Morning, everyone. Morning. Thank you for joining us. It's our pleasure to introduce the members of the management team for Home Depot. This morning, we have Ted Decker, Chair, President, and Chief Executive Officer, and Billy Bastek, Executive Vice President of Merchandising. Morning. Good morning. Morning. Thank you for joining us. I wanted to start with the biggest question you're probably getting, have gotten, or will still get for a while, is the macro. Right. Just the broader macro environment obviously has been maybe okay. The consumer's been holding in, the housing market has been maybe a little bit more difficult with higher interest rates. Can you give us a view on how you see the housing market currently, what it has meant for your business, and how you see things playing out into 2024? Well, as you say, macro, surprisingly strong. Mm-hmm. And, we follow Goldman Sachs, obviously, and you're down to a 15%- Yeah expectation of a recession. And we started this, I think most people said it, certainly a recession, and whether it's gonna be, a hard landing or a soft landing, and now we're maybe not a recession, and if we have one, it would, it would be a softer landing. So kudos to the Fed. They've just- Mm-hmm Done a remarkable job to manage through this inflation and be bringing that down without tanking the economy. On housing, I mean, housing, as you in home improvement, we had just a terrific run during COVID. Grew our business $47 billion, 43% growth in 2021 and 2022. So we call this, for Home Depot, a year of moderation. I mean, we certainly don't like negative comps. We have a guidance out there of -2% to -5% in comps. And Home Depot is, for 45 years, we are an entrepreneurial growth company, so we certainly don't love a year of moderation, as we're calling it. But after that explosive growth and significant share gain over the three years of COVID, to have a year of modest negative comps is understandable. So we look at housing, and we couldn't be more optimistic on the medium to long term for our sector. Again, understandable that you'd have a year to digest that growth. There was so much engagement. You see it in the PCE numbers. I mean, very clearly that the American consumer shifted their spending from services to goods over the three years of the pandemic. And now you can very clearly see it in the numbers, that the spend is now going from goods back to services. And the question for us—we've talked a lot about, PCE, and it's an imperfect science, translating it to The Home Depot. So while we're $157 billion, you're looking at basis points of spend on a $20-odd trillion economy. So directionally, it makes sense. And we saw our sector share of PCE increase. We saw Home Depot, in particular, share of PCE increase, and it is starting to moderate. But where does it end, vis-à-vis pre-pandemic? W here does housing engagement, go from here? And that's where we're, again, very bullish. Reason being, number one, the fundamental increase in value of the asset class. Mm-hmm. So while house prices are a little off the boil from the peak of last year, you're still talking about an asset class that's increased in value over 40%, which translates to $13 trillion of wealth. So a disproportionate increase in value of the asset class from 2019. So it would make sense, well, hard to, to call it, it would make sense that there'd be more engagement with that asset class, and we see that in home price appreciation, and that is driven by a fundamental shortage of housing. We look at a shortage of housing of at least 2 million housing units. I've seen estimates as high as 4 million housing units, and that's why house values are holding up. Even with higher interest rates, even with lower transactions, house values, again, off the boil a little bit, but sequentially, they're up after trickling down a bit. So values are up. It's the strongest correlation with our business. Age of housing is up. While housing is always aging, the average age is increased. The slope of that age curve increased because for 15 years we underbuilt, which is what led to the shortage of housing. And then usage of the asset class is up, because even if you're, back to working three days a week, most people are, one, two, even three days more a week working from home, so you're using the house more. So all those are positive. The millennials are highly engaged. There's another question, is millennials going to engage in housing? They're highly engaged in housing. Gen Z, quickly behind them, very engaged in housing. So we're super optimistic. We'll get through this period of moderation in sort of X, X months as we work our way through this. But really, again, couldn't be more positive on the sector. So that leads me to just you had mentioned PCE, and frankly, I think you're one of the only companies that are really kind of taking into account that there is a shift between goods and services, and that's, that's part of the