HOME DEPOT, INC. - Quarter Report: 2024 July (Form 10-Q)

Long-lived assets, goodwill, and other intangible assets are subject to nonrecurring fair value measurement for the assessment of impairment. We did not have any material assets or liabilities that were measured and recognized at fair value on a nonrecurring basis during the three and six months ended July 28, 2024 or July 30, 2023. See Note 10 for discussion on the fair values of assets acquired and liabilities assumed in our acquisition of SRS.

(1) In connection with the acquisition, certain members of SRS’s management team concurrently reinvested a portion of their respective after-tax merger consideration proceeds into shares of the Company’s common stock. A portion of such shares of Company common stock are fully vested, and accordingly, the fair value of such shares was recorded as non-cash purchase consideration. A portion of such shares of Company common stock, which replaced legacy SRS stock-based awards, are subject to service-based vesting conditions over a three-year period and become forfeitable if such vesting conditions are not satisfied. Accordingly, a portion of the fair value of these shares was recorded as non-cash purchase consideration, and the remainder will be recorded as post-combination expense over the vesting period. The fair value of these shares, including the amount which will be recorded as post-combination compensation cost, is not material.

The preliminary fair value of identifiable intangible assets was determined by using certain estimates and assumptions that are not observable in the market. The Company used the multi-period excess earnings method to value the customer relationships intangible assets. The significant assumptions used to estimate the fair value of customer relationships included forecasted revenues, customer attrition rates, and the discount rate. Determining the useful life of an intangible asset also requires judgment, as different types of intangible assets will have different useful lives.

The goodwill arising from the acquisition is calculated as the excess of the purchase price over the net assets acquired and is attributable to (i) growth acceleration in the residential professional customer market; (ii) expansion in high growth verticals including roofing; (iii) additional addressable market opportunities; (iv) enhanced delivery network capabilities; and (v) growth in sales force. We expect approximately $ billion of goodwill related to the acquisition to be deductible for U.S. federal and state income tax purposes. As the valuation is preliminary, we have not yet finalized the assignment of goodwill to our reporting units, and no goodwill currently resides in our Primary segment.

We have completed preliminary valuation analyses necessary to assess the fair values of the assets acquired and liabilities assumed and the amount of goodwill to be recognized as of the acquisition date. These fair values were based on management’s estimates and assumptions; however, the amounts indicated above are preliminary in nature and are subject to adjustment as additional information is obtained about the facts and circumstances that existed as of the acquisition date. Accordingly, there may be adjustments to the assigned values of acquired assets and liabilities. The primary areas that remain preliminary include, but are not limited to, intangible assets including the preliminary assumptions used in their estimates of fair values and their respective estimated useful lives, the valuation of certain tangible assets, income taxes, and residual goodwill. The final determination of the fair values, purchase consideration, related income tax impacts and residual goodwill will be completed as soon as practicable, and within the measurement period of up to one year from the acquisition date as permitted under GAAP. Any adjustments to provisional amounts that are identified during the measurement period will be recorded in the reporting period in which the adjustment is determined.

We have reviewed the consolidated balance sheet of The Home Depot, Inc. and its subsidiaries (the “Company”) as of July 28, 2024, the related consolidated statements of earnings, comprehensive income and stockholders’ equity for the three-month and six-month periods ended July 28, 2024 and July 30, 2023, the related consolidated statements of cash flows for the six-month periods ended July 28, 2024 and July 30, 2023, and the related notes (collectively, the “consolidated interim financial information”). Based on our reviews, we are not aware of any material modifications that should be made to the consolidated interim financial information for it to be in conformity with U.S. generally accepted accounting principles.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated balance sheet of the Company as of January 28, 2024, and the related consolidated statements of earnings, comprehensive income, stockholders’ equity, and cash flows for the fiscal year then ended (not presented herein); and in our report dated March 13, 2024, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet as of January 28, 2024 is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

This consolidated interim financial information is the responsibility of the Company’s management. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our reviews in accordance with the standards of the PCAOB. A review of consolidated interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

The following discussion provides an analysis of the Company’s financial condition and results of operations from management's perspective and should be read in conjunction with the consolidated financial statements and related notes included in this report and in the 2023 Form 10-K and with our MD&A included in the 2023 Form 10-K.

