10-QPeriod: Q1 FY2025

HOME DEPOT, INC. Quarterly Report for Q1 Ended Apr 28, 2024

Filed May 21, 2024For Securities:HD

Summary

Home Depot reported first-quarter fiscal 2024 results with net sales of $36.4 billion, a decrease of 2.3% compared to the prior year, primarily due to a decline in comparable sales. Net earnings were $3.6 billion, or $3.63 per diluted share, down from $3.87 billion in the same period last year. This decrease in earnings was attributed to lower net sales and increased operating expenses, despite an improvement in gross profit margin driven by lower transportation and shrink costs. The company is actively pursuing a significant strategic acquisition of SRS Distribution Inc. for $18.25 billion, which is expected to accelerate growth in the residential professional customer segment. To finance this acquisition, Home Depot has substantially increased its commercial paper program and secured new credit facilities. Management remains confident in its liquidity position, supported by operating cash flow, existing cash, and access to capital markets, to fund operations, dividends, and the SRS acquisition.

Financial Highlights

50 data points
Beta

Revenue

$36.42B

34.1% Gross Margin

Net Income

$3.60B

9.9% Net Margin

EPS (Diluted)

$3.63

Total Assets

$79.23B

Cash & Equivalents

$4.26B

Free Cash Flow

$5.50B

Financial Statements
Beta
Revenue$36.42B
Cost of Revenue$23.98B
Gross Profit$12.43B
SG&A Expenses$6.67B
Operating Expenses$7.35B
Operating Income$5.08B
Interest Expense$485.00M
Net Income$3.60B
EPS (Basic)$3.64
EPS (Diluted)$3.63
Shares Outstanding (Basic)989.00M
Shares Outstanding (Diluted)992.00M

Key Highlights

  • 1Net sales for Q1 FY24 decreased by 2.3% year-over-year to $36.4 billion.
  • 2Net earnings for Q1 FY24 declined by 7.0% to $3.6 billion, with diluted EPS at $3.63.
  • 3Comparable sales decreased by 2.8%, driven by a 1.5% drop in customer transactions and a 1.3% decrease in average ticket, influenced by macroeconomic factors and consumer spending shifts.
  • 4Gross profit margin improved slightly to 34.1% from 33.7% in the prior year, benefiting from reduced transportation and shrink expenses.
  • 5The company announced a definitive agreement to acquire SRS Distribution Inc. for $18.25 billion, expected to close by the end of fiscal 2024.
  • 6Share repurchases were paused in March 2024 in anticipation of the SRS acquisition, with $11.7 billion remaining on the existing authorization.
  • 7Operating cash flow was strong at $5.5 billion, though down from $5.6 billion in the prior year period.

Frequently Asked Questions

The acquisition of SRS for $18.25 billion is a significant event for Home Depot. While it is expected to accelerate growth, it will also require substantial funding. The company has expanded its commercial paper program and secured new credit facilities to manage the financing. The acquisition is expected to be completed by the end of fiscal 2024 and will likely impact the company's debt levels and capital allocation priorities post-completion, with management intending to reduce debt before resuming share repurchases.

The decrease in net sales was primarily driven by a negative comparable sales environment, with both comparable customer transactions and average ticket declining. This is attributed to macroeconomic factors, including the shift in consumer spending towards services and the impact of high interest rates on home improvement demand. The decline in net earnings reflects these lower sales and an increase in operating expenses, particularly selling, general, and administrative costs, partially offset by improved gross profit margins.

Home Depot's capital allocation strategy prioritizes investing in the business, followed by paying dividends, and then returning excess cash to shareholders through share repurchases. The company announced a 7.7% increase in its quarterly cash dividend in February 2024 to $2.25 per share. However, share repurchases were paused in March 2024 due to the pending SRS acquisition, and management plans to prioritize debt reduction over repurchases once the acquisition is complete.

The company reported a decrease in inventory turnover ratio to 4.5 times at the end of Q1 FY24, compared to 3.9 times in the prior year. This improvement in turnover was driven by lower average inventory levels during the quarter, suggesting improved inventory management.