equation, too. It's not just- Mm The macro. And I think your guidance even accounts for- Yeah What happens with PCE, primarily in the range. Yes. You've done that down, down 2 to down 5.... So could you maybe talk a little bit about that share of wallet? And as we look into next year, and not asking for anything about next year specifically, but do you need housing turnover to be positive or get back into healthier territory for you to comp positive, or is it not just that alone? Well, yeah, it certainly isn't turnover alone. We talk about what are the drivers of housing. The strongest correlation is value. Turnover certainly has a correlation- Yeah. Age of home has a correlation, household formation has a correlation. So three of those four are very strong. Transactions are down. U.S. housing has turned over 4%-5% a year. We're certainly now toward the four. Why is that? We know the dynamic of interest rates and so many people locked in to lower mortgage rates, under 5%. Mortgage rates now over 7%, so people are staying at home. It's a two sides of a coin argument, though, on transactions. Certainly, we see an increase in spend when there's a transaction. You fix your home to sell it, and then the people that move into the home make it theirs. So there's definitely an increase in spend on a house that's been turned over. But on the other side, if you're in a home at a 3.5% mortgage, and you've seen the value go up 20, 30, 40% and you're not gonna move, well, okay, let's do the kitchen. L et's do a big project. And while we've always seen big projects, we haven't seen the dynamic yet of that investment in staying relative offset of a more agile, if you will, spend on a turnover. Needless to say, if we move down to a 4% range in turnover for the foreseeable future, you'll have comped that? So, okay, you went, you worked your way from 5 down to 4. If you stay steady at 4-ish, you've now comped that. On the PCE reversion, again, it's directionally correct, inaccurate when you're trying to tie basis points, of a $20 trillion-odd dollar economy to The Home Depot sales. The question on our range, when we said -2 to -5, the -5 was if we reverted back to 2019 by the end of this year. Doesn't seem to be happening, but it's still within the range. My question is, if I had to call it, it would be... it shouldn't revert back- Mm-hmm. Because your asset class is disproportionately higher as a value of the overall economy than before the pandemic, and all the aging, all the other aspects that I talked about. So if you had to call it, you'd say there's more engagement in the asset class. It doesn't revert all the way. And again, we get through this sort of period of leveling in all the dynamic of the sector. It's been a robust sector for... Well, I mean, owning the American home has been the dream- Mm-hmm. For 200-odd years, and it, it's gonna stay so. That kind of leads us to our question about unit versus price. So while, the comp guide this year is down 2-down 5, if you look back over the last Q9, transaction growth and home improvement has been negative. It's really been led by- Mm-hmm By ticket. So we've heard you speak before, I think, about the support you think there is for ticket going forward. But should that easier compare in units be something that we should be looking towards as we enter into 2024? And has your view on ticket changed meaningfully? Sure. Billy Bastek, our head merchant. Yeah. So I'll let him take that. So certainly we've seen, categories like lumber and the deflation. There's been a lot of talk about that. Yeah. We have seen, the equalization of units and ticket kind of come back, to Ted's earlier point, as you lap some of the things, that have occurred. There's pressure on larger ticket projects, some deferral, certainly. Lots of projects that were pulled forward as part of the pandemic, but we have seen the balancing out of those factors. And then certainly, as we're a project business, so when we see deflation in lumber, we see, pickup across our store because of being a project-based retailer, obviously, versus just a unit-based retailer. So we've seen a good pickup and balancing of that, which to your point, has been out of balance over the last few years with everything that's transpired. But we feel good about, what we're seeing in the balance of those at this point. We don't see any need for broad-based deflation. Yeah. I mean, there's., you all can look at the cumulative growth in ticket and AUR, and as Billy said, things like commodity, we price weekly to market on things like copper and lumber. But the general, price levels in the economy for, for any product, any, non-commodity specific product, as we all know, deflation is not a great thing. Broad-based deflation is not a great thing, and I think it's more of a disinflation. Yeah. So, we're cost rate requests in, not completely off the table, but way, way lower than what we had seen. It is a period of disinflation. Don't expect it