At its 2023 Investor and Analyst Conference, The Home Depot discussed key strategic priorities and provided a market stability base case built on its analysis of opportunities available.
The Market Stability Base Case rests on a company analysis of sector conditions and Home Depot response that indicates:
- Overall home improvement market growth in the low-single digits.
- Sales growth between 3% and 4% annually.
- Flat gross margin rate.
- Operating margin expansion driven by sales leverage and productivity.
- Mid to high single-digit diluted earnings-per-share growth.
“Once the home improvement market returns to stability, we expect to see sales growth consistent with how our business has performed in the past,” said Richard McPhail, Home Depot CFO and executive vice president. “While the base case assumes share capture, we are not ruling out a case for even higher growth. In our Accelerated Growth Case, we would expect sales and earnings per share to grow faster than the Market Stability Base Case.”
In addition to the market stability presentation, Home Depot reaffirmed its guidance for the year, including a sales and comparable sales decline between 2% and 5% versus fiscal 2022. The company also expects operating margin rate to run between 14.3% and 14%; a tax rate of about 24.5%; interest expense of about $1.8 billion; and a diluted earnings per share proportional decline of between 7% and 13% compared with fiscal 2022.
Decker’s presentation delivered four key messages:
- Home Depot intends to deliver strong financial performance, given competitive advantages and execution.
- To serve strong core customer and compelling opportunities in a highly fragmented market.
- To drive growth with consumers and pros through investments in differentiated capabilities.
- to create stakeholder value through disciplined capital allocation.
“While a lot has changed in the environment and our business since our last Investor and analyst conference, our objectives to grow market share and deliver exceptional shareholder value remain unchanged, and our culture and values remain our guideposts,” said Ted Decker, The Home Depot chair, president and CEO. “Investments we’ve made over the last several years have further strengthened our distinct competitive advantages and enabled agility in our operating model. We operate in a large and highly fragmented market with unique characteristics that make it one of the most attractive sectors in retail, if not the economy as a whole. While we are the number one home improvement retailer in the world, we have a relatively small share of the market today, and there are significant opportunities in front of us.”