During the second quarter of fiscal 2024, we opened two new stores in the U.S. and one new store in Mexico, resulting in a total store count of 2,340 at July 28, 2024. A total of 321 stores, or 13.7%, were located in Canada and Mexico. For the second quarter of fiscal 2024, sales per retail square foot were $660.17, and for the first six months of fiscal 2024, sales per retail square foot were $616.17. Our inventory turnover ratio was 4.9 times at the end of the second quarter of fiscal 2024, compared to 4.4 times at the end of the second quarter of fiscal 2023. The increase in our inventory turnover ratio was primarily driven by lower average inventory levels during the first six months of fiscal 2024.

During the first six months of fiscal 2024, we generated $10.9 billion of cash flow from operations, received approximately $10.0 billion of proceeds from the issuance of long-term debt, net of discounts, and received $2.5 billion of proceeds from commercial paper borrowings, net of repayments. We utilized a combination of commercial paper borrowings and the issuance of this long-term debt, together with cash on hand, to fund the acquisition of SRS, with cash purchase consideration totaling $17.7 billion. Specifically, in June 2024, leading up to the acquisition on June 18, 2024, we raised commercial paper borrowings of over $15.0 billion to fund the transaction, of which approximately $10.0 billion was then immediately repaid with the proceeds from our issuance of long-term debt. We continued to repay these outstanding commercial paper borrowings during the quarter and ended the second quarter with $2.5 billion of commercial paper borrowings outstanding.

Our ROIC for the trailing twelve-month period was 31.9% at the end of the second quarter of fiscal 2024 and 41.5% at the end of the second quarter of fiscal 2023. The decrease in ROIC was primarily driven by higher average long-term debt levels due to the financing of the SRS acquisition and lower operating income. See the Non-GAAP Financial Measures section below for our definition and calculation of ROIC, as well as a reconciliation of NOPAT, a non-GAAP financial measure, to net earnings (the most comparable GAAP financial measure).

On March 27, 2024, we entered into a definitive agreement to acquire SRS, a leading residential specialty trade distribution company across several verticals serving the professional roofer, landscaper and pool contractor. On June 18, 2024, following the satisfaction or waiver of the applicable closing conditions, including receipt of the requisite regulatory approvals, the acquisition was completed and all merger consideration was transferred. We believe the acquisition of SRS will accelerate the Company’s growth with the residential professional customer. The acquisition is expected to complement our existing capabilities and enable us to better serve complex project purchase occasions with the renovator/remodeler, while also establishing the Company as a leading specialty trade distributor across multiple verticals. Refer to Note 2 and Note 10 to our consolidated financial statements for further discussion of the impact of the acquisition on our consolidated financial statements.


	Three Months Ended
	July 28, 2024				July 30, 2023
dollars in millions	$		% of Net Sales		$		% of Net Sales
Net sales	$	43,175			$	42,916
Gross profit	14,416		33.4	%	14,157		33.0	%
Operating expenses:
Selling, general and administrative	7,144		16.5		6,915		16.1
Depreciation and amortization	738		1.7		653		1.5
Total operating expenses	7,882		18.3		7,568		17.6
Operating income	6,534		15.1		6,589		15.4
Interest and other (income) expense:
Interest income and other, net	(84)		(0.2)		(41)		(0.1)
Interest expense	573		1.3		469		1.1
Interest and other, net	489		1.1		428		1.0
Earnings before provision for income taxes	6,045		14.0		6,161		14.4
Provision for income taxes	1,484		3.4		1,502		3.5
Net earnings	$	4,561	10.6	%	$	4,659	10.9	%


	Three Months Ended
Selected financial and sales data:	July 28, 2024			July 30, 2023			% Change
Comparable sales (% change)	(3.3)		%	(2.0)		%	N/A
Comparable customer transactions (% change) (1)	(2.2)		%	(2.0)		%	N/A
Comparable average ticket (% change) (1)	(1.3)		%	0.1		%	N/A
Customer transactions (in millions) (1)	451.0			459.1			(1.8)	%
Average ticket (1) (2)	$	88.90		$	90.07		(1.3)	%
Sales per retail square foot (1) (3)	$	660.17		$	684.65		(3.6)	%
Diluted earnings per share	$	4.60		$	4.65		(1.1)	%

(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.

