portable fold up gas grill The Home Depot (HD) Craig A. Menear on Q4 2015 Results - Earnings Call Transcript

Home Depot Limited(New York Stock Exchange: HD) zero o'clock A.M. on February 23, 2016, 2015 earnings call in the fourth quarterVice President-Investor RelationsMenear -Edward P. president and chief executive.Decker -Executive Vice PresidentB.Tomé -Chief Financial Officer & EVP-Company ServicesBill Rennie-Executive Vice PresidentExternal sales and services by Kevin HoffmanSenior Vice President and PresidentHome Depot limited onlineMark Holifield-Executive VP-Analysis of supply chain and product developmentBenedict -Robert W.Baird & Co., Inc.Christopher Michael Horvers-JPMorgan Securities Co., Ltd.Morgan StanleyLLCSeth I.Sigman -Credit Suisse Securities (New York Stock Exchange: United States) Co., Ltd.UBS Securities Co., Ltd.Basham -Wedbush Securities Co., Ltd.Jessica Sean Mace.Nomura Securities International LimitedDaniel Thomas BindeJack LLCMatthew J.Fassler -Goldman Sachs & Co .)Scottish peopleRoyal Bank of Canada Capital MarketCitigroup Global Markets Ltd.(Broker) Gregory merrichLadies and gentlemen, welcome to the conference call for the fourth quarter and fiscal 2015 of Home Depot.Today's meeting is being recorded.I want to hand over the meeting to Ms at this time.Diane Dayhoff, Vice President of Investor RelationsPlease continue, madam.Diane Dayhoff -Vice President-Thank you, Nicole. good morning.Craig mennar, Chairman, CEO and president, attended our conference call today;EVP for sale, Ted Decker;Carol Tomé, chief financial officer and executive vice president of corporate services.After the comments we have prepared, the analyst's questions will be made public.Questions will be limited to analysts and investors, and as a reminder, we would appreciate it if the participants answered only one questionup please.If we are unable to answer your question on the phone, please call Investor Relations Department 770-384-2387.Now, before I transfer the call to Craig, let me remind you that today's press release and our executive presentations include forwardingOutlook statement as defined in the Private Securities Litigation Reform Act of 1995.There are risks and uncertainties in these statements that may lead to significant differences in actual results from our expectations and forecasts.These risks and uncertainties include, but are not limited to, the factors identified in the distribution and in our submission to the Securities and Exchange Commission.Today's speech may also include someGenerally accepted measurement.Coordination of these measurements is provided on our website.Now, let me transfer the call to Craig.Craig A.Menear -President, President and Chief Executive Thank you, Diane, good morning.Fiscal 2015 is a record year for our company.We achieved sales of $88.5 billion, the highest in the company's history.We also recorded the highest net profit in the company's history, with earnings per share growing by 15 in fiscal 2015.9% to $5.46.Sales in the fourth quarter were $21 billion, up 9.5% more than last year.Comp sales increased by 7.1% from last year and our USS.Sales at the store are £ 8.9%.Diluted earnings per share are $1.In the fourth quarter.Our strong sales performance is driven by a sustained and moderate housing recovery, exciting sales activities, solid execution and favorable weather.We will continue to seeBased on the growth of the entire store and our location.Three of our Americans.S.The department released positive competition in the fourth quarter, led by our Southern Department, which released a low doubledigit comps.Although our northern and western regions are singledigit comps.In all 19 U.S.Central region and top 40 marketsSingle low double-Digital competition this quarter.In the world, our Mexico and Canada business has been strong for another quarter.Mexico report doubleIn local currency, positive salary growth was achieved for 49 consecutive quarters.Our Canadian business has also hit a new high.In positive comp growth for 17 consecutive quarters, digital comps in local currency.Canada ended the year with more than $7 billion in local currency sales, consolidating our position as the number one home --Improved retailers in Canada.I would like to congratulate Jeff Kinnard, who has recently been promoted to the president of Canadian Home Depot.Jeff is a 19-Years of experience in Home Depot, with rich experience in operation and sales, has made him play an important role in our success in Canada.While seasonal holiday decorations, gift centers, and Black Friday events all have an advantage, the core categories are also an important factor in our performance.Both air tickets and transactions increased during the quarter.As Ted will detail, all of our sales departments have released positive collaborations, and we have seen a healthy growth balance between the professional and DIY categories, with the professional surpassing our USS.You will remember that in the third quarter we completed the acquisition of the Interline brand, a leading national distributor for maintenance repair and operation or MRO products.We tell you that we will build specific business cases within the second 90 days of integration.We are moving forward with some of the exciting sales drive plans identified through this process.For example, we will soon start offering our exclusive paint to Interline's multi-brandFamily operators.We have a good understanding of what we need to accomplish in the next 18 to 24 months in order to fully realize the value of Interline acquisition and total career opportunities.The retail environment is changing and the convergence of the digital and physical world remains a common theme.We respond to these trends, build interconnected capabilities, and invest in content, website improvements, and improved mobile experiences to address frictionless customer experiences.We continue to see healthy sales from our digital business, while also seeing a year --over-Customer satisfaction score is increasing year by year.This year, our online business grew by about $1 billion, up more than 25% year on year.A large part of this online growth takes advantage of the physical store assets we have because more than 40% of our online orders are received in the store.This proves the power of our connected strategy.At the investor meeting in December, we highlighted plans to further optimize the supply chain through what we call supply chain sync or project sync.We have been in the Houston