 FY2023 decreased by 3.0% year-over-year to $37.7 billion, driven by a 2.7% decline in comparable customer transactions and some commodity price deflation.
  • 2Diluted EPS for Q3 FY2023 decreased to $3.81 from $4.24 in Q3 FY2022, reflecting lower net earnings.
  • 3Gross profit margin slightly contracted to 33.8% from 34.0% year-over-year, impacted by price stabilization and partially offset by lower supply chain costs.
  • 4Selling, General & Administrative (SG&A) expenses increased by 2.8% to $6.6 billion, rising as a percentage of net sales due to deleverage from lower sales and wage investments.
  • 5Generated strong operating cash flow of $16.4 billion for the first nine months of fiscal 2023, up significantly from $10.0 billion in the prior year, largely due to working capital improvements.
  • 6The company returned substantial capital to shareholders, with $6.5 billion in share repurchases and $6.3 billion in dividends paid during the first nine months of fiscal 2023.
  • 7A new $15.0 billion share repurchase authorization was approved, with approximately $13.8 billion remaining available as of October 29, 2023.

Frequently Asked Questions

Home Depot experienced a year-over-year decrease in net sales for the third quarter of fiscal 2023, down to $37.7 billion from $38.9 billion in the prior year. This decline was primarily driven by a 3.1% decrease in comparable sales, which was a result of a 2.7% drop in customer transactions and a slight decrease in average ticket size. Management attributes this to macroeconomic factors and moderating home improvement demand.

Profitability declined compared to the prior year. Net earnings for the third quarter of fiscal 2023 were $3.8 billion, or $3.81 per diluted share, down from $4.3 billion, or $4.24 per diluted share, in the third quarter of fiscal 2022. This reduction was due to lower gross profit and an increase in operating expenses, particularly SG&A, as a percentage of net sales.

Home Depot maintains 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. In the first nine months of fiscal 2023, the company paid $6.3 billion in dividends (including a 10% increase announced in February 2023) and repurchased $6.5 billion of its common stock. A significant $15.0 billion share repurchase authorization remains largely available, indicating a continued commitment to shareholder returns.

The company ended the quarter with $2.1 billion in cash and cash equivalents. Management believes its current cash position, operational cash flow generation, and access to financing are sufficient to meet operating requirements, debt obligations, and strategic investments. They repaid $1.2 billion of long-term debt in the first nine months of fiscal 2023 and have a $5.0 billion commercial paper program with backup credit facilities in place. Notably, they had no outstanding borrowings under their commercial paper program at the end of the quarter.