to be deflation in our industry or the economy in general. I mean, do we gonna, who expects grocery prices in total to deflate, car prices to deflate? I think we're all experiencing a level setting of what price levels are today. Let's say, the one other piece on the AUR, while it's been, some cost driven, there's been so much innovation- Yeah Even through the pandemic. I mean, you can go to every aisle in our store, from building materials over to the left side, all the way through the middle of the store, to our garden business, and there's been so much innovation brought into the marketplace. So there's also a factor of that in the AUR shift, where people, we do see trade-up. Mm-hmm. While we see some moderation in some of the projects, where we've introduced innovation, which we're,, we've never been more bullish on the innovation. Again, aisle by aisle in our store, we've seen customers, both, both pro and consumers, react to that very favorably. So there's that component in there- Mm. As well, that's driven that piece. Great. That's, that's super helpful. Thank you. I think at your recent Investor Analyst Day event there was a lot of time spent on the complex pro and your plans to target roughly $200 billion, what you term the complex flow- Mm-hmm. Complex pro, sorry, market. 375 is the TAM, $200 billion is what you want. Right. How much of this market do you have today? And can you maybe back up and tell us how much you service this pro today and where you see it going? Right. So as you said, Kate, the market in total is huge. Yeah. Home improvement, one of the biggest TAMs out there, $950 billion. It's about 50/50 pro and consumer. Our business is about 50/50 pro and consumer. So we've always been focused on the pro. We've had, just an incredibly strong pro business, but most of that business has been on the cash and carry purchase. And every pro is in a Home Depot store. It's just a matter of how much they're engaging with us. So the smaller pro, cash and carry, we have tremendous share of wallet, and have had that for decades. The larger pro, again, they're all in our store for decades, but they're doing infill purchases, coming to get the odd tool. They're not, purchasing the principal material need for these larger projects. So when we digest the TAM of the $950 billion, $475 billion being pro, we say about $100 billion of that is MRO, and that's what our HD Supply subsidiary business services. So this is maintenance, repair, and operating supplies for multifamily, hotels, government housing, et cetera. That's a separate $100 billion. We have just a terrific business with HD Supply, number one, by far, in that space and growing. Then you look at the residual $375 billion, we've identified about $200 billion of that being this larger, complex, engaged project that the tends to be larger pros is engaging in, and we have very little of that. Mm. Now, all those pros, as I said, shop with us. We have some of their wallet in a number of purchase occasions, but we don't have the principal purchase for the project. And in all the research we've done, we've identified what's required to get that. And you really need to develop wholesaler-like capabilities. They expect a point of contact, a professional, B2B traditional sales force. They expect order management to be able to, in a planned purchase, identify quantity of product and date of delivery. They expect to be billed when shipped. I mean, Home Depot now, it's actually quite amazing that we have such a large pro business, and it is a cash or credit, at point of purchase. So if... We were chatting with a group earlier, if you have a pro that's remodeling a house and getting a $30,000 window package today, and that's not going to be delivered for two months, they're paying for it today. Mm. Which is amazing. In the wholesale world, you'd never pay before it's shipped, so we're having to build capability to bill when shipped. And then in some cases, not always, they'd expect a credit on that as well, whether it's 20, 30 days, so we're building credit capabilities. We're building capabilities to have account management because these larger accounts have hierarchies, whether subsidiaries, or properties, or administrators, and purchase, levels that are authorized within purchasing agents within their organizations. All the normal B2B activity that a wholesaler's built their business around, those are the capabilities that we're building out to get more share of that $200 billion. So it's actually super exciting. It's a lot of greenfield opportunity for us, and it's one of the three growth pillars we talked about at our investor conference, where we're gonna grow share in sales beyond the market. And, of that total TAM of $950 billion, the $200 billion is by far and away the most fragmented- Mm. most specialized, because no one's been able to put that under, under a single roof. It's hard. So, we're bullish on that opportunity because it is so