Net Sales. Net sales for the second quarter of fiscal 2024 were $43.2 billion, an increase of 0.6% from $42.9 billion for the second quarter of fiscal 2023. The increase in net sales for the second quarter of fiscal 2024 was driven by sales from the SRS acquisition, the acquisitions we completed in fiscal 2023, and new store openings. Net sales attributable to SRS since the completion of the acquisition and included within our results for the second quarter of fiscal 2024 totaled $1.3 billion. 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.

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 52nd 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 second quarter of fiscal 2024 decreased 3.3%, reflecting a 2.2% decrease in comparable customer transactions and a 1.3% decrease in comparable average ticket compared to the second 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.

Gross profit for the second quarter of fiscal 2024 increased 1.8% to $14.4 billion from $14.2 billion for the second quarter of fiscal 2023. Gross profit as a percentage of net sales, or gross profit margin, was 33.4% for the second quarter of fiscal 2024 compared to 33.0% for the second quarter of fiscal 2023. The increase in gross profit margin during the second quarter of fiscal 2024 reflects lower transportation costs and lower shrink within our Primary segment, partially offset by the inclusion of SRS gross profit margin in our consolidated results.

Selling, General & Administrative. SG&A for the second quarter of fiscal 2024 increased $229 million, or 3.3%, to $7.1 billion from $6.9 billion for the second quarter of fiscal 2023. As a percentage of net sales, SG&A was 16.5% for the second quarter of fiscal 2024 compared to 16.1% for the second quarter of fiscal 2023, primarily reflecting deleverage from a negative comparable sales environment.

Depreciation and Amortization. Depreciation and amortization for the second quarter of fiscal 2024 increased $85 million, or 13.0%, to $738 million from $653 million for the second quarter of fiscal 2023. As a percentage of net sales, depreciation and amortization was 1.7% for the second quarter of fiscal 2024 compared to 1.5% for the second quarter of fiscal 2023, primarily reflecting increased intangible asset amortization expense of $46 million, of which $39 million was related to the SRS acquisition, as well as increased depreciation expense from ongoing investments in the business, and deleverage from a negative comparable sales environment.

Interest and other, net for the second quarter of fiscal 2024 increased $61 million, or 14.3%, to $489 million from $428 million for the second quarter of fiscal 2023. As a percentage of net sales, interest and other, net was 1.1% for the second quarter of fiscal 2024 compared to 1.0% for the second quarter of fiscal 2023, primarily reflecting higher interest expense driven by commercial paper borrowings and higher long-term debt, partially offset by higher interest income resulting from elevated cash balances in the second quarter of fiscal 2024 leading up to the acquisition of SRS.


	Six Months Ended
	July 28, 2024				July 30, 2023
dollars in millions	$		% of Net Sales		$		% of Net Sales
Net sales	$	79,593			$	80,173
Gross profit	26,849		33.7	%	26,714		33.3	%
Operating expenses:
Selling, general and administrative	13,811		17.4		13,270		16.6
Depreciation and amortization	1,425		1.8		1,304		1.6
Total operating expenses	15,236		19.1		14,574		18.2
Operating income	11,613		14.6		12,140		15.1
Interest and other (income) expense:
Interest income and other, net	(141)		(0.2)		(74)		(0.1)
Interest expense	1,058		1.3		943		1.2
Interest and other, net	917		1.2		869		1.1
Earnings before provision for income taxes	10,696		13.4		11,271		14.1
Provision for income taxes	2,535		3.2		2,739		3.4
Net earnings	$	8,161	10.3	%	$	8,532	10.6	%