pilot sync project for some time and are now rolling out in several other regions.While it's early, we 've seen the benefits of transportation savings, inventory turnaround and product lead-time reductions.We thank our cross-functional teams for their internal efforts and for their increased collaboration with our external partners, as all parties are working together to develop and adopt the engineering flow schedule that is the basis for project sync.To the macro environment, 2016 consensus on the United StatesS.GDP growth forecasts have slowed, and we continue to see positive signs in housing data, with rising house prices, housing volume and home structure being key drivers of growth in our business.We expect about 2016 comp growth.5%.Carol will take you through the details, but currency headwinds can lead to a decline in the company's total salary growth.As a result, we expect the company's total salary to grow by about 3.7% to 4.Corresponding diluted earnings of $ 5% per share.12 to $6.18.Today, our board of directors announced an 17% increase in our quarterly dividend to $0.69 per share.We remain committed to maintaining a disciplined capital allocation strategy that creates value for our shareholders.We will invest in maintaining and developing our business and return excess cash to shareholders through dividends and stock buybacks.The power of Home Depot begins with our strong culture and commitment to values.I would like to thank our colleagues for their hard work and dedication to our customers.I want to congratulate Ann-Mary Campbell was recently promoted to executive vice president of the State Department.S.Stores.Working in the company for more than 30 years, Ann-Mary brings a deep understanding of Home Depot operations, culture and clients to this role.Based on the results of this quarter, 100% of our stores are eligible for successful sharing, which is our profit sharing plan for hourly employees.This is our second largest.Half of the spending so far, and we look forward to continuing that momentum in 2016.With this, let me transfer the phone to Ted.Edward P.Decker -Executive Vice PresidentThank you, Craig. good morning, everyone.As sales exceeded our expectations, we were pleased with our performance in the fourth quarter.We see the strength of the entire store and the continued growth of our online business.Mild weather and large events, including strong Black Friday and gift center, all contribute to sales.All of our sales departments have released positive cooperation.Home appliances, tools, building materialsDigital competition this quarter.Lighting, plumbing, hardware, and indoor gardens are above the company's average, and decoration is consistent with the company's average.Outdoor Garden, wood products, wood, kitchen and bathroom, paint, electrical and flooringsingle-Positive numbers.Pro-As we have seen double growth, heavy classes have seen significant growth in the quarterDigital combination in siding, pneumatic, circuit protection, fencing, fasteners and exterior doors.As we have seen, our recent classification update on the roof continues to be excellentDigital competition for roofs in the fourth quarter.We continue to see the advantages of core maintenance and maintenance.Digital combinations in pumps, safety lighting, water heaters, power tools, building adhesives, ladders and Caulkers.Cleaning, bathtub fixtures, door locks and pipes and accessories are also higher than the company's average.We believe that more favourable weather trends this quarter helped sales grow by about $100 million.Our customers are able to complete more outdoor projects using the mild weather.We see, for exampleDigital comp sales for pressure washers, hard view, mower, outdoor power, concrete and pressureTreated deck.Black Friday, gift center and storage activities offer great value and are well received by our customers.Our strong Black Friday helped us achieve doubleDigital competition in categories such as portable power supplies and appliances.Our gift center was very good. we saw the double.Digital combinations in tool storage, power tool accessories, and manual tools.In addition, our staff support our decorative holiday products, resulting in comps being above the company average.In the fourth quarter, total comp transactions increased by 5%.This year, we have created more than 1 new transaction record.Total transactions 5 billion.In the quarter, comp tickets rose 2%.Due to falling commodity prices for products such as wood and copper, our comp ticket increase reflects a contraction of about 32 basis points.Deals for tickets under $50, or about 20% of the U.S.S.Sales rose by 3.Fourth quarter 8%.Ticket deals over $900 also represent about 20% of our USS.Sales rose 11.Fourth quarter 9%.The drivers behind growth --Tickets for purchase include home appliances, roofs and special offers.order kitchens.Big-Tickets are also driven by several categories of installation services such as roofs, sheds and countertops.Now, let me turn my attention to the first quarter.In our ongoing efforts to update and update our classification, we will reset our door lock classification in the first quarter.Using our classification planning tool, we are able to classify door locks more effectively around styles, finishes and brands.In addition, we have introduced a new way of selling goods, highlighting our brand and its full range.Our reset will include great innovative products such as Schlage Connect and Kwikset 915 E-lock.For our professional customers, we are introducing brand new exclusive products from Milwaukee, DeWalt, Ryobi and RIDGID, which are leaders in the field of professional tools.New Milwaukee M18 fuel-KEY is a revolutionary technology that gives users the ability to control tool settings, track tool locations, and manage tools and device inventory using wireless devices.This innovative technology provides our professional customers with the power to trust the Milwaukee brand and brings them more benefits.Among big-Box retailer, Milwaukee M18 fuel & One-The key can only be found in Home Depot.In addition to great new products, we are also preparing for the spring sales season.We are excited about the exclusive Grill offer from Weber, Nexgrill and KitchenAid.We offer a wide range of options online from infrared gas grills to smokers.Our range of terraces continues to expand, including enhanced products for new restaurant designs and patio accessories in Hampton Bay.For gardeners, we are excited about the exclusive organic matter options we have expanded from our PhD.Earth and black magic.Our Spring Black Friday event will once again provide amazing value to our customers.The store will load exciting products and exclusive products on items such as daily necessities, grill and outdoor power equipment.We look forward to a wonderful spring.With this, I want to transfer the phone to Carol.Carol B.Tomé -Chief Financial Officer & EVP-Thank you, Ted. good morning, everyone.Sales in the fourth quarter were $21 billion, or 9.Growth of 5% over last year.Comp sales are 7.At 1% this quarter, comps gained 6.3% November 8.