HOME DEPOT INC

RESULTS OF OPERATIONS

The following table presents the percentage relationship between net sales and major categories in our consolidated statements of earnings.

FISCAL 2024 AND FISCAL 2023 THREE MONTH COMPARISONS

Note: Certain percentages may not sum to totals due to rounding.

(1)Does not include results for HD Supply or SRS. At this time, we are still evaluating whether SRS results will be incorporated into our selected sales metrics.

(2)Average ticket represents the average price paid per transaction and is used by management to monitor the performance of the Company, as it represents a primary driver in measuring sales performance.

(3)Sales per retail square foot represents annualized sales divided by retail store square footage. Sales per retail square foot is a measure of the efficiency of sales based on the total square footage of our stores and is used by management to monitor the performance of the Company’s retail operations as an indicator of the productivity of owned and leased square footage for these retail operations.

Sales

We assess our sales performance by evaluating both net sales and comparable sales.

Net Sales. Net sales for the third quarter of fiscal 2024 were $40.2 billion, an increase of 6.6% from $37.7 billion for the third quarter of fiscal 2023. The increase in net sales for the third quarter of fiscal 2024 was primarily driven by SRS, which contributed $2.9 billion of net sales during the third quarter of fiscal 2024. This increase in net sales was partially offset by the impact of a negative comparable sales environment, primarily driven by decreases in comparable average ticket and comparable customer transactions.

Online sales, which consist of sales generated through our websites and mobile applications for products picked up at our stores or delivered to customer locations, represented 14.0% of net sales during the third quarter of fiscal 2024 and increased by 4.0% compared to the third quarter of fiscal 2023.

A stronger U.S. dollar negatively impacted net sales by $131 million during the third quarter of fiscal 2024.

Comparable Sales. Comparable sales is a measure that highlights the performance of our existing locations and websites by measuring the change in net sales for a period over the comparable prior period of equivalent length. Comparable sales includes sales at all locations, physical and online, open greater than 52 weeks (including remodels and relocations) and excludes closed stores. Retail stores become comparable on the Monday following their 52 nd week of operation. Acquisitions are typically included in comparable sales after they have been owned for more than 52 weeks. Comparable sales is intended only as supplemental information and is not a substitute for net sales presented in accordance with GAAP.

Total comparable sales for the third quarter of fiscal 2024 decreased 1.3%, reflecting a 0.8% decrease in comparable average ticket and a 0.6% decrease in comparable customer transactions compared to the third quarter of fiscal 2023. The decrease in comparable customer transactions primarily reflects the impact of heightened macroeconomic uncertainties and other macroeconomic factors, including the impacts of a persisting high interest rate environment pressuring home improvement demand. The decrease in comparable average ticket primarily reflects price stabilization relative to last year, slightly offset by demand for new and innovative products. Comparable sales during the third quarter of fiscal 2024 also reflects incremental sales related to hurricane demand.

During the third quarter of fiscal 2024, our Power, Outdoor Garden, Building Materials, Indoor Garden, and Paint merchandising departments posted positive comparable sales compared to the third quarter of fiscal 2023. All of our other merchandising departments posted negative comparable sales during the third quarter of fiscal 2024 compared to the third quarter of fiscal 2023.

Gross Profit

Gross profit for the third quarter of fiscal 2024 increased 5.4% to $13.4 billion from $12.7 billion for the third quarter of fiscal 2023. Gross profit as a percentage of net sales, or gross profit margin, was 33.4% for the third quarter of fiscal 2024 compared to 33.8% for the third quarter of fiscal 2023. The decrease in gross profit margin primarily reflects the inclusion of SRS in our consolidated results, partially offset by lower shrink within our Primary segment.

Operating Expenses

Our operating expenses are composed of SG&A and depreciation and amortization.

Selling, General & Administrative. SG&A for the third quarter of fiscal 2024 increased $563 million, or 8.5%, to $7.2 billion from $6.6 billion for the third quarter of fiscal 2023. As a percentage of net sales, SG&A was 17.9% for the third quarter of fiscal 2024 compared to 17.6% for the third quarter of fiscal 2023, primarily reflecting higher payroll and other operational costs, along with deleverage from a negative comparable sales environment, all within our Primary segment, partially offset by the inclusion of SRS in our consolidated results.

Depreciation and Amortization. Depreciation and amortization for the third quarter of fiscal 2024 increased $112 million, or 16.4%, to $795 million from $683 million for the third quarter of fiscal 2023. As a percentage of net sales, depreciation and amortization was 2.0% for the third quarter of fiscal 2024 compared to 1.8% for the third quarter of fiscal 2023, primarily reflecting increased intangible asset amortization expense of $90 million, of which $86 million was related to SRS.

Interest and Other, net

Interest and other, net for the third quarter of fiscal 2024 increased $157 million, or 35.8%, to $595 million from $438 million for the third quarter of fiscal 2023. As a percentage of net sales, interest and other, net was 1.5% for the third quarter of fiscal 2024 compared to 1.2% for the third quarter of fiscal 2023, primarily reflecting higher interest expense driven by higher long-term debt.

Provision for Income Taxes

Our combined effective income tax rate was 24.4% for the third quarter of fiscal 2024 compared to 23.3% for the third quarter of fiscal 2023. The increase in our effective rate reflects certain one-time tax benefits recognized during the third quarter of fiscal 2023.

