The Home Depot, Inc. Price & Performance (HD)

At The Home Depot, we know communities are more than brick and mortar. They're people. And we're part of the community too. So in the aftermath of the Los Angeles wildfires, wildfires, We're here to help you rebuild and restore. As always, our associates are here to assist you. We have essential items in our stores, making it easy for you to get what you need. And our online resources are available to guide you through your recovery. Because when our community needs us, The Home Depot is here to help. Off select appliances like LG, plus save up to an extra $450 on select appliances. And with customizable kitchen packages, we make it easy to shop and swap for the features you want. Like the three door French door refrigerator with slow melting round crap ice. Shop present day savings and get up to 35% off select appliances like LG, America's most reliable line of appliance. The Home Depot, how doers get more done.

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They're people. And we're part of the community too. So in the aftermath of the Los Angeles wildfires, we're here to help you rebuild and restore.

As always, our associates are here to assist you. We have essential items in our stores, making it easy for you to get what you need. And our online resources are available to guide you through your recovery.

Because when our community needs us, The Home Depot is here to help.

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Start your carpet project today at the Home Depot. The doers get more done. Installation included qualify [indiscernible] The both small and large spaces, these tiles create a seamless spacious look with fewer grout lines. They're great for kitchen or bathroom remodel jobs. You'll also find competitive pricing for on trend tiles starting at a dollar 99. Shop in store and online. And don't forget to complete the project with First of all large format tile border. [indiscernible] When it comes to getting job supplies fast, nothing beats the Home Depot. We're always thinking of new ways to get things done quicker, whether you're buying online for a quick in store pickup using image search to find exactly what you need, rapidly locating products with store mode or getting supplies delivered same day, we Greetings, and welcome to the Home Depot The Quarter twenty twenty four Earnings Conference Call.

At this time, all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Isabel Jansy. Please go ahead. Thank you, Christine, and good morning, everyone. Welcome to Home Depot's fourth quarter and fiscal year twenty twenty four earnings Joining us on our call today are Ted Decker, Chair, President and CEO Ann Marie Campbell, Senior Executive Vice President Billy Bastic, Executive Vice President of Merchandising and Richard McHale, Executive Vice President and Chief Financial Officer. Following our prepared remarks, the call will be open for questions. Questions will be limited to analysts and investors And as a reminder, As we are unable to get to your question during the call, 38423 Before I turn the call over to Ted, let me remind you that today's press release and the presentations made by our executives include forward looking statements as defined in the Private Securities Litigation Reform Act of 1995. These statements are subject to risks and uncertainties that could cause actual results to differ materially from our expectations and projections. These risks and uncertainties include but are not limited to The factors identified in the release and in our most recent annual report on Form 10 ks and our other filings with the Securities and Exchange Commission.

Today's presentation will also include certain non GAAP measures including but not limited to adjusted operating margin adjusted diluted earnings per share and return on invested capital. For a reconciliation of these and other non GAAP measures The the corresponding GAAP measures, please refer to our earnings press release and our website. Now, let me turn the call over to Ted.

Thank you, Isabelle, and good morning, everyone. Sales for fiscal 2024 were $159,500,000,000 an increase of 4.5% from the same period last year. Comp sales declined 1.8% from the same period last year. Our U. S. Stores had negative comps of 1.8%. Adjusted diluted earnings per share were $15.24 compared to $15.25 in the prior year.

In the fourth quarter, comp sales increased 0.8% from last year. And comps in our U. S. Stores were up 1.3%. Adjusted diluted earnings per share were $3.13 compared to $2.86 in the prior year. In the quarter, we saw broad based engagement across our geographies. As 15 of our 19 U. S. Regions delivered positive comps. In addition, both Canada and Mexico reported positive comps in local [indiscernible] Our fourth quarter results exceeded our despite ongoing pressure on larger modeling projects. Throughout the year, we remain steadfast in our investments across our strategic initiatives. Despite uncertain macroeconomic conditions and a higher interest rate environment, impacted home improvement demand. Our strategic priorities remain creating the best interconnected shopping experience, growing our Pro wallet share through a unique ecosystem of capabilities, and building new stores. We are always improving our interconnected shopping experience. We know that our customers want faster delivery than ever before. Recall that last quarter, I shared the progress we made with our including an expanded assortment in our DFCs to allow for faster delivery speeds across more products. We also began leveraging our stores to offer more delivery options. Our delivery speeds are now the fastest they've ever been and customers are increasing their spend.