	Six Months Ended
Selected financial and sales data:	July 28, 2024			July 30, 2023			% Change
Comparable sales (% change)	(3.1)		%	(3.2)		%	N/A
Comparable customer transactions (% change) (1)	(1.9)		%	(3.4)		%	N/A
Comparable average ticket (% change) (1)	(1.3)		%	0.1		%	N/A
Customer transactions (in millions) (1)	837.8			850.1			(1.4)	%
Average ticket (1) (2)	$	89.72		$	90.92		(1.3)
Sales per retail square foot (1) (3)	$	616.17		$	638.50		(3.5)	%
Diluted earnings per share	$	8.23		$	8.46		(2.7)	%

Net Sales. Net sales for the first six months of fiscal 2024 were $79.6 billion, a decrease of 0.7% from $80.2 billion for the first six months of fiscal 2023. The decrease in net sales for the first six months of fiscal 2024 reflects the impact of a negative comparable sales environment, primarily driven by a decrease in comparable customer transactions and comparable average ticket. The decrease in net sales was partially offset by sales from the acquisition of SRS, the acquisitions we completed in fiscal 2023, and new store openings. Net sales attributable to SRS since the completion of the acquisition and included within our results for the first six months of fiscal 2024 totaled $1.3 billion.

Comparable Sales. Total comparable sales for the first six months of fiscal 2024 decreased 3.1%, reflecting a 1.9% decrease in comparable customer transactions and a 1.3% decrease in comparable average ticket compared to the first six 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 six months of fiscal 2024, our Building Materials merchandising department posted positive comparable sales compared to the first six months of fiscal 2023. All of our other merchandising departments posted negative comparable sales during the first six months of fiscal 2024 compared to the first six months of fiscal 2023.

Gross profit for the first six months of fiscal 2024 increased 0.5% to $26.8 billion from $26.7 billion for the first six months of fiscal 2023. Gross profit as a percentage of net sales, or gross profit margin, was 33.7% for the first six months of fiscal 2024 compared to 33.3% for the first six months of fiscal 2023. The increase in gross profit margin during the first six months of fiscal 2024 reflects lower transportation costs and lower shrink within our Primary segment, partially offset by the inclusion of SRS gross profit margin in our consolidated results.

Selling, General & Administrative. SG&A for the first six months of fiscal 2024 increased $541 million, or 4.1%, to $13.8 billion from $13.3 billion for the first six months of fiscal 2023. As a percentage of net sales, SG&A was 17.4% for the first six months of fiscal 2024 compared to 16.6% for the first six months of fiscal 2023, primarily due to deleverage from a negative comparable sales environment, lower legal-related benefits, and higher payroll costs.

Depreciation and Amortization. Depreciation and amortization for the first six months of fiscal 2024 increased $121 million, or 9.3%, to $1.4 billion from $1.3 billion for the first six months of fiscal 2023. As a percentage of net sales, depreciation and amortization was 1.8% for the first six months of fiscal 2024 and 1.6% for the first six months of fiscal 2023, primarily reflecting increased intangible asset amortization expense of $54 million, of which $39 million was related to the SRS acquisition, increased depreciation expense from ongoing investments in the business, and deleverage from a negative comparable sales environment.

Interest and other, net for the first six months of fiscal 2024 increased $48 million, or 5.5%, to $917 million from $869 million for the first six months of fiscal 2023. As a percentage of net sales, interest and other, net was 1.2% for the first six months of fiscal 2024 compared to 1.1% for the first six 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.

To provide clarity on our operating performance, we supplement our reporting with certain non-GAAP financial measures. However, this supplemental information should not be considered in isolation or as a substitute for the related GAAP measures. Non-GAAP financial measures presented herein may differ from similar measures used by other companies.

We believe ROIC is meaningful for management, investors and ratings agencies because it measures how effectively we deploy our capital base. ROIC is a profitability measure, not a measure of financial performance under GAAP. We define ROIC as NOPAT, a non-GAAP financial measure, for the most recent twelve-month period, divided by average debt and equity. We define average debt and equity as the average of beginning and ending long-term debt (including current installments) and equity for the most recent twelve-month period.


