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2
Forward Looking Statements and Non-GAAP Financial Measurements
Certain statements contained in today’s presentations constitute "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements may relate to, among other things, the demand for our products and services; net sales growth; comparable store sales; effects of competition; state of the economy; state of the residential construction, housing and home improvement markets; state of the credit markets, including mortgages, home equityloans and consumer credit; demand for credit offerings; inventory and in-stock positions; implementation of store, interconnected retail, supply chain and technology initiatives; management of relationships with our suppliers and vendors; the impact and expected outcome of investigations, inquiries, claims and litigation; issues related to the payment methods we accept; continuation of share repurchase programs; net earnings performance; earnings per share; dividend targets; capital allocation and expenditures; liquidity; return on invested capital; expense leverage; stock-based compensation expense; commodity price inflation and deflation; the ability to issue debt on terms and at rates acceptable to us; the effect of accounting charges; the effect of adopting certain accounting standards; the impact of the Tax Cuts and Jobs Act of 2017; store openings and closures; guidance for fiscal 2018 and beyond; financial outlook; and the integration of acquired companies into our organization and the ability to recognize the anticipated synergies and benefits of those acquisitions. These forward-looking statements are based on currently available information and current assumptions, expectations and projections about future events, and actual results could differ materially from our expectations and projections. You should not rely on our forward-looking statements as they speak only as of the date hereof, and we undertake no obligation to update these statements to reflect subsequent events or circumstances except as may be required by law. Additional information regarding risks and uncertainties is described in Item 1A, "Risk Factors," and elsewhere in our Annual Report on Form 10-K for our fiscal year ended January 29, 2017 and our subsequent Quarterly Reports on Form 10-Q.
Today’s presentations are also supplemented with certain non-GAAP financial measures. We believe these non-GAAP financial measures better enable management and investors to understand and analyze our performance. However, this supplemental information should not be considered in isolation or as a substitute for the related GAAP measures. Reconciliations of the supplemental information to the comparable GAAP measures can be found on our Investor Relations website at ir.homedepot.com.
22
Fiscal 2017 Results
Our View of the Economy and State of the U.S. Housing Market and Fiscal 2018 Guidance
Company Initiatives and Long-term Targets
Discussion Overview
3
13.0% Earnings Per Share Growth in 2017
Fiscal 2017 Results
4
($ Millions USD, except per share data)
FY 2017 FY 2016 V%Sales $100,904 $94,595 6.7%
Comp Sales 6.8% 5.6%
Gross Profit $34,356 $32,313 6.3%
Gross Profit Margin 34.05% 34.16% (11) bps
Total Operating Expenses $19,675 $18,886 4.2%
Operating Profit $14,681 $13,427 9.3%
Operating Profit Margin 14.55% 14.19% 36 bps
Net Earnings $8,630 $7,957 8.5%
Diluted Earnings Per Share $7.29 $6.45 13.0%
Discussion Overview
Fiscal 2017 Results
Our View of the Economy and State of the U.S. Housing Market and Fiscal 2018 Guidance
Company Initiatives and Long-term Targets
5
Our View of the Economy
Real U.S. GDP is expected to grow, supported by improved job market and higher consumer spending
Drivers of home improvement related spending expected to trend positively and support economic growth
Anticipating favorable economic conditions in Canada & Mexico
6
Real U.S. GDP is Expected to Grow, Making This the Longest Economic Recovery in History
Source: Bureau of Economic Analysis (Hist.), Composite average from various sources (Est.)
Real U.S. GDP (Year Over Year Percentage Change)
2.5%
1.6%
2.2%
1.7%
2.6% 2.9%
1.5%
2.3%
2.7%
2.2% 2.1%
2010 2011 2012 2013 2014 2015 2016 2017E 2018E 2019E 2020E
Average: 2.3%
8
Drivers of Home Improvement Spend
8
Housing TurnoverAge of Housing
Stock
Increases DemandDrives Spending Both
Pre And Post Sale
Demands Ongoing Repairs
And Major Repairs
Impact on HI
Spend
Recent
Impact
Expected
Future Impact
Acceleration
Home Price
Appreciation
Supports Incremental
Investments
Continued
Appreciation
Stays At
Current Rate
Forward
ViewPer Unit Spend
Increases
Household
Formation
Household Formation Growing
9
Household Formation Percentage of Young Adults Living at Home
32%
30%
20%
22%
24%
26%
28%
30%
32%
34%
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17E
20
18E
20
19E
20
20E
Young Adults Living at Home Long-term Avg.