Billy will take you through these results in a moment. Growing our share of wallet with our Pro customers is a key part of our growth strategy. We've continued investing in our store experience fulfillment options and sales teams. These investments are delivering incremental sales growth and Ann will discuss this in detail shortly. In June, we completed the acquisition of SRS, While we've only owned them for seven months, we could not be happier with the business. The capabilities that SRS brings are both additive and complementary to our strategic effort. As expected for fiscal twenty twenty four, SRS contributed $6,400,000,000 in sales for the seven months we owned them. And since we acquired them in June, they have opened over 20 greenfield locations We're also focusing on many cross sell opportunities with SRS. As an example, we've talked about the opportunity with QuoteCenter. Our platform that provides real time quote pricing in different fulfillment options for larger job lot quantities. SRS was already in quote center, but not in all markets. Today, they are in nearly every market with their roofing products. And since making this change, we have seen SRS' sales and quotes center more than triple, Going forward, we will continue to support SRS' momentum.

And we expect their organic sales to grow mid single digits in fiscal twenty twenty five. Distinct competitive advantages are expanding that footprint by investing in new stores in areas that have experienced population growth. Or where it makes sense to relieve pressure on existing high volume stores. In fiscal twenty twenty four, we opened 12 new stores. 10 in The U. S. And two in Mexico The. We are seeing great results from these stores which are outperforming our expectations. For fiscal twenty twenty five, we plan to open 13 new stores. For fiscal twenty twenty five, we expect total sales growth of approximately 2.8% comparable sales growth of approximately 1%, and adjusted diluted earnings per share to decline approximately 2%. We remain excited about all our growth opportunities and we feel confident The the investments we are making will set us up for continued success. I want to close by thanking our associates for their hard work and dedication to our customers in the fourth quarter and throughout the year. Our results reflect strong execution by our stores, merchants and supply chain teams. As well as our vendor partners as they remain focused on delivering value and service to our customers.

With that, let me turn the call over to Anne.

Thanks, Ted, and good morning, everyone. Our thoughts continue to be with everyone impacted by hurricanes Helene and Milton as well as the devastating fires in Los Angeles. We are here as these communities rebuild with our associates and suppliers The consistently go above and beyond to serve our customers. And I want to thank them for all that they do. As you heard from Ted, growing our share of wallet with The pro is a key part of our growth strategy. And I'd like to take a moment to talk more about the progress we've made. For the quarter, all OPRE cohorts positive comp and it is clear that our initiatives are working. Over the last few years, we've made investments in our stores, as well as through our pro ecosystem to improve the shopping experience for all of our pros regardless of their purchase occasion. Whether they are shopping in store, online or getting delivery from stores or distribution centers. We know that nearly all pros shop for stores. Over the years, we have been investing across our stores to simplify and The in store shopping experience investments in our freight flow process and technology to increase on shelf availability, investments in inventory to provide a deeper assortment and job lock quantities in core SKUs.

Enhancements in our labor model and the introduction of CSMs or dedicated customer experience managers. And the development of selling tools to provide better insights for our associates of [indiscernible] In addition to these in store investments, our investments in the FTC network have improved the in store experience by taking many deliveries out of the store, which reduced clutter in the aisles from staged orders. As a result, our in stock have improved and our associate availability is higher. The FTC has also enabled faster delivery expanded fulfillment options and more consistent on time and complete delivery of larger orders directly to the job site.