% On December 6, 6.7% in January.The continued strength of the United States.S.The dollar had a negative impact on the company's overall performance in the quarter of about $0.35 billion, or 1.8%.Comps for U.S.The store is positive 8.At 9% this quarter, comps rose by 8.%, 10, November 1.%, 8, December 6.2% in January.Our sales have increased by 6 this year.4% to $88.5 billion, the total sales of the company comp is 5.6%.Comps for U.S.The store is positive.1%.The US economy has been stronger this year.S.The dollar has had a negative impact on sales growth of about $1.4 billion, or 1.6%.Our gross margin is 34.The fourth quarter was 1%, 24 basis points less than last year, in line with our plan.The change in gross profit margin is mainly driven by the following factors.First, due to productivity within the supply chain and lower fuel costs, we experienced a gross margin expansion of 15 basis points.Second, due to the influence of the Interline brand, we have 26 basis points for gross profit margin contraction.Third, due to changes in the sales portfolio, we have 13 basis points for gross margin contraction, including higher penetration rates for lower gross margin product categories such as electrical appliances.This year, we have experienced a gross profit margin expansion of six basis points.In the fourth quarter, operating expenses as a percentage of sales fell to 22% from 96 basis points last year.Our operating expenses cost US $90 million more than our plan.We have some unexpected expenses related to store maintenance, snow removal and data leakage.In addition, given that our sales performance is superior to the plan, we have increased the pool of management bonuses and successful sharing.In fiscal 2015, our operating expenses accounted for 20 of sales.9%, 65 basis points less than fiscal 2014.Our operating margin for the fourth quarter was 12.1%, 13 for the whole year.3%.Interest and other expenditures in the fourth quarter were $0.236 billion, an increase of $0.138 billion over last year.The year-over-The annual increase reflects two projects.First of all, we had an estimated value of $0.111 billion last year.The tax proceeds from selling HD's supply of common stock have not been repeated this year.Second, interest spending increased by $29 million over last year, mainly due to the long termBalance of regular debt.Our income tax provision rate for the fourth and 2015 fiscal years is 36.4%.Diluted earnings per share for the fourth quarter were $1.17. increase 11.4% more than last year.Diluted earnings per share this year are $5.46, an increase of 15.Compared with fiscal 9%, it was 2014.Now turn to some additional highlights and in the fourth quarter we opened a new store in Mexico, bringing our total number of stores to 2,274 by the end of the year.At the end of the year, the sales area was 0.237 billion square feet, a slight increase from last year.Sales per square foot increased by 5.2% to $371.At the end of the year, Inventory was $11.8 billion $0.73 billion of a year.On the basis of currency neutrality, the stock dollar increased by $0.872 billion.Inventory turnover is 4 times.Rose 9 times from 4 times.Seven times last yearAccounts payable increased by $0.758 billion over last year.On the basis of currency neutrality, accounts payable increased by $0.834 billion.Capital allocation continues.We made about $9 in 2015.4 billion of operating cash.And used the cash and the incremental long-term gain of $4 billion.Issue bonds on a regular basis, invest in our business, buy back our shares and pay dividends to our shareholders.We invested about $3 in this year.2 billion returned to the business through capital expenditures and the acquisition of Interline Brands.In addition, we have repurchased outstanding shares of $7 billion or about 59 million, including $2 billion or 16 shares.2 million shares in the fourth quarter.Finally, we paid a dividend of $3 billion.Our capital allocation philosophy supports our commitment to return on investment capital.Calculated based on the average of start and end long-In the past four quarters, the return on investment capital was 28%, 310 basis points higher than at the end of fiscal 2014.There is also a comment on capital allocation.We refinance about $3 billion earlier this month.Regular debt due in March 2016.This morning, we issued a press release that included our guidance for fiscal 2016.I would like to take a moment to comment on these highlights.Keep in mind that we deviate from GAAP, so the guidance for fiscal 2016 will be rolled out from the results of fiscal 2015 we reported.Looking forward to 2016, we expect a total of about 4 companies.5%.Our comp forecast is based on the United States.S.GDP growth estimate 2.The real estate market continues to recover 1%.With the strength of five new stores and the annual sales of Interline Brands, we expect total sales to grow by about 6%.Our 2016 sales forecast is based on average US sales in 2015.S.Dollar exchange rate.The U.S.The dollar is now stronger than the average exchange rate.Therefore, we provide a range of sales, comp sales and diluted earnings per share growth to reflect the difference between the average exchange rate and the current exchange rate in 2015.If the currency exchange rate is maintained at today's level, this will negatively affect the net sales growth of about $2016 in fiscal 0.8 billion, reducing our projected total sales growth rate from 6% to 5.1% and we expect comp sales to grow from 4.5% to 3.7%.As we discussed at our investor meeting in December, we plan to keep the gross margin flat with what we reported in fiscal 2015.We do not expect our gross margin to be significantly affected by the exchange rate.On a currency-On a neutral basis, we predict that our spending will grow at about 40% of the sales growth rate, lower than what we experienced in fiscal 2015, because we have a net default of $0.128 