Source: US Census Bureau, Moody’s Analytics (Est.), Pew Research Center, United Nations Department of Economic and Social Affairs, Internal analysis
1.9
1.3
0.9 0.9
1.6
1.41.3
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
1.8
2.0
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18E
20
19E
20
20E
Change Ann. Avg. Households (MM) 60-year Avg. (MM)
$0
$5
$10
$15
$20
$25
$30
2010 2011 2012 2013 2014 2015 2016 Q12017
Q22017
Q32017
Value of Home Equity ($tn) Single-Family Mortgage Debt ($tn)
Home Price Appreciation and Value of the Housing Stock
10
Home Price Appreciation Value of Housing Stock and Home Equity
14.2%
-9.5%
9.6%
5.9%
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
Source: Case-Shiller U.S. National Home Price Index, Federal Reserve Board
$10.0tn
$14.2tn
$9.8tn
$6.3tn
$24.2tn
125% increase in
U.S. home equity
since 2011
Inventory Constraints and High Affordability Should Drive Home Price Appreciation
11
Source: National Association of Realtors, Moody’s Economy.com
Months of Supply Affordability
11.0 11.4
3.5
3
4
5
6
7
8
9
10
11
12
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
Mos. Supply (Existing Homes) Healthy Balance
107.9
198.8
158.5
50
75
100
125
150
175
200
225
250
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
Affordability Index Equilibrium Long-term Avg.
Aging Housing Stock Creates AdditionalDemand for Projects
12
Age of Housing Stock Home Age Spend per House
1995 2005 2016 2020E
0-9 17% 15% 8% 6%
10-19 18% 15% 14% 13%
20-29 17% 16% 13% 13%
30-39 14% 15% 14% 14%
>40 33% 40% 51% 54%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
40+ yrs 30-39 yrs 20-29 yrs 10-19 yrs 0-9 yrs
$
$
$$
$$
$$$
Source: John Burns Real Estate Consulting
Favorable Trends in Home Improvement Expected to Continue
13
Average Spend per Large
Home Improvement ProjectRemodeling Index
Source: NAHB, John Burns Real Estate Consulting
$11.4
2016
$9.2
2012
$8.2
11%
2006
-19%
0
10
20
30
40
50
60
70
80
200
1
200
2
200
3
200
4
200
5
200
6
200
7
200
8
200
9
201
0
201
1
201
2
201
3
201
4
201
5
201
6
201
7
NAHB Remodeling Index Equilibrium
60
$ in thousands
14
Fiscal 2018 Guidance1)
1) All guidance based on GAAP; includes 53rd week
(As of February 20, 2018)
Sales growth ~6.5% (53rd week adding ~$1.6 billion in sales)
Comp store sales growth ~5.0% (based on 52-week comparison)
New store openings 3 new stores
Operating margin ~14.5%
Diluted EPS growth$9.31, or an increase of ~28% (53rd week
contributing ~19 cents)
Share repurchases Targeting $4 billion
Fiscal 2017 Results
Our View of the Economy and State of the U.S. Housing Market and Fiscal 2018 Guidance
Company Initiatives and Long-term Targets
Discussion Overview
15
HD Must Continue to Keep Pace with Changing Environment
Retail Customers Expect More
16
Personalized Experiences
SeamlessCheckout
ImprovedDelivery
17
Strategic Investments for the Future
(1) Investments: Capital and Expense, excludes incremental depreciation
2018 – 2020 Investments(1) ($ in billions)
BAU
Investment
Supply
Chain
IT /
Online
Stores5.0
0.6
1.8
0.8
2.9
Other
New Stores
0.8
0.6
Supply Chain
IT
Other
New Stores
0.2
1.7
Stores2.4
$5.7B
$11.1B
TargetBAU
22
Investing in Supply Chain & Delivery
Vendors
DC Network
(Bulk / Stocking / Flow)
Direct Fulfi l lment Centers
Stores
Upstream
Leverage our Competitive Advantage
Customers
Downstream
Build a Competitive Advantage
Productivity is Our Virtuous Cycle
23
Cost of
Goods Sold
Operating
Expenses
Continued Focus on Productivity