We also continue to build out a more comprehensive set of capabilities in our Pro ecosystem. These capabilities include a broader and deep assortment of products in the FTC The, dedicated sales teams that provide a higher level of service enhanced selling tools with CRM capabilities to better serve our customers additional digital capabilities through our B2B website loyalty The preferred pricing programs. It is all of these capabilities as well as enhancement in store that have really allowed us to win a greater share of wallet with all or pros. Our initiatives are resonating with pros and not only are we gaining traction with a larger pro that works on complex projects, we are also seeing meaningful lift in sales with all pros across all purchase occasions. In fact, these investments have driven over $1,000,000,000 in incremental sales on an annualized basis in 17 markets. Even in these 17 markets, we are in different stages of maturity and there's still a lot to do better serve all our pros. From improving our delivery experience to building new capabilities like trade credit and order management to leveraging SRS and improving connectivity with our stores. We know that as we invest across all of our assets, it will allow us to more uniquely serve the pro.

We have a lot to be proud of this year. We continue to focus on delivering the best customer experience in home improvement We've seen great associate engagement historically high retention rates.

Our safety performance was exceptional and we've made significant progress in shrink, driven by our company specific initiatives. All of these efforts are positioning us well and will allow us to The continue to grow with all of our customers. Thank you. And with that, let me turn the call over to Billy. Thank you, Anne, and good morning, everyone. I want to start by also thanking all of our associates and supplier partners for their ongoing commitment to serving our customers and communities.

As you heard from Ted, our performance during the fourth quarter exceeded our expectations as we saw broader engagement across In addition, we also saw incremental sales as a result of the ongoing hurricane recovery effort, However, The higher interest rate environment continues to pressure larger remodeling projects. Turning to our merchandising department comp performance, for the fourth quarter, 10 of our 16 departments posted positive comps including appliances, indoor garden, [indiscernible] [indiscernible] building materials, outdoor garden, storage, hardware and plumbing. During the fourth quarter, our comp transactions increased 0.6% and comp average ticket increased 0.2%. Inflation from core commodity categories positively impacted our average ticket by approximately 20 basis points driven by inflation in lumber and copper wire.

Additionally, during the quarter, we continue to see our customers trading up for new and innovative products. Big ticket comp transactions or those over $1,000 were up 0.9% compared to the fourth quarter of last year. We were pleased with the performance we saw in categories such as appliances, building materials and lumber. However, we continue to see softer engagement in larger discretionary projects for customers typically use financing to fund the project such as Kitchen, and bath remodels. Both pro and DIY comp sales were positive, with Pro outpacing the DIY customer.

In the fourth quarter, we saw strength across many pro heavy categories like gypsum, decking Concrete [indiscernible] Turning to total company online sales, the excluding the impact of the extra week in the quarter, sales leveraging our digital platforms increased approximately 9% compared to the fourth quarter of last year. Are a lot of drivers to our online success. From the focus on continuously improving the shopping and browsing experience, to enhancing the delivery and post delivery experience leveraging AI to enhance our chat features. Product descriptions and creating rating summaries for our customers, This quarter, I'd like to talk more specifically about delivery. As you heard from Ted, we remain focused on continuing to improve our interconnected reach [indiscernible] And have made significant progress on the delivery experience for our customers. Have invested in a broader assortment across our 19 DFCs established partnerships with third party last mile providers and made technology improvements across our 2,000 plus stores to better utilize all of our assets for the benefit of our customers. Today, we have the fastest delivery speeds across the greatest number of products in company history. Our customers also have more fulfillment options than ever before. The can choose what they want when they want.

Including same day and next day delivery, We know that driving a superior customer experience, including speed of delivery drives greater customer satisfaction higher engagement higher conversion and ultimately more sales. We've seen these customers who are engaging in our delivery capabilities meaningfully increase their overall spend with us across all purchase occasions and channels. During the fourth quarter, we hosted our appliance gift center, decorative holiday and Black Friday events.