billion --The costs associated with fiscal 2015 should not be repeated in 2016.This year, we expect our operating margin to grow by about 70 basis points.We do not expect our operating margins to be significantly affected by the exchange rate.We expect the income tax rate to be around 37% this year.We expect diluted earnings per share to increase by about $ 13% to $6.However, if the exchange rate remains at today's level, we expect the diluted earnings per share to be around $6.12.Our earnings per share guide includes our plans to use excess cash to buy back some $5 billion of outstanding shares within a year.This year, we expect about $10 billion in cash flow from the business.Our 2016 capital expenditure plan is about $1.64 billion, an increase of 9% over the cost we spent in fiscal 2015 to support our strategic initiatives and maintain our aging store base.We will also buy back $5 billion in cash and pay $3.4 billion of dividendsAs Craig mentioned, we have just announced a 17% increase in our quarterly dividend, equivalent to a $2 dividend per year.76 meet our target dividend payout rate of 50%.Our commitment to shareholder returns remains a sign of Home Depot.Therefore, we would like to thank you for attending today's conference call.And Nicole, we're ready to ask questions now.Question-and-Thank you.We will answer Peter Benedict's first question from Robert W. Baird.Peter S.Benedict -Robert W.Baird & Co., Inc.Hey guys.Thank you for answering this question. I think the first question is just an accounting question.As we move into 2016, what will you do with the sales of Interline Brands?Once our anniversary, are these going into the comp base or are they separated?Carol B.Tomé -Chief Financial Officer & EVP-Company service Yes, Peter, we will add Interline to our comp base.We think it is important to operate as a Home Depot.So when you consider the shape of the year, the comps in the second half will be higher than the comps in the first half.Peter S.Benedict -Robert W.Baird & Co., Inc.Okay, perfect.That's helpful.The numbers then don't seem to indicate that you see any impact of the wealth impact, whether it's the energy market or the stock market.I mean, obviously everything goes well, but when you peel the information out, from the consumer's point of view, what do you see that might start to recover any higher tickets, again, does the combined number seem to suggest that?Thank you.Carol B.Tomé -Chief Financial Officer & EVP-We did not see the service of the company.Our business has always been good.Peter S.Benedict -Robert W.Baird & Co., Inc.Okay, good.Thank you very much.We have Chris Horvers from JPMorgan Chase.Michael hoversGood morning, JP Morgan Securities Co., Ltd. this quarter was great.Craig A.Menear -Good morning, chairman, president and chief executive, Chris.Michael hoversJP Morgan Securities (LLCI) is trying to understand the potential demand you mentioned for an increase of about $100 million from weather to comps, and it looks like the weather benefit for these three months is about 50 basis points, or is it mainly the impact of November and December?Carol B.Tomé -Chief Financial Officer & EVP-If we look at our comp performance, we see the doubleDigital pop music in AmericaS.The weather was indeed like this in December.December is the hottest month on record since 121.And Ted, don't we see a lot of strength in the outdoor category?Edward P.Decker -Executive Vice PresidentIt is clear that both our professionals and consumers are able to continue their outdoor projects.But actually, we see that comp continues to be strong throughout the store.We appreciate $100 million, though.Getting weird benefits from the weather, we don't think it's our weather story for the fourth quarter.Carol B.Tomé -Chief Financial Officer & EVP-Our sales increased by $1.As a result, $8 billion increased by $100 million.8 billion is not a weather story.Craig A.Menear -Chairman, president and chief executive, and location, Chris.We see strength in all markets.Michael hoversJPMorgan Securities Co., Ltd.Then, do you think that $100 million is a pull and is consistent with the weather because the first and second quarters tend to be unstable, then, what do you think about this $100 million, what do you think about the arrival of spring.I know it's easier to see half, but what do you think about the first and second quarters when we model the quarter?Craig A.Menear -Chairman, President and CEO Chris, in general, you don't see progress from the fourth quarter to the first quarter, and vice versa.In general, it has a bathtub effect between the first and second quarters, so we don't think it's a pull.Carol B.Tomé -Chief Financial Officer & EVP-As Ted commented, we made our plan and we did make the first quarter the lowest competitive quarter of the year, but it was mainly because when we quit the year, there is deflation in our sales.Commodity deflation continued in the first quarter, so we have a plan to reflect this situation.Michael hoversJ.P. Morgan Securities is very grateful.We are going to answer the next question from Simon Gutman at Morgan Stanley.Gutman-AliMorgan StanleyGood morning, good quarter.Craig A.Menear -Good morning, president and chief executive.Gutman-AliMorgan StanleyAfter this theme, I think this is the second most powerful U.S.Since Home Depot's housing recovery, comp has started when other things in the retail space have become a bit shaky.We talked about the weather.But can you give us some examples? Can you share any housing market that may be in the recovery of teeth for a longer period of time that just continues to grow?Craig A.Menear -In fact, our overall market-by-market changes this quarter are directly in line with what we saw last year.According to the winter break, you will get more market changes in the winter.So seriously, there is not much change.Gutman-AliMorgan StanleyI got it, so it's just a potential force.Then I may have missed this in the prepared review.But on Interline, can you share with us how it performs in terms of sales or profit?I realize it's too early, and I don't think-a lot of the integrations are just beginning, but have you ever felt how much overlap the Pro has, what are your professionals and spending on Interline Brands outside of Home Depot today?Craig A.Menear -It is clear that we are in the early stages of integration efforts.We have been working hard-as we share, we have a common vendor base.We are working on these projects with our suppliers.We 've reduced redundancy