	Twelve Months Ended
dollars in millions	July 28, 2024 (2)			July 30, 2023
Net earnings	$	14,772		$	16,233
Interest and other, net	1,813			1,683
Provision for income taxes	4,577			5,124
Operating income	21,162			23,040
Income tax adjustment (1)	(5,044)			(5,555)
NOPAT	$	16,118		$	17,485

Average debt and equity	$	50,534		$	42,084

ROIC	31.9		%	41.5		%

At July 28, 2024, we had $1.6 billion in cash and cash equivalents, of which $1.1 billion was held by our foreign subsidiaries. We believe that our current cash position, cash flow generated from operations, funds available from our commercial paper program, and access to the long-term debt capital markets should be sufficient not only for our operating requirements, any required debt payments, and satisfaction of other contractual obligations, but also to enable us to invest in the business, fund dividend payments, and fund any share repurchases through the next several fiscal years. In addition, we believe that we have the ability to obtain alternative sources of financing, if necessary.

Our material cash requirements include contractual and other obligations arising in the normal course of business. These obligations primarily include long-term debt and related interest payments, operating and finance lease obligations, and purchase obligations. In addition to our cash requirements, we follow a disciplined approach to capital allocation. This approach first prioritizes investing in the business, followed by paying dividends, with the intent of then returning excess cash to shareholders in the form of share repurchases. In March 2024, we paused share repurchases in anticipation of the acquisition of SRS. We do not currently plan to resume share repurchases until we have used our excess cash to reduce our outstanding debt.

During the first six months of fiscal 2024, we invested approximately $1.6 billion back into our business in the form of capital expenditures. For fiscal 2024, in line with our expectation of approximately two percent of net sales on an annual basis, we plan to invest approximately $3.0 billion to $3.5 billion back into our business in the form of capital expenditures, with investments focused on new stores and improving the customer experience, including through technology and development of other differentiated capabilities. However, we may adjust our capital expenditures to support the operations of the business, to enhance long-term strategic positioning, or in response to the economic environment, as necessary or appropriate.

In February 2024, we announced a 7.7% increase in our quarterly cash dividend from $2.09 to $2.25 per share. During the first six months of fiscal 2024, we paid cash dividends of $4.5 billion to shareholders. We intend to pay a dividend in the future; however, any future dividend is subject to declaration by our Board of Directors based on our earnings, capital requirements, financial condition, and other factors considered relevant by our Board of Directors.

In August 2023, our Board of Directors approved a $15.0 billion share repurchase authorization that replaced the previous authorization of $15.0 billion, which was approved in August 2022. The August 2023 authorization does not have a prescribed expiration date. As of July 28, 2024, approximately $11.7 billion of the $15.0 billion share repurchase authorization remained available. During the first six months of fiscal 2024, we had cash payments of $649 million for repurchases of our common stock through open market purchases, prior to pausing share repurchases in March 2024 as discussed above.

At the beginning of 2024, we had a commercial paper program that allowed for borrowings up to $5.0 billion. In connection with our program, we had back-up credit facilities with a consortium of banks for borrowings up to $5.0 billion, which consisted of a five-year $3.5 billion credit facility scheduled to expire in July 2027 and a 364-day $1.5 billion credit facility scheduled to expire in July 2024. At January 28, 2024, there were no outstanding borrowings under our commercial paper program or back-up credit facilities.

In May 2024, we increased our commercial paper program from $5.0 billion to $19.5 billion in connection with the anticipated financing of the acquisition of SRS (see Note 10). In May 2024, in connection with the increase in the commercial paper program, we also entered into three additional back-up credit facilities that consisted of a 364-day $3.5 billion credit facility scheduled to expire in May 2025, a three-year $1.0 billion credit facility scheduled to expire in May 2027, and a 364-day $10.0 billion credit facility scheduled to expire in May 2025. The $10.0 billion credit facility also provided that the commitments and any borrowings under this facility would be reduced by the amount of net cash proceeds we received from any future debt issuance.

In June 2024, leading up to the acquisition of SRS on June 18, 2024, we raised commercial paper borrowings of over $15.0 billion to fund the transaction. On June 25, 2024, we received the proceeds from the issuance of $10.0 billion of long-term debt, and immediately used the proceeds to repay approximately $10.0 billion of these commercial paper borrowings. On June 27, 2024, we terminated the $10.0 billion back-up credit facility, and subsequently reduced our commercial paper program from $19.5 billion to $9.5 billion.