We saw strong engagement across all of these events with our appliance and gift center events posting record sales years. We're looking forward to the year ahead, particularly with spring selling season right around the corner and we have a great lineup of new and innovative to outdoor power equipment We continue to see an industry wide shift from gas powered to battery powered tools and we have been leaning into this trend for some time. We have the brands that matter most to our customers including Ryobi, [indiscernible] DeWalt and Nikita. In our spring gift center event, we will provide our largest assortment of battery powered products with longer run times and enhanced performance across a number of battery platforms including Ryobi ONE, Milwaukee M18 Forge DEWALT XR PowerPack and Power Stack, and Makita LXT to name a few. Also excited about our LiveGoods program.

Each year, our merchants partner with a wide network of regional and local growers to ensure that our customers have new and improved varieties in the right localized assortments to enhance the overall garden experience. Investing in our relationships with our growers will allow us to continue to drive innovation to meet our customers' needs and improve their shopping experience while building loyalty to the Home Depot. As we look forward to spring, we are excited about continuing to provide a broader assortment of best in class products that are in stock and available for our customers when and how they need it. With that, I'd like to turn the call over to Richard.

Thank you, Billy, and good morning, everyone. In the fourth quarter, total sales were $39,700,000,000 an increase of $4,900,000,000 or approximately 14% from last year.

Fiscal twenty twenty four included a fifty third week which added approximately $2,500,000,000 in sales for the quarter and the year. During the The [indiscernible] our total company comps were positive 0.8% with comps of negative 1.7% in November positive 6.6% in December and negative 2% in January.

Comps in The U. S. Were positive 1.3% for the quarter with comps of negative 2% November, positive 8% in December and negative 1.4% in January.

It is important to note that holiday shifts positively impacted December while negatively impacting November and January.

Our results for the fourth quarter include a net contribution of approximately $220,000,000 in hurricane related sales, which positively impacted total company by approximately 65 basis points for the quarter.

Additionally, foreign exchange rates negatively impacted total company comps by approximately 70 basis points for the quarter.

For the year, our sales totaled $159,500,000,000 an increase of $6,800,000,000 or 4.5% versus fiscal twenty twenty three. For the year, total company comp sales decreased 1.8% and U. S. Comp sales decreased 1.8%.

In the fourth quarter, our gross margin was a decrease of 25 basis points from the fourth quarter last year reflecting a change in mix as a result of the SRS acquisition which was in line with our expectations. For the year, our gross margin was approximately 33.4% an increase of approximately five basis points from last year, which was in line with our expectations. During the fourth quarter, operating expense as a percent of sales increased approximately 30 basis points to 21.5% compared to the fourth quarter of twenty twenty three.

Our operating expense performance was in line with our expectations.

For the year, operating expenses were approximately 19.9% of sales representing an increase of 75 basis points from fiscal twenty twenty three.

Our operating margin for the fourth quarter in the fourth quarter of twenty twenty three.

Excluding intangible asset amortization in the quarter, our adjusted operating margin for the fourth quarter was 11.7% compared to 12.1% in the fourth quarter of twenty twenty three.

Our operating margin for the year was 13.5% compared to 14.2% in 2023 The.

Excluding intangible asset amortization, our adjusted operating margin for the year was 13.8% compared to 14.3% in 2023.

Interest and other expense for the fourth quarter increased by $150,000,000 to $6.00 $8,000,000 due primarily to higher debt balances than a year ago. In the fourth quarter, our effective tax rate was 22.9% and for the year was approximately 23.7%.

Our diluted earnings per share for the fourth quarter were $3.02 an increase of approximately 7% compared to the fourth quarter of twenty twenty three.

Diluted earnings per share for fiscal twenty twenty four were $14.91 a decrease of 1.3% compared to fiscal twenty twenty three. Excluding intangible asset amortization, our adjusted diluted earnings per share for the fourth quarter were $3.13 an increase of approximately 9.4% compared to the fourth quarter of twenty twenty three.