in the business and now we're really starting to focus more on the sales side of it and the sales drive plan.As we have called for, we are excited that we will start selling our paint brands to multiple partiesFamily operators of Interline.Bill Renney is here and he may make a comment.We started to see some cross-cutting success, but it's still early.Bill Lennie -Executive Vice PresidentIt is in addition to sales and services.We have seen some initial customer engagement wins.So this does verify the value of what we believe to be inter-line acquisitions.This is only the synergy that can be sold across channels.Then, as Carol has articulated, we are working to achieve the vision of a Home Depot that allows our customers to shop in the store, online or through Interline, more opportunities to access a wider range of goods.Gutman-AliMorgan StanleyThank you, LLCOkay.We will answer the next question from Seth Sigman of Credit Suisse.Seth I.Sigman -Thank you, Credit Suisse Securities (US) Co., Ltd. (broker ).Good morning, congrats this section.Craig A.Menear -Thank you, president and chief executive.Seth I.Sigman -Credit Suisse Securities (US) Co., Ltd. (brokerage) I want to follow up on the last question, but the gross profit margin is the specific one.Carol, your gross profit margin is flat, which is very consistent with what you said before.Obviously, Interline is a little close-Although SG & A is low, there is still an impact on this termOnce you honor the addition of Interline, how do you see the gross margin opportunities that come with Synergy or ongoing supply chain benefits with Interline, or even lower the input costs that some vendors talk about?I guess what do you think this offset is?Thanks.Carol B.Tomé -Chief Financial Officer & EVP-Business Services.As Craig mentioned, it's half as simple as seeing our business.Therefore, when you consider the gross profit margin of 2016, the first half of the year will decline year on year due to the influence of the middle line.The second half will grow year on year.Since we will be anniversaring Interline and we will see the benefits of productivity, the latter half will grow year on year.In the past, we have been trying to increase productivity within the cost of goods and we have talked to you.We have a cost-We set up a team a few years ago to work directly with Ted and merchants to drive productivity and first cost, which is our biggest pool of costs.You 've seen us drive incredible productivity in the supply chain.This year, we have expanded by 20 basis points from the supply chain.This productivity that we drive our business allows us to invest less.Profit categories, not only Interline, but also low profit categories like appliances and others that haven't fully recovered since the recession.Therefore, we are very confident in the gross margin guidance we provide for 2016.Craig A.Menear -President, President and CEO Seth, I also think-my comment at the investor conference is that our approach is to really look at the end --to-Close the value chain with our supplier partners and drive deeper collaboration.When we work on this with major suppliers, as Ted and I talked to them, we are confident that, again, they have the opportunity to deduct costs from the entire value chain, this is not only good for Home Depot customers, but also for shareholders, and our supplier partners are also improving their profitability.Seth I.Sigman -Good Credit Suisse Securities (US) Co., Ltd. (broker), thank you.This is very helpful, maybe just a follow-up-Canada's recent focus.Can you elaborate on the performance of Canada? Perhaps more importantly, how did the location of Home Depot evolve over time?What do you think of other people in the industry who might deploy more capital there?Craig A.Menear -We are very pleased with our performance in Canada.He did a fantastic job in Canada before bringing bill back, and Jeff and the team will continue to work hard.We have made a lot of capital investment in Canada, not only in our store, our customers have rich experience in the store, but also in our website.Platformed forms our website and continues to develop our connectivity strategy in Canada, as well as significant investments in our supply chain, deploying the strategy we have developed in the USS.I also went to Canada.We therefore look forward to the opportunity to continue to serve our Canadian customers.Carol B.Tomé -Chief Financial Officer & EVP-From the point of view of the store footprint, we have 182 stores in Canada and we want the store to be there.So we are very satisfied with our store.Seth I.Sigman -Credit Suisse Securities (USA) Co., Ltd. (Broker) is very grateful for the color.We will answer the next question from Michael Lasser of UBS.Michael Louis latherGood morning, UBS Securities.Thank you very much for accepting my question.It seems that one of the biggest surprises in the fourth quarter is the market share you can get.It doesn't even take into account some of your non-Traditional competitors like department stores.This is just the flow of your building materials.So have you ever felt where it came from?Do you see that the capacity of this system comes from some of your traditional competitors, which may give you a share?Or have you changed the way you do business to make these stock gains accelerate?Craig A.Menear -The president, the president and the chief executive, and what I want to say is, of course, this is something that we have been focusing on.Customers are obviously investing in our space, so we are in a good asset class in terms of housing.But take great pride in the efforts of the team, whether it is the ability of merchants to deliver incredible value, which our store and online team are able to execute, our supply chain team the flexibility of our supply chain is able to respond to two weather patterns that occur in the quarter.Just very, very satisfied with the team's efforts in total.Michael Louis latherUBS Securities LLCDo do you know if your share has increased, according to your comments on different business units, it seems to be suggested, is your share gain more than the consumer's share gain?I don't include Interline, I'm just talking about core business.Craig A.Menear -President, President and Chief Executive Officer.I mean, what I'm trying to say is that in general, the measurement of sharing is very difficult.We do believe that we have a share in the market, but it is very difficult to find it.Carol B.Tomé -Chief Financial Officer & EVP-Business services, it depends on what you are talking about.Look at double-Yes, I suspect it's a professional customer.In fact, we know this is a professional customer through our consumer insights.Home appliances contributed 50 basis points to our comp growth this quarter.Most of them are consumers.So you really have to look at the business category and the factors that drive each category.Michael Louis latherUBS Securities LLCAnd can you link these stock returns to some of your Pro plans, such as the credit plan, the Pro Xtra plan, and some of the things you 've done recently?I think it is important to know how long these market share growth can last?Carol B.Tomé -Chief Financial Officer & EVP-Business Services.Maybe I will talk to the private label card.Craig A.Menear -President and Chief Executive Officer.Carol B.Tomé -Chief Financial Officer & EVP-Enterprise services we just launched our new value pillar in January, so you really can't attribute Pro's advantages to it, by the way, Pro grew faster in the fourth quarter than consumersYou can't attribute it to private.But we are very excited about the new private brand.Label Cards are provided by our professional customers.As you know, 60 days of payments, Fuel Rewards, 365 days of returns, early returns, but we like what we see and our new account is more than our goal.When our professionals use fuel reward cards, they get an average $25 discount at the gas station, so we really like what we see, we think this is a good sign for 2016 people.So you can't boil it down to it, but some of the other initiatives we 've introduced do help drive the business.Craig A.Menear -Chairman, President and CEO yes, Michael, I think what is going on, we are very happy with the performance of all categories, we focus on having the right brand, the right classification;We did a lot of work.We have discussed our classification planning tools and we feel that we have the right production line structure in the store and the right brand at the right price point.We focus on providing daily value and convenience to our professionals and consumers, which I think resonates.Michael Louis latherThank you very much. good luck.Craig A.Menear -Thank you, president and chief executive.Seth Bassham OperatorAnd we have a question from Wedbush Securities.Seth M.Basham -Wedbush Securities Co., Ltd.Thank you very much. good morning.Craig A.Menear -Good morning, president and chief executive.Seth M.Basham -Wedbush Securities Co., Ltd.To follow up on Michael's question, as you imagine in 2016 and your comp forecast, ex Interline, would you expect Pro to be a bigger driver for your comps in 2016 than 2015?Craig A.Menear -The chairman, the president and the chief executive believe that our focus is actually to develop all of our market segments.We focus on developing professional customers, DIY customers, do-it-for-My clients and our digital clients.So we don't really think it's a very different problem than the other one.We also see deals and tickets as a balance of growth.Seth M.Basham -Wedbush Securities Co., Ltd.Got it.A follow up.When you consider the composition of 2016 of transportation and tickets, you are looking for a balance, what does that mean from your expectations of the real estate market?Do you expect house prices and volume to be consistent with around 2015? Or do you expect any changes?Carol B.Tomé -Chief Financial Officer & EVP-We actually look forward to some changes.So, let me show you these changes if you can.First of all, what I have to do is take you from where we left America.S., a comp of 7.1% to guidance 4.5%.This is a 260 basis point increment with three drivers.First of all, from the beginning of GDP, we are using GDP growth forecast 2.1%, the United States GDP in 2015 is 2.4%, so these 30 basis points fell off the top due to a slowdown in GDP.Second, in terms of house prices, we expect prices to rise next year.5%, very good.This is down from the growth we experienced in 2015.4%, so that's another 30 basis points of growth from the top.Then, the market share will drop by 200 basis points because we do not feel the market share in the growth forecast.So this gives you 4.5% of comp is estimated at 2016.Since you asked me, I have given you the price estimate we are using and we expect the volume of houses to rise by 4.We predict that the household composition will increase significantly in 4% units.9 million family forms have grown a lot this year, about 1.3 million households.Another thing is that we really took the time to better understand the impact of the age of housing stock.As you know, 65% of households in the United States are older than 30 years old, and external studies have shown that older families spend more.John Burns would suggest the 7 th.5% cm high, internal research shows that it is 8% cm high, so this housing bodes well for the beauty.If we can bring you back to the last mild recession, I 've said a lot here, and I apologize, but if I bring you back to the last mild recession in 2001, 10 years ago, housing reserves are much younger.So this is a good new story for us.Seth M.Basham -Wedbush Securities Co., Ltd.Got it.This is a good new story.Last follow up.Obviously, you don't take into account the growth of market share, but do you think any way of execution that might affect the trajectory of market share growth in 2016 will change?Craig A.Menear -I mean, we will continue to focus on what we have been doing.So, no.I don't see any big changes.Seth M.Basham -Wedbush Securities Co., Ltd.Great. thank you. Good luck.We have a problem with Jessica Mez from Nomura Securities.Jessica Sean Mace.Nomura Securities International LimitedHi.Good morning, congratulate on the good results.Craig A.Menear -Thank you, president and chief executive.Jessica Sean Mace.Nomura Securities International LimitedMy first question is the SG & A Guide.I just want to clarify that 40% of sales growth includes last year's data leakage fee?If we should also consider other factors, why would this be lower than the 50% sales growth guidance you gave on analyst day?Carol B.Tomé -Chief Financial Officer & EVP-Company services.I confirm that you fully understand this.Jessica Sean Mace.Nomura Securities International LimitedOkay, great.Thank you.Then I asked a question about the interconnected retail.You made some good progress on that channel.What else is nearby-Should we look for term milestones on that channel?Craig A.Menear -Chairman, President and CEO we will continue to make clear our