fragmented today. As Ted mentioned, we have very, very little of that business today, with that same customer that shops on the cash and carry side for, whether it's fill-in and so forth, on that complex project. So the capability set will allow us to- Mm To get after that biggest piece of that $950 billion. How have some of the investments you've made in the supply chain, you've just been through a real, long period of in supply chain investment, does that position you well, or is the supply chain positioned well to go after that? Yes. In delivery, I didn't mention delivery, but that, in addition to the sales force and order management, I mean, delivery is paramount- Mm-hmm All this, all this product on larger projects are delivered. And when we started to build out, the next generation of our supply chain in 2019, that work is largely done. I mean, you're never done with your supply chain, but the goals we articulated back in 2017 are largely done. And I'll try and go quickly here. There are three main components to that supply chain. The first being what we call our MDOs, our Market Delivery Operations. Yeah. That is, box truck-enabled, last mile delivery through our distribution hub. We have about 100 of those around the country that we control and, manage. Our teams are in there managing those buildings, and that's largely built out. And the principal goods that are flowing through that now is our appliance, building appliance business. These are millions of appliance deliveries a year. And then that last mile of the box truck operation itself has largely been third party. Mm-hmm. We'll never have 100% control of, of that box truck. You want to have capacity, flexibility, and markets, but the Temco acquisition that we announced recently, they were our largest and, and very, very good operator for us. So we insourced that last mile delivery. Over time, we'll start to put more product in addition to appliances, big and bulky product grills and patio sets, and, and the like, so you'll get density and efficiencies of that operation. So that's, that's largely complete. The second piece is our DFCs, our Direct Fulfillment Centers. So this is... think of a pick, pack, and ship parcel. We had a goal to be able to ship next day to 90% of the country. That's essentially complete. We're high 80s%. We have, national distribution of these are 1 million sq ft, big, big, operations and largely complete. The third piece is what we call our flatbed distribution centers. And while we have a number of those up and running, that we still have room to grow those. And what those are, they're a combination of a national footprint we've had for some time on lumber replenishment in big and bulky building material replenishment for our stores. We now move those, older BDCs into these new flatbed facilities, and you add customer job site delivery capability in addition to the store replen. So you're leveraging the inventory, you're leveraging the operation, you're taking that activity out of the store. We've always delivered that type of product for years out of our store, but you just think of the double and triple handling that goes on to get product out of the store. It's a retail environment, it's not a, it's not a wholesale distribution environment. So we take that activity out of the store, more effective, better customer satisfaction, better on time and complete coming out of a, out of a wholesale facility. So while we still have national coverage on the replen, we're, I don't even know if we're halfway done in terms of the, the flatbed to the customer. Mm-hmm. Supply chain, substantially, complete. Okay, thank you. I think, one place maybe you surprised some people at your Analyst Day, was the announcement that you're going to open new stores. Which is, I think, the first time in many years- Mm. That we've seen this degree, I think, of store openings, which is 80 new stores. It sounds like it's coming at a time where you can maybe take some volume stress off existing stores. Mm. But has there been a change in how much ultimately you think the number of stores... Will we see that 80 change? Mm. Do you think you can open more from there, and how are you thinking about the opportunity? Yeah, if you go back to our height of opening stores, we were opening 200 a year. Mm-hmm. So, 80 over five years is a pretty, is a pretty small number relative to that. But there's been a lot of different factors that, that have led into that. When you think about 25 million new Americans, you think about household formation, and you think about really, in our sector, no new stores opened for the last, 10, 12 years. So, it's an opportunity for us. It's not going to be a huge growth, driver, but it is. And then the other piece is, you've got two pieces. You've got migration of where folks continue to, to reside, and then certainly, you mentioned it, is, taking some of the pressure off of our larger stores. Stores that have done, in excess