Adjusted diluted earnings per share for fiscal twenty twenty four were $15.24 essentially flat During the year, we opened 12 new stores bringing our store count to 2,347 at the end of fiscal twenty twenty four. Retail selling square footage was approximately two forty three million square feet and total sales per retail square foot were approximately $600 in fiscal twenty twenty four. At the end of the quarter, merchandise inventories were $23,500,000,000 up approximately $2,500,000,000 versus last year And inventory turns were 4.7 times up from 4.3x last year. Turning to capital allocation.

During the fourth quarter, we invested approximately $1,100,000,000 back into our business in the form of capital expenditures.

This brings total capital expenditures for fiscal twenty twenty four approximately $3,500,000,000 And during the year, we paid approximately $8,900,000,000 in dividends to our shareholders.

Today, we announced our Board of Directors increased our quarterly dividend by 2.2% to $2.3 per share which equates to an annual dividend of $9.2 per share.

And finally, during fiscal twenty twenty four, we returned approximately $600,000,000 to our shareholders in the form of share repurchases. Computed on the average of beginning and ending long term debt and equity for the trailing twelve months, return on invested capital, was approximately 31.3% down from 36.7% in the fourth quarter of fiscal twenty twenty three. Now I'll comment on our outlook for 2025.

As you heard from Ted, we feel great about the investments we made in 2024 the progress we've made throughout the year and the significant opportunities we have as we look ahead the home improvement market is on the way towards normalization uncertainty still remains. As we look ahead to fiscal twenty twenty five, We expect The underlying momentum in the business that we saw in the back half of 2024 to continue into 2025.

However, we are not assuming any meaningful changes to the macroeconomic environment.

We expect our consumer will remain healthy We are not assuming a change in the rate environment nor improvements in housing turnover.

As a result, we would expect continued pressure on larger remodeling projects. Given these factors, our fiscal twenty twenty five outlook is for total sales growth to outpace sales comp sales growth of approximately positive 2.8% and comp sales growth of approximately positive 1%. Compared to fiscal twenty twenty four.

Total sales growth will benefit from the SRS The, The new stores we opened in fiscal twenty twenty four and plan to open in fiscal twenty twenty five.

And for the year, we expect SRS to deliver mid single digit Our gross margin is expected to be essentially flat compared to fiscal twenty twenty four. Further, we expect operating margin of approximately 13% adjusted operating margin of approximately 13.4%.

This primarily reflects natural deleverage from sales and continued investments across the business as well as reflecting the mix impact from the SRS acquisition. Our effective tax rate is targeted approximately 24.5% We expect net interest expense of approximately $2,200,000,000 We expect our diluted earnings per share to decline approximately 3% compared to fiscal twenty twenty four when comparing the fifty two weeks in fiscal twenty twenty five to the fifty three weeks in fiscal twenty twenty four.

We expect our adjusted diluted earnings per share to decline approximately 2% compared to fiscal twenty twenty four. On a fifty two week basis, it would be essentially flat compared to fiscal twenty twenty four. We plan to continue investing in our business with capital expenditures of approximately 2.5% of sales for fiscal twenty twenty five. We believe that we will grow market share in any environment by strengthening our competitive position with our customers and delivering the best customer experience in home improvement.

Before opening the call for questions, we are pleased to announce that we will be holding an investor conference on December 9, 2025 in New York City.

We will share more details in the future but for now, please hold the date.

Thank you for your participation today's call. And Christine we are now ready for questions.

Thank you. Will now be conducting a question and answer session.

Our first question comes from the line of Laura Ng with Morgan Stanley. Please proceed with your question. Good morning. It's Simeon Gutman from Morgan Stanley.

My first question is on the macro housing backdrop.

And the ingredients to a 1% comp.

So existing home sales look like they're set to grow mid singles. Mean, if that's the case, home improvement demand could arguably be a little stronger than maybe a one comp or whatever assumption you're using. What's your take on that? I know Richard said we're not assuming any improvement in turnover. Is there anything changed about any change about your forecast due to people staying in their homes longer and rates being stubborn?

