December 6, 2017 Jeff Kinnaird: President, Canada Peter Muench: Vice President, Finance Isabel Janci: Vice President, Investor Relations Tim Walsh: Director, Investor Relations Canada October 2018 1
Forward Looking Statements and Non- GAAP Financial Measurements Certain statements contained herein 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 sales; effects of competition; implementation of store, interconnected retail, supply chain and technology initiatives; issues related to the payment methods we accept; state of the economy; state of the residential construction, housing and home improvement markets; state of the credit markets, including mortgages, home equity loans and consumer credit; demand for credit offerings; inventory and in-stock positions; management of relationships with our suppliers and vendors; 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 impact and expected outcome of investigations, inquiries, claims and litigation; the effect of accounting charges; the effect of adopting certain accounting standards; the impact of the Tax Act; 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. Forward-looking statements are based on currently available information and our current assumptions, expectations and projections about future events. You should not rely on our forward-looking statements. These statements are not guarantees of future performance and are subject to future events, risks and uncertainties – many of which are beyond our control or are currently unknown to us – as well as potentially inaccurate assumptions that could cause actual results to differ materially from our expectations and projections. These risks and uncertainties include but are not limited to those described in Item 1A, “Risk Factors,” and elsewhere in our Annual Report on Form 10 -K for our fiscal year ended January 28, 2018 and in our subsequent Quarterly Reports on Form 10-Q. Forward-looking statements speak only as of the date they are made, and we do not undertake to update these statements other than as required by law. You are advised, however, to review any further disclosures we make on related subjects in our periodic filings with the Securities and Exchange Commission. 2 2 2
Discussion Overview Financial Results Our View of the Economy and State of the U.S. Housing Market and Fiscal 2018 Guidance Company Initiatives and Long-term Targets 3
Fiscal 2017 Results ($ 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 $6.45 13.0% 13.0% Earnings Per Share Growth in 2017 4
First Half 2018 Results ($ Millions USD, except per share data) 1H 2018 1H 2017 V% Sales $55,410 $51,995 6.6% Comp Sales 6.2% 6.0% Gross Profit $18,982 $17,615 7.8% Gross Profit Margin* 34.26% 33.88% 38 bps Total Operating Expenses $10,700 $9,803 9.2% Operating Profit $7,797 $7,322 6.5% Operating Profit Margin 14.07% 14.08% (1) bps Net Earnings $5,910 $4,686 26.1% Diluted Earnings Per Share $5.12 $3.91 30.9% *During the first quarter of fiscal 2018, the Company adopted ASU No. 2014-09, which pertains to revenue recognition. The adoption has changed the presentation of certain line items related to gift cards and our private label credit card program, resulting in 46 basis points of gross margin expansion in the first half of fiscal 2018. Please refer to the 2Q18 Earnings Release for further details. 30.9% Earnings Per Share Growth in 1H 2018 5
Discussion Overview Financial Results Our View of the Economy and State of the U.S. Housing Market and Fiscal 2018 Guidance Company Initiatives and Long-term Targets 6
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 7
Real U.S. GDP is Expected to Grow, Making This the Longest Economic Recovery in History Real U.S. GDP (Year Over Year Percentage Change) Average: 2.3% 2.9% 2.7% 2.6% 2.5% 2.3% 2.2% 2.2% 2.1% 1.7% 1.6% 1.5% 2010 2011 2012 2013 2014 2015 2016 2017E 2018E 2019E 2020E Source: Bureau of Economic Analysis (Hist.), Composite average from various sources (Est.) – March 2018 8
Drivers of Home Improvement Spend Household Home Price Age of Housing Housing Turnover Formation Appreciation Stock Impact on HI Supports Incremental Drives Spending Both Demands Ongoing Repairs Increases Demand Spend Investments Pre And Post Sale And Major Repairs Recent Impact Forward Per Unit Spend Acceleration Continued Stays At View Increases Appreciation Current Rate Expected Future Impact 9
Fiscal 2018 Guidance 1) (As of August 14, 2018) ~7.0% (53 rd week adding ~$1.6 billion in sales) Sales growth Comp store sales growth ~5.3% (based on 52-week comparison) New store openings 3 new stores Operating margin ~14.5% $9.42, or an increase of ~29.2% (53 rd week Diluted EPS growth contributing ~19 cents) Share repurchases Targeting $6 billion 1) All guidance based on GAAP; includes 53 rd week 10
Discussion Overview Financial Results Our View of the Economy and State of the U.S. Housing Market and Fiscal 2018 Guidance Company Initiatives and Long-term Targets 11
Retail Customers Expect More Improved Seamless Personalized Delivery Checkout Experiences HD Must Continue to Keep Pace with Changing Environment 12
Strategic Investments for the Future 2018 – 2020 Investments (1) ($ in billions) Investment $11.1B Other 1.8 New Stores 0.6 5.0 Stores Supply 0.8 Chain $5.7B BAU Other 2.9 IT / 0.8 Online New Stores 0.6 2.4 Stores 0.2 Supply Chain 1.7 BAU Target IT (1) Investments: Capital and Expense, excludes incremental depreciation 13
Investing in Stores & Associates 14
Investing in Product & Innovation 15
Investing in Personalized Experiences Takeaway Bar 16
Investing in Pro & Services 17
Investing in Supply Chain & Delivery Upstream Downstream Direct Fulfillment Centers Vendors Customers DC Network (Bulk / Stocking / Flow) Stores Leverage our Competitive Advantage Build a Competitive Advantage 18
Continued Focus on Productivity Cost of Operating Goods Sold Expenses Productivity is Our Virtuous Cycle 19
Enhancing the Customer Experience, Investing for the Future, Creating Value Sales Operating Margin ROIC ~15.0% ~$120.4B ~40%+ 14.55% ~$115.5B ~34.2% ~14.4% $101B 2017 2020T 2017 2020T 2017 2020T $ in Billions One Home Depot 20
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