investment in the direct fulfillment center.Therefore, we will continue to classify these buildings, which will enable us to install the products in all three buildings in order to deliver the products to us in two working days or lessTherefore, you will see that we continue to shorten the lead time of our customers.You will continue to see our enhancements through search, visual investment, as it relates not only to photography, but also to video from our customers.We know our customers are involved.Kevin Hoffman runs our online business here.Kevin, I hope you have more comments on this.Kevin Hofmann -Senior Vice President and PresidentHome Depot limited onlineSure.Continue to develop a better experience for our customers.Mobile experience is also the focus of our attention.As Craig mentioned, we will also launch our online purchases, delivered from store features throughout the year.We think our customers will be excited about it.Craig A.Menear -The good news for us, the chairman, the president and the CEO is that more than 40% of all orders that take place in our digital space are what our customers choose to buy in one of our stores.They are conveniently located and safe.They know the product will be there and they don't have to worry about the product being out of their door.This is a great opportunity for us as it will bring more traffic to our store.Jessica Sean Mace.Nomura Securities International LimitedGreat. thank you very much.We have an issue with Dan Binder from Jefferies.Daniel Thomas BindeJack LLCHi, thank you.My question is about online.I wonder if you can give us the growth rate for this quarter?I think you gave us a year.What do you think is the first two or three things that help make a powerful transition there?Carol B.Tomé -Chief Financial Officer & EVP-Yes, business services.Our online sales grew $0.23 billion this quarter, up 23%.Online sales totaled $4 this year.7 billion.That's 5.3% of our total sales, from 4.5% more than last year.Very happy with growth.Craig A.Menear -Kevin, president and chief executive, would you like to comment?Kevin Hofmann -Senior Vice President and PresidentHome Depot limited onlineSo the key factor driving growth is what we're talking about.Great mobile experience, great terminal experienceto-End the interrelated experience.Our focus is not just on online trading, as Craig said, more than 40% of our orders actually appear in the store in some way, shape or form.So we found that many of our online experiences are actually a shopping trip to bring customers back to the store.When we see the total conversion rate of the enterprise, we are very, very satisfied with our progress there.Whether they are converting online or in the store, this is the decision of the customer.With such great progress, we have created all new records during the cyber Monday event and the Black Friday event, and the momentum is very strong.Daniel Thomas BindeThen my follow up, I just hope you can comment on something.First, what are your assumptions about commodity deflation in the first quarter?What is the breakdown of additional costs of $90 million in the fourth quarter?What are you likely to see in wage pressures across the company or region?Carol B.Tomé -Chief Financial Officer & EVP-The service of the company is very happy.Therefore, the pressure of deflation in commodity prices, similarly, we do not predict the future of deflation.So our prediction is inflation, deflation is neutral, but because we see that prices have fallen for a year.over-year impact.The first quarter was about 50 basis points.Take a look at the expense details.Of the $90 million more than we planned, about one-The third money was related to store maintenance, snow removal and data leakage, which was $9 million.The rest is our bonus and success sharing.As Craig points out, all of our stores are eligible to share success.We're going to take the second place.Half of the expenses in our company's history, so we are excited about it.Then, Dan, the third question?Daniel Thomas BindeJefferies LLCIt is about the wage pressure in the region or company you might see, how does it increase and so on?Carol B.Tomé -Chief Financial Officer & EVP-Yes, thank you for your question.As we told you at the investor meeting, we do have people who charge us, both in terms of wage pressures and in terms of rising medical costs caused by prescription drugs.All these pressures are addressed in the direction we give you.Daniel Thomas BindeThank you, Jeffery.We have the question of Matthew faisler from Goldman Sachs.Matthew J.Fassler -Goldman Sachs & Co .)Thank you very much. good morning.Craig A.Menear -Good morning, president and chief executive.Matthew J.Fassler -Goldman Sachs & Co .)My main question has something to do with your big question.Ticket sales trends.I think the $900 or more comp growth for tickets is the second strongest ever --year and a two-year basis.The custom kitchen you mentioned has several elements.I'm just curious if those big projects are more attractive.In addition, the career growth you have seen, especially the acceleration of some professional categories, is it better to do it, and the impact is so large.The ticket area you sell?Edward P.Decker -Executive Vice PresidentI want to say, Matt, in big-Tickets, we like the progress we see in the momentum.You specifically mentioned the kitchen cabinet business.This is a strong double.Our digital compensation.It is encouraging that the quotation channels in our system have reached a record high.Even after such a strong fourth quarter in the first quarter, we have a very strong pipeline.Right across the street from the entire store, the appliance is obviously a big-Growing ticket program.Our service business, whether it's a kitchen installation or a roof, siding, windows, we all have a great appeal to our in-house business and external business.So it's seen in the whole industry.Matthew J.Fassler -Goldman Sachs & Co .)If it is possible to analyze the growth from 8% to 12%, which is a very high single digit, would you say that DIY or Pro is out of proportion behind that pickup?Craig A.Menear -The president, the president and the chief executive are actually both.Edward P.Decker -Executive Vice PresidentConsumers, of course, right?Carol B.Tomé -Chief Financial Officer & EVP-Business services for consumers.Edward P.Decker -Executive Vice PresidentThere is a tendency to sell electrical appliances, consumers and roofs.Matthew J.Fassler -Goldman Sachs & Co .)Great. thank you.Craig