Hi, Simeon. Yes, at this point, while we've seen a little life in turnover in Q4, we're not expecting meaningful increase of that forty year low. We've likely reached the bottom of housing turnover at about 3% of units. [indiscernible] we're not expecting a big rebound nor significant in increases in new housing starts. However, if you just step back, I mean, if you look at our customer, they remain very healthy. We look at our customer today, we think about $110,000 average income Those incomes have been growing. We've talked about the increase in home equity values up 50% since the end of twenty nineteen The Wealth Effect through stock market and other investments. So our customer is very healthy And as you say, if they're staying in their homes longer, they will take on larger remodeling projects as opposed to moving those that are locked into to lower interest rates or just not wanting to get mortgages with with the higher rates.

But we're not anticipating a a large decrease in mortgage rates will be more issue of consumers getting used to these higher rates and to take on a larger project usually finance. And that financing is through HELOC. And we've started to see a little increase in each of cash out refis as well as draws on HELOCs But there's literally trillions of dollars of equity [indiscernible] In U. S. Housing And as homes continue to age and people are staying in those homes, and realize highly unlikely to see the low interest rates we saw over the past two, three years. That they'll eventually tap that equity and do the larger remodeling projects. We're just not sure [indiscernible] turn comes in 2025 at a dramatically accelerated [indiscernible] And to follow-up on the 1%, just to to explain that, Simeon, Obviously, this is a triangulation We look at exit run rates of the business And as we said, keep in mind that Q4 while certainly showing signs of momentum, growing from Q3 still had some benefits from hurricanes that don't fully repeat in 2025. [indiscernible] a slight dampening of the run rate and then the assumption of continued pressure on larger projects.

With the shape of the year increasing slightly through the year, which also includes the inclusion of SRS in our comp.

You'll see them in our comp for the last seven months of the year.

Okay. That's helpful. The follow-up, if comps do end up being a little stronger than one, does each point flow through at this 10 points of leverage to the margin Or is there a scenario whether it's better DIY, more pro, more complex project or do you spend more? Is there a mix shift that could alter that relationship above one?

No, I think, look, the 10 basis points is a good rough estimate of leverage from that point.

Great. Good luck. You're not going to have meaningful shifts in mix. Even if mix shifts, you're not going to have meaningful meaningful differences in that leverage number.

Thank you.

Next question comes from the line of Christopher Horvers with JPMorgan. Please proceed with your question.

I wanted to go at a similar kind of question maybe on a different angle. Appliances were up paint was up, Was that volume driven? And to what extent do you think The category gain share because as you look forward, The replacement cycle dynamics should get better from 4Q levels. You'll be five years out, Ted, you've talked about in the past every well was painted in The U. S. And in 2020, but we're getting further from there. So it doesn't that replacement part of the business further accelerate and curious if you're going to say like, well, X percent of the business is replacement versus Y percent is more like big ticket remodel, which would we expect to continue to be an anchor? Sure, Chris. Let me make a broad comment and then Billy can give some detail particular categories Look, if we just step back and look at this quarter, We're happy with it, right? Sales exceeded our expectations and we're with positive comps obviously for the first time in two years and particularly happy with positive transaction comps which is been negative for over three years. [indiscernible] as you say, the business is strengthened across many categories and in many geographies.

In fact, we haven't seen broader base performance and over two years and maybe even closer to three years. And if you go back, Chris, to your comment on COVID, I'd say that shift of of spending back to services post COVID and the pull forward of demand during the pandemic The. Those have largely played out. There may be a category here and there, but I'd say that PC shift in home improvement pull forward have largely played out. And engagement in repair in smaller updates and decor oriented updates is strengthening and Billy can give some detail on the categories.