of $2 billion since their inception, and, and we know that not every customer loves to come to a Home Depot on a Saturday afternoon and park, 200 yards away. The great thing is, as we've seen, we're going to open up 13 this year, 9 in the back half of the year. As we open these stores up and take some pressure off of maybe an existing store that's, got significant volume, but especially over the last three years, we've seen an overall incremental comp because we've taken some pressure off that store. They can operate that store much more efficiently, much better for their current constituents of customers, and then that's driven a better shopping experience there, more engagement, better associate experience, and seeing incrementality of that. So we've got 80 on the board as it stands today, over the next five years. We'll continue to evaluate. It is a long process from a real estate standpoint, and going to find the work that's been done there. Our real estate department's been, looking at this for some time. So bullish on new stores, one of our three growth opportunities, and we'll continue to evaluate what the options are as we go forward in that investment. Okay, thank you. We ask four questions of every company that sits here on stage with us. We've addressed a lot of it. So we've talked about the health of the consumer- Mm-hmm. And your view. We've talked about share of wallet, so we've, we've knocked those two out already. We've even talked about pricing. Mm. Just in terms of where you think pricing could be.... Could I get a sense of, do you think pricing will be the same or higher into 2024? Doesn't sound like it'll be lower. We went through that, but for Home Depot specifically. Yeah, again, we, our business is, I think, been well chronicled. The folks know it's a very rational- Yeah Marketplace. Always has been. There's some categories, that play a little outside of that. So, we don't see, a big deflationary market coming in the foreseeable future. I know we talked earlier about whether it's home improvement or other places, you're not seeing a lot of that. So we don't anticipate a huge deflationary environment. And while we have costs down from a supplier standpoint, there's still inflation. Yeah in our business. So, we think where we are now is for the foreseeable future, where we'll be. Great. Then the last question we have is on destocking. Destocking has been a fairly big theme across retail, just given the supply chain challenges- Mm-hmm And, everything we've lived through the last few years. Where is Home Depot in the process of managing the inventory? How are you feeling about your in-stocks, and how do you feel about the inventory going into next year? Yeah, I mean, we mentioned during our Q2 call, our inventory was down just under $3 billion, year-over-year. And I'd go back a year ago, if you go back to Q2 a year ago, we still had a super strong business. I mean, the economy in general, and certainly... We did start to see some factors as we especially on discretionary- Yeah All the pull forward that we saw. But we really liked the health of the inventory that we had, and we saw some slowdown in categories like seasonal from pull forward. But we really did like the, the quality of that inventory. So it took some time to forecast through that and the teams, the merchant teams and our inventory management folks really working on that well into early last year. We didn't have to, we didn't have to mark down a lot of our inventory. We just had to get through a cycle where, we could put that inventory back into play. Having said that, our in-stocks are a lot better, but they're not back to historical norms as it relates to 98%+ in stock every day. Far better than they've been, 200 basis points better than even a year ago. We've got some more work to do there, and then we'll always, be working on productivity. Always. We're very, we've got very low obsolescence of inventory, so feel good about that. So we'll continue, to work at a market level, at a store level. W e've got a field merchandising team that's super tenured, but we, we'll continue to drive productivity in that space, as we always have. I think the big chunk that we, wanted to get through was some of the 6-month supply chain buildup that you did still in a year ago, still a very strong environment that we had. So as we've worked through that, again, almost $3 billion in Q2, we'll continue to work the productivity model on that based on the demands we see, and we'll, we'll continue to invest. I mean, the number one piece of customer service is being in stock, so we've still got work to do, as it, as it relates to our in-stock every day, but, but feeling, feeling really good about our position there. Okay, thank you. We're kind of towards the end of the- Mm-hmm the period, so I'll wrap it up there. All right Thank you so much for joining us today. Thank you. Thank you. Thanks for having us. Thanks for having us. Thank you.