Diluted Earnings per Share

Diluted earnings per share were $3.67 for the third quarter of fiscal 2024 compared to $3.81 for the third quarter of fiscal 2023. The decrease in diluted earnings per share was primarily driven by lower net earnings during the third quarter of fiscal 2024, slightly offset by lower diluted shares.

FISCAL 2024 AND FISCAL 2023 NINE MONTH COMPARISONS

Note: Certain percentages may not sum to totals due to rounding.

(1)Does not include results for HD Supply or SRS. At this time, we are still evaluating whether SRS results will be incorporated into our selected sales metrics.

(2)Average ticket represents the average price paid per transaction and is used by management to monitor the performance of the Company, as it represents a primary driver in measuring sales performance.

(3)Sales per retail square foot represents annualized sales divided by retail store square footage. Sales per retail square foot is a measure of the efficiency of sales based on the total square footage of our stores and is used by management to monitor the performance of the Company’s retail operations as an indicator of the productivity of owned and leased square footage for these retail operations.

Sales

We assess our sales performance by evaluating both net sales and comparable sales.

Net Sales. Net sales for the first nine months of fiscal 2024 were $119.8 billion, an increase of 1.6% from $117.9 billion for the first nine months of fiscal 2023. The increase in net sales for the first nine months of fiscal 2024 was primarily driven by SRS, which contributed $4.2 billion of net sales during the first nine months of fiscal 2024, along with net sales from new store openings and the acquisitions we completed in fiscal 2023. This increase in net sales was partially offset by the impact of a negative comparable sales environment, primarily driven by decreases in comparable customer transactions and comparable average ticket.

Online sales represented 14.7% of net sales during the first nine months of fiscal 2024 and increased by 3.7% compared to the first nine months of fiscal 2023.

A stronger U.S. dollar negatively impacted net sales by $47 million for the first nine months of fiscal 2024.

Comparable Sales. Total comparable sales for the first nine months of fiscal 2024 decreased 2.5%, reflecting a 1.5% decrease in comparable customer transactions and a 1.2% decrease in comparable average ticket compared to the first nine months of fiscal 2023. The decrease in comparable customer transactions primarily reflects the impact of heightened macroeconomic uncertainties and other macroeconomic factors, including the impacts of a persisting high interest rate environment pressuring home improvement demand. The decrease in comparable average ticket primarily reflects price stabilization relative to last year, slightly offset by demand for new and innovative products.

During the first nine months of fiscal 2024, our Power and Building Materials merchandising departments posted positive comparable sales compared to the first nine months of fiscal 2023. All of our other merchandising departments posted negative comparable sales during the first nine months of fiscal 2024 compared to the first nine months of fiscal 2023.

Gross Profit

Gross profit for the first nine months of fiscal 2024 increased 2.1% to $40.3 billion from $39.5 billion for the first nine months of fiscal 2023. Gross profit as a percentage of net sales, or gross profit margin, was 33.6% for the first nine months of fiscal 2024 compared to 33.5% for the first nine months of fiscal 2023. The increase in gross profit margin reflects lower transportation costs and lower shrink within our Primary segment, partially offset by the inclusion of SRS in our consolidated results.

Operating Expenses

Our operating expenses are composed of SG&A and depreciation and amortization.

Selling, General & Administrative. SG&A for the first nine months of fiscal 2024 increased $1.1 billion, or 5.5%, to $21.0 billion from $19.9 billion for the first nine months of fiscal 2023. As a percentage of net sales, SG&A was 17.5% for the first nine months of fiscal 2024 compared to 16.9% for the first nine months of fiscal 2023, which primarily reflects deleverage from a negative comparable sales environment, higher payroll costs and lower legal-related benefits.

Depreciation and Amortization. Depreciation and amortization for the first nine months of fiscal 2024 increased $233 million, or 11.7%, to $2.2 billion from $2.0 billion for the first nine months of fiscal 2023. As a percentage of net sales, depreciation and amortization was 1.9% for the first nine months of fiscal 2024 and 1.7% for the first nine months of fiscal 2023, primarily reflecting increased intangible asset amortization expense of $144 million, of which $125 million was related to SRS, as well as increased depreciation expense from ongoing investments in the business.

Interest and Other, net

Interest and other, net for the first nine months of fiscal 2024 increased $205 million, or 15.7%, to $1.5 billion from $1.3 billion for the first nine months of fiscal 2023. As a percentage of net sales, interest and other, net was 1.3% for the first nine months of fiscal 2024 compared to 1.1% for the first nine months of fiscal 2023, primarily due to higher interest expense driven by higher long-term debt and commercial paper borrowings, partially offset by higher interest income resulting from elevated cash balances in the first half of fiscal 2024 leading up to the acquisition of SRS.

Provision for Income Taxes

Our combined effective income tax rate was 23.9% for the first nine months of fiscal 2024 compared to 24.0% for the first nine months of fiscal 2023.

Diluted Earnings per Share

Diluted earnings per share were $11.90 for the first nine months of fiscal 2024, compared to $12.28 for the first nine months of fiscal 2023. The decrease in diluted earnings per share was primarily driven by lower net earnings during the first nine months of fiscal 2024, partially offset by lower diluted shares.