Yes. You know, listen, as Ted mentioned, the broader base performance I talked about, the 10 of the 16 departments that posted positive comps, we had an outperform Chris, as you mentioned, in Appliances and our Gift Center, business, which we had record sales candidly in that in those areas across the store. So we had a healthy balance of transactions and unit performance, which Ted's point, we hadn't seen [indiscernible] With that said, still the pressure we know in finance projects. We had great performance across many of our Pro Heavy categories, that meant gypsum and decking. Concrete, fencing and while there was some hurricane, impact in there, we're pretty pleased with the broad base of performance, not only across the merchandising departments, but certainly across the country. But there's just no denying the deferral that we're still seeing. We are pleased with the pull forward that we think is largely behind us at this point from a go forward standpoint. So So all those things bode well, but still the pressure in some of The more finance projects we're still continuing to see that exist.

Got it. And then Richard, can you talk about the monthly U. S. Comps adjusting for The for the holiday shift? There's been a lot of questions, I think, over the past five, six weeks on what's going on with the consumer. You saw F and D talk about a slowdown relative to what they saw in the fourth quarter and they talk about weather. So can you talk about do you think that the weather had any influence on the business in January The and any comment on exit rate? Thanks very much.

I think that so the monthly progression was absolutely influenced by holiday shifts Again, to the benefit of December to the detriment of November and January The, But no doubt weather was horrible in January.

We've had two years in a row of tough January, but this one was particularly tough. And so that's why we don't read a tremendous amount into it when we think about about exit run rate, but no doubt weather had an impact.

Great. Thanks very much. Have a great spring.

Thanks. Our next question comes from the line of Michael Lasser with UBS.

Good morning. Thank you so much for taking my question.

What market share assumption have you embedded into your 2025 outlook? And why wouldn't it be reasonable for us to assume that Home Depot's market share gains should accelerate from here and be above where they've been historically in light of you now having SRS as well as many more capabilities given the investments that have been made over the last several years.

Is that a sign that you think your DIY market share is starting to peak and that could have an impact on the overall overall share gains for the [indiscernible] Hi, Michael. Thanks for the question. As we look The overall market for for 2025 We see it overall being flat maybe up slightly, Those expectations have come down over the last several months. And our plus one, as Richard explained, a continuation of some of the underlying strength in the business and our initiatives that we absolutely are are gaining incremental sales for us. So that's why we peg our comp growth at 1%. Now if you look at the the combination of what's driving our share gain for both pro and consumer in the core it is all the capabilities that that we're putting in the marketplace. We talked a lot about interconnected in all the investments we've made on the interconnected journey and then certainly all the investments on our Pro ecosystem and I'll have Jordan spend a few minutes more on what we're doing on interconnected. And then you add what we're doing with SRS, SRS will grow faster than the core and we believe they're taking share in each of their three verticals.

So we're very pleased with what SRS is doing. So all that with our new stores, which we're starting to some meaningful dollars to our growth. Gets us to the 1% comp and 2.8% overall growth in a flat market. So we wouldn't say our share has peaked by any means in DIY or pro. And then Jordan, if you could chat about what we're doing to drive share in pro and consumer with interconnect as well. Sure. So I mean, we Billy shared the excitement we have had on .com sales performance and that's really across both The consumer and the pro, both of them up healthily online. And it's been a combination of investments that we've made that have helped from the site experience and really making that journey so much better from a from browse and search perspective and finding the right product to the fulfillment. Billy mentioned that we've had the fastest delivery speeds in the history of our company, same day delivery, next day delivery, whether that's concrete and lumber or whether that's a light bulb or power tool. It's been really fast. And all of those investments have come together to really drive an improvement in conversion rate on the site.

And then what we see is an increased engagement across channel with more purchases The come in store. So we're really excited about the momentum there. And see the investments that we've made really Thank you for that. My follow-up question is what's been happening as of late. There's been a lot of focus on the impact that the government efficiency measures and or immigration policy implementation could have on The U. S. Consumer How did you factor that and those considerations into the guidance?

