The Home Depot, Inc. (HD)
Q3 2009 Earnings Call Transcript
November 17, 2009 9:00 a.m. ET

Executives

Diane Dayhoff - Vice President of Investor Relations
Frank Blake - Chairman and Chief Executive Officer
Craig Menear - Executive Vice President, Merchandising
Carol Tomé - Chief Financial Officer and Executive Vice President Corporate Services
Marvin Ellison - Executive Vice President of U.S. stores

Analysts

Peter Benedict - Robert W. Baird & Co.
Chris Horvers - J.P. Morgan
David Schick - Stifel Nicolaus & Company
Gary Balter - Credit Suisse
Michael Lasser - Barclays Capital
Colin McGranahan - Sanford C. Bernstein & Company
Stephen Chick - FBR Capital Markets
Deborah Weinswig - Citigroup
Alan Rifkin - Bank of America/Merrill Lynch
Scott Ciccarelli - RBC Capital Markets
Matthew Fassler - Goldman Sachs
T.J. McConville - Raymond James
William Truelove - UBS

Presentation

Operator

Good day, everyone and welcome to today’s Home Depot third quarter earnings conference call. Today’s conference is being recorded. Beginning today’s discussion is Ms. Diane Dayhoff, Vice President of Investor Relations. Please go ahead.

Diane Dayhoff

Hi, Joseph. Thank you, Joseph and good morning to, everyone. Welcome to the Home Depot third quarter earnings conference call. Joining us on our call today are Frank Blake, Chairman and CEO of the Home Depot; Craig Menear, Executive Vice President of Merchandising; and Carol Tomé, Chief Financial Officer and Executive Vice President Corporate Services.

Following our prepared remarks, the call will be opened for analysts’ questions. Questions will be limited to analysts and investors and as a reminder, we would appreciate it if the participants would limit themselves to one question with one follow-up, please.

This conference call is being broadcast realtime on the Internet at homedepot.com, with links on both our home page and the investor relations section. The replay will also be available on our site. If you are unable to get to your question during the call, please call our investor relations department at 770-384-2387.

Before I turn the call over to Frank, 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. These risks and uncertainties include but are not limited to those factors identified in the release and in our filings of the Securities and Exchange Commission.

Today’s presentations also include certain non-GAAP measurements. Reconciliation of these measurements is provided in the financial statements included with our earnings release. Now, let me turn the call over to Frank Blake.

Frank Blake

Thank you, Diane and good morning, everyone. Sales for the third quarter were $16.4 billion, down 8% from last year. Our comp sales were negative 6.9%. Diluted earnings per share were $0.41. As Carol will detail, our comp sales in the U.S. were negative 7.1%.

From a regional perspective, our Gulf market had double digit negative comps as we anniversaried the impact of last year’s hurricanes. But as a sign of the steadying of our business at the end of the quarter, 36 of our top 40 markets showed a sequential comp improvement on a rolling six-week average basis.

Our strongest regions were the mid-Atlantic and mid-South but we also continue to see signs of stabilization in the markets that were hardest hit by the housing crisis, such as California, Florida and Arizona. And we gained overall market share in the quarter.

From a macro perspective, for the first time in the last few years, private fixed residential investment, PFRI, as a percent of GDP did not decline quarter-over-quarter. We’ve referenced the PFRI data point consistently and while it’s not a perfect indicator of our business, it is at least directionally relevant.

So, it’s positive news that the PFRI data seemed to have bottomed. Despite this positive momentum, caution is appropriate. We are still in less bad territory for comps, not positive. Average ticket performance remains a concern, even as our comp transaction rate stabilizes.