A.Menear -Chairman, President and CEO Matt, the only point is that when we see-we talk about our top class, these people haven't recovered from the peak.Although we have recovered all the lost sales, we still have $2.There are 5 billion key categories.And these tend to be larger ticket items, so the special order kitchen, countertops and a variety of wood products are still below the peak of 2006.As Carol said, we are looking at the tickets carefully.But from all the signs, the pipeline is strong and the sales momentum is good.Matthew J.Fassler -Goldman Sachs & Co .)Great.Then just a few cleanup points on the expense line.Carol, you talked about the impact of the median line on gross margin.Can you talk about the impact on the cost ratio?The D & A guide then did suggest A little pick-up.Is this mainly related to trading, or is there something else in this number?Carol B.Tomé -Chief Financial Officer & EVP-Company service D & A pickup with shorter-Life assets put into use.We invest in it to a large extent, and the life of this capital is often shorter.Interline's impact is indeed reflected in the overall cost growth factor for the quarter.We're around 52%.ish.This is really because of Interline.It's more like 40% if you quit Interline.Matthew J.Fassler -Goldman Sachs & Co .)Great. thank you very much.Carol B.Tomé -Chief Financial Officer & EVP-Yes, business services.We have a problem with Ciccarelli, a Scot from RBC Capital Markets.Scottish peopleGood morning, ladies and gentlemen, RBC Capital Markets.Craig A.Menear -Good morning, president and chief executive.Scottish peopleA bigger problem with RBC Capital Market LLCSo, I think there are two problems in technologycommerce.Obviously, we saw it.Business has disrupted many retail businesses.So I guess these two questions are first, how do you see the risk that consumers may become more accustomed to shopping for your category, especially as your own online platform grows?Then, in your opinion, there are two reasons why home improvement is different from what we have seen in many other retail industries, and over time box manufacturers tend to struggle with market share losses and profit compression?In your opinion, why are you immune to this?Craig A.Menear -The chairman, president and chief executive believe that factors are integrated when you look at the business as a whole.There's a part of our business-we 've shared it in the past, and we think the best business model is in the store.Customers are smart and they tend to adopt the best business model.Therefore, we believe that elements such as concrete, soil and coverings make sense, and customers will find the best value for purchasing products in these elements.The digital experience enhances other categories.Like Kevin just shared a minute ago, our customers are actually starting their shopping experience online and then ending at the store.It is clear that there are some categories that may be transferred online, if you wish, as there are a wide variety or convenient transportation.So far, in these categories, we have actually seen growth in both channels.As a result, the digital business is largely our incremental growth and we see this opportunity continue to exist.Scottish peopleRBC Capital Market LLCBut do you think there is a risk? As people get used to shopping in some categories that you think are at risk, you might see an increase in profit compression because it's clearly what we're seeing in a lot of other retail areas?Craig A.Menear -Chairman, President and CEO we operate the business as a portfolio.We have built features in our tools that allow our merchants to manage across channels.So all this is included in the forward-looking outlook that we shared at the investor meeting.Scottish peopleWell, the RBC Capital Market will be good for you.Thanks, guys.Craig A.Menear -President, President and Chief Executive Officer.We will answer the next question from Kate McShane at Citi.Kate McShane -Citigroup Global Markets Ltd.(Broker) Hi, thank you.Good morning.Craig A.Menear -Good morning, president and chief executive.Kate McShane -Citigroup Global Markets Ltd.My problem is that the project is synchronized.I know this is a big focus for your analyst day and you mentioned in your prepared comments that it has been launched outside Houston.Could you please let us know more about the details of where this has been promoted? Can you remind us when you see this is done?Craig A.Menear -The chairman, president and chief executive are working in more southern parts of the country, a multi-year effort.Kate McShane -Citigroup Global Markets Ltd.Okay, thank you.And then my followersThe problem is the exclusivity of the product.Again, in the prepared review, I think you said it was a difference for Pro, do you have a percentage of the product you provided, or is the percentage of sales an exclusive product for Pro customers?Craig A.Menear -To be honest, we haven't figured this out yet.We talk about our private brand in the range of 15% to 20%, but haven't talked about exclusive products McShane-Citigroup Global Markets Ltd.Okay, thank you.Carol B.Tomé -Chief Financial Officer & EVP-We will go back and do the calculations.I don't know what it is.Craig A.Menear -President, President and Chief ExecutiveDiane Dayhoff -Vice President-We still have time to ask a question about Investor Relations.We will then answer the last question from Greg Melich of Evercore ISI.Gregory merrich.Thank you all.I have to split it into two parts to sneak it in.Carol, I just wanted to make sure I found SG & A in the guide.If it is 40% of sales growth, we should account for 40% of 5.It was 5% when we thought about SG & A dollar growth, right?Carol B.Tomé -Chief Financial Officer & EVP-Company services, so you should account for 40% of our sales growth, that is, 6%.Gregory merrich.Iokay Evercore.The second question is about working capital.So I don't want to end this, but try to find out that there is a problem with these numbers, the inventory has increased a lot, but the payables have also increased, what's in your $10 billion liquidity guidance in 2016?How do you feel about inventory?It's too hot. it's too cold, right?Carol B.Tomé -Chief Financial Officer & EVP-Company service so our inventory is the best we 've ever seen, I 've been here and it's been 21 years for me so I can say from the authority that they are in very good shape.We have one-The tenth improvement of the 2016 inventory plan and Mark Holifield are right here and I would