And while you had just indicated that weather was really the underlying cause of some of the results in January. Are you seeing any evidence that these factors are having an impact on the business. There's been talk about housing inventory in the Mid Atlantic starting to creep higher So anything you could provide that would be very helpful. Michael, I don't think we've seen anything specifically. You tick through some of the things you mentioned and some I'd add, tax policy would [indiscernible] One of the most important to Home Depot is a full taxpayer, so we'd be very pleased The corporate rate stays at 21% Tariffs is obviously a lot of discussion on what rates would be and what countries would be impacted and what categories of goods We've been through that before and I think we have the best team to manage through any tariff environment, which would impact the industry Broadly, I'd say our diversification efforts out of certain concentrations in countries has been quite good over the last six or seven years. You mentioned immigration. We've talked about having a shortage of skilled trades folks in the country for some time. We believe it's like 400,000 trades folks short.

And not sure how that number would would change with any meaningful change in immigration And then specifically to the government efficiency in Mid Atlantic, no, we've not seen anything The.

Thank you very much and good luck.

Thank you.

Our next question comes from the line of Scott Ciccarelli with Truist. Please proceed with your question.

Good morning, guys. Anne talked about $1,000,000,000 of incremental sales in the The markets where you've started to build out Complex Pro capabilities. How do you actually measure that And then what kind of ramp would you expect in those markets in 2025 as you continue to phase in order management, credit expansion, etcetera, some of the capabilities that you've discussed?

Yes. Thank you, Scott. Yes, as we mentioned, that we're incredibly pleased with what we've seen so far. We're generating $1,000,000,000 and growing. So that's been fantastic. And as we mentioned as well, it's geared across all participants. The way we measure that is the incremental sales in the 17 The versus what we see in the top 40 markets. So the $1,000,000,000 of annualized sales is that in those 17 markets, we have been outperforming The the top top 40 markets. And so when you think about 2025, we're focused on really maturing the capabilities in these 17 markets, which is really important. Not only maturing the existing capabilities, but really, really rolling out new capabilities as well. So whether it be delivery, expanding our sales force, those are key things that we'll continue to focus on. As well as new capabilities as we talk about trade credit, order management, account management. Those are opportunities that we have to continue to grow in 2025. And Ted talked about SRS, and there's also an opportunity for us to really drive cross selling opportunities across the SRS portfolio. Last but not least, we have more FDCs in the pipeline as well.

We have our three FDCs under construction. We have more in the pipeline. So we're incredibly pleased with what we've seen. 2024 when we think about the 17 markets, across our company and compared to the top 40 The, But more importantly, what we've seen with the Pro ecosystem across the country as well. And making sure that we're doubling down on The opportunities that we see.

Appreciate that. What's the biggest sticking point as you roll this out? Is it building The specialty sales force? Is it the recognition from your complex pros, etcetera? Like what's the toughest piece that you've kind of learned that you'd have to what's your toughest hurdle you have to clear?

Yes, Scott. This is what we continue to find. This is an entire ecosystem, right? So it's not just one component of the ecosystem, right? When we talk about the outside sales or we talk about delivery, or we talk about order management and account management, it's all of those things working in concert. So what is always difficult is as you roll these capabilities out and there are different levels of maturity our focus is to refine and really what we're seeing. And that takes time in a market, especially when you're building relationships. We don't want to create new relationships with our new capabilities with our pros. And that have big failure points. So The difficult part is making sure that we're doubling down and moving at a speed that drives outcomes, but at the same time that we focus on perfecting within the market. So it's incredibly complex. It is really important that we do this right. And in 2024, we saw some really, really great progress And that's what makes us excited about what we will do in 2025 and beyond.

Thank you.

Our next question comes from the line of Karen Short with Melius Research. Please proceed with Hi, thanks very much and good to talk to you.

So I had one question regarding guidance. And another totally year related. So ex the intangibles in terms of operating margin guidance, So should we look at that as the right way think about the relationship between sales growth and operating margin growth. I. E. Excluding intangible impact from SRS, on your guidance?

Yes, Karen. We believe that removing the non cash Amortization expense related to the amortization of intangible assets is the best way to look at our underlying operating margin. And so that's where we would we have guided for the last couple of quarters and will continue to guide on the basis of moving forward.

So how should we And The includes [indiscernible] operating margin is adjusted for all