All of our short-term borrowings in the first six months of fiscal 2024 were under our commercial paper program, and the maximum amount outstanding at any time was $15.3 billion. At July 28, 2024, we had outstanding borrowings under our commercial paper program of $2.5 billion with a weighted average interest rate of 5.4%, we had no outstanding borrowings under our back-up credit facilities, and we were in compliance with all of the covenants contained in our credit facilities, none of which are expected to impact our liquidity or capital resources.

The indentures governing our senior notes do not generally limit our ability to incur additional indebtedness or require us to maintain financial ratios or specified levels of net worth or liquidity. The indentures governing our notes contain various customary covenants; however, none are expected to impact our liquidity or capital resources. See Note 5 to our consolidated financial statements for further discussion of our debt arrangements.

Cash flow generated from operations provides us with a significant source of liquidity. Our operating cash flows result primarily from cash received from our customers, offset by cash payments we make for products and services, associate compensation, operations, occupancy costs, and income taxes. Cash provided by or used in operating activities is also subject to changes in working capital. Working capital at any point in time is subject to many variables, including seasonality, inventory management and category expansion, the timing of cash receipts and payments, vendor payment terms, and fluctuations in foreign exchange rates.

Net cash provided by operating activities decreased by $1.3 billion in the first six months of fiscal 2024 compared to the first six months of fiscal 2023, primarily driven by changes in working capital and a slight decrease in net earnings. Changes in working capital were primarily driven by normalized inventory levels during the first six months of fiscal 2024, compared to strategic reductions in inventory during fiscal 2023.

Net cash provided by financing activities in the first six months of fiscal 2024 primarily reflected approximately $10.0 billion of net proceeds from long-term debt and $2.5 billion of proceeds from commercial paper borrowings, net of repayments, partially offset by $4.5 billion of cash dividends paid, $1.3 billion of repayments of long-term debt, and $649 million of share repurchases prior to pausing share repurchases in March 2024. Net cash used in financing activities in the first six months of fiscal 2023 primarily reflected $5.0 billion of share repurchases, $4.2 billion of cash dividends paid, and $1.1 billion of long-term debt repayments.

The overall net increase in cash inflows from financing activities during the first six months of fiscal 2024 totaled $16.4 billion and was predominantly attributable to the financing of the SRS acquisition. Specifically, as discussed above, a combination of commercial paper borrowings and the $10.0 billion long-term debt issuance, along with increased cash on hand resulting from the pause of share repurchases, were utilized to fund the cash paid to acquire SRS.

We account for business combinations using the acquisition method of accounting, which requires that once control is obtained, all the assets acquired and liabilities assumed are recorded at their respective fair values at the date of acquisition. The determination of fair values of identifiable assets and liabilities requires estimates and the use of valuation techniques when fair value is not readily available and requires a significant amount of management judgment. For the valuation of intangible assets acquired in a business combination, we typically use an income approach. Specifically, for the SRS acquisition, we used the multi-period excess earnings method to value the customer relationships intangible assets. The significant assumptions used to estimate the fair value of customer relationships included forecasted revenues, customer attrition rates and the discount rate. Although the Company believes its estimates of fair value are reasonable, actual financial results could differ from those estimates due to the inherent uncertainty involved in making such estimates. Changes in assumptions concerning future financial results or other underlying assumptions could have a significant impact on the determination of the fair value of the customer relationships intangible assets acquired.

The excess of the purchase price over fair values of identifiable assets acquired and liabilities assumed is recorded as goodwill. During the measurement period, which is up to one year from the acquisition date, we may record adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill due to the use of preliminary information in our initial estimates. Upon the conclusion of the measurement period, any subsequent adjustments are recorded to earnings.

Our exposure to market risk results primarily from fluctuations in interest rates in connection with our long-term debt portfolio. We are also exposed to risks from foreign currency exchange rate fluctuations on the translation of our foreign operations into U.S. dollars and on the purchase of goods by these foreign operations that are not denominated in their local currencies. Additionally, we may experience inflation and deflation related to our purchase and sale of certain commodity products. During the first six months of 2024, there have been no material changes to our exposure to market risks from those disclosed in the 2023 Form 10-K, including the types of instruments we use to manage our exposure to such risks.

We are in the process of an ongoing business transformation initiative, which includes upgrading and migrating certain accounting and finance systems. We plan to continue to migrate additional business processes over the course of the next few years and have modified and will continue to modify the design and implementation of certain internal control processes as the transformation continues.

SEC regulations require us to disclose certain information about proceedings arising under federal, state or local environmental regulations if we reasonably believe that such proceedings may result in monetary sanctions above a stated threshold. Pursuant to SEC regulations, the Company uses a threshold of $1 million for purposes of determining whether disclosure of any such proceedings is required.

In December 2023, the Home Depot received a notice of violation from the State of Washington Department of Ecology (the “DOE”) alleging sales to customers in Washington of a refrigerant that was generally prohibited from retail sale by the state in 2022. On June 26, 2024, the DOE issued Home Depot a notice of penalty assessing a civil penalty of approximately $1.6 million for the alleged violations. In the second quarter of fiscal 2024, we resolved the matter with the DOE and paid the civil penalty.

In addition to the other information set forth in this report, you should carefully consider the factors discussed under Part I, Item 1A. Risk Factors and elsewhere in the 2023 Form 10-K. These risks and uncertainties could materially and adversely affect our business, consolidated financial condition, results of operations, or cash flows. Our operations could also be affected by additional factors that are not presently known to us or by factors that we currently do not consider material to our business. There have been no material changes in the risk factors discussed in the 2023 Form 10-K.


Period	Total Number of Shares Purchased(1)	Average Price Paid Per Share(1)(3)		Total Number of Shares Purchased as Part of Publicly Announced Program(2)	Dollar Value of Shares that May Yet Be Purchased Under the Program(2)(3)
April 29, 2024 – May 26, 2024	4,477	$	361.04	—	$	11,657,503,041
May 27, 2024 – June 23, 2024	2,271	335.02		—	11,657,503,041
June 24, 2024 – July 28, 2024	1,941	350.36		—	11,657,503,041
	8,689	351.86		—

(1)These amounts include repurchases pursuant to our Omnibus Stock Incentive Plan, as Amended and Restated May 19, 2022, and our 1997 Omnibus Stock Incentive Plan (collectively, the “Plans”). Under the Plans, participants surrender shares as payment of applicable tax withholding on the vesting of restricted stock. Participants in the Plans may also exercise stock options by surrendering shares of common stock that the participants already own as payment of the exercise price. Shares so surrendered by participants in the Plans are repurchased pursuant to the terms of the Plans and applicable award agreement and not pursuant to publicly announced share repurchase programs.

(2)On August 14, 2023, our Board of Directors approved a $15.0 billion share repurchase authorization that replaced the previous authorization of $15.0 billion, which was approved on August 18, 2022. The August 2023 authorization does not have a prescribed expiration date. In March 2024, we paused share repurchases in anticipation of the acquisition of SRS.

During the second quarter of fiscal 2024, we issued 2,351 deferred stock units under The Home Depot, Inc. Nonemployee Directors’ Deferred Stock Compensation Plan pursuant to the exemption from registration provided by Section 4(a)(2) of the Securities Act and Rule 506 of the SEC’s Regulation D thereunder. The deferred stock units were credited during the second quarter of fiscal 2024 to the accounts of those non-employee directors who elected to receive all or a portion of board retainers in the form of deferred stock units instead of cash. The deferred stock units convert to shares of common stock on a one-for-one basis following a termination of service as described in this plan.

During the second quarter of fiscal 2024, we credited 937 deferred stock units to participant accounts under the Restoration Plans pursuant to an exemption from the registration requirements of the Securities Act for involuntary, non-contributory plans. The deferred stock units convert to shares of common stock on a one-for-one basis following a termination of service as described in these plans.


Exhibit		Description
2.1	*‡	Agreement and Plan of Merger, dated as of March 27, 2024 by and among The Home Depot, Inc., Star Acquisition Merger Sub Inc., Shingle Acquisition Holdings, Inc. and Shingle Acquisition, LP [Form 10-Q filed on May 21, 2024, Exhibit 2.1]
3.1	*	Amended and Restated Certificate of Incorporation of The Home Depot, Inc. [Form 10-Q filed on September 1, 2011, Exhibit 3.1]
3.2	*	By-Laws of The Home Depot, Inc. (As Amended and Restated Effective February 23, 2023) [Form 8-K filed on February 28, 2023, Exhibit 3.2]
4 .1	*	Indenture, dated as of May 4, 2005 between the Company and The Bank of New York Mellon Trust Company, N.A., as Trustee [Form S-3 filed on May 6, 2005, Exhibit 4.1]
4.2	*	Form of Floating Rate Note due December 24, 2025 [Form 8-K filed on June 25, 2024, Exhibit 4.2]
4.3	*	Form of 5.100% Note due December 24, 2025 [Form 8-K filed on June 25, 2024, Exhibit 4.3]
4.4	*	Form of 5.150% Note due June 25, 2026 [Form 8-K filed on June 25, 2024, Exhibit 4.4]
4.5	*	Form of 4.875% Note due June 25, 2027 [Form 8-K filed on June 25, 2024, Exhibit 4.5]
4.6	*	Form of 4.750% Note due June 25, 2029 [Form 8-K filed on June 25, 2024, Exhibit 4.6]
4.7	*	Form of 4.850% Note due June 25, 2031 [Form 8-K filed on June 25, 2024, Exhibit 4.7]
4.8	*	Form of 4.950% Note due June 25, 2034 [Form 8-K filed on June 25, 2024, Exhibit 4.8]
4.9	*	Form of 5.300% Note due June 25, 2054 [Form 8-K filed on June 25, 2024, Exhibit 4.9]
4.10	*	Form of 5.400% Note due June 25, 2064 [Form 8-K filed on June 25, 2024, Exhibit 4.10]
10.1	‡	364-Day Revolving Credit F acility A greement dated as of May 7 , 2024 by and among The Home Depot, Inc., the banks party t hereto and JPMorgan Chase Bank , N.A., as the Administrat ive Agent
1 0.2	‡	Three-Year Revolving Credit Facility Agreement dated as of May 7, 2024 by and among The Home Depot, Inc., the banks party thereto and JPMorgan Chase Bank, N.A., as the Administrative Agent
10.3	‡	364-Day Revolving Credit Facility Agreement dated as of May 7, 2024 by and among The Home Depot, Inc., the banks party thereto and JPMorgan Chase Bank, N.A., as the Administrative Agent
15.1		Acknowledgement of Independent Registered Public Accounting Firm
31.1		Certification of the Chair, President and Chief Executive Officer pursuant to Rule 13a-14(a)
31.2		Certification of the Executive Vice President and Chief Financial Officer pursuant to Rule 13a-14(a)
32.1		Certification of the Chair, President and Chief Executive Officer furnished pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2		Certification of the Executive Vice President and Chief Financial Officer furnished pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS		XBRL Instance Document - the instance document does not appear in the Interactive Data file because its XBRL tags are embedded within the Inline XBRL document
101.SCH		Inline XBRL Taxonomy Extension Schema Document
101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document
104		Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)


THE HOME DEPOT, INC. (Registrant)

By:			/s/ EDWARD P. DECKER
			Edward P. Decker, Chair, President and Chief Executive Officer (Principal Executive Officer)

			/s/ RICHARD V. MCPHAIL
			Richard V. McPhail, Executive Vice President and Chief Financial Officer (Principal Financial Officer)

			/s/ KIMBERLY R. SCARDINO
			Kimberly R. Scardino, Senior Vice President – Finance, Chief Accounting Officer and Controller (Principal Accounting Officer)

Date:			August 19, 2024


Executive Summary			19
Results of Operations			20
Liquidity and Capital Resources			24
Critical Accounting Estimates			26

HOME DEPOT, INC. - Quarter Report: 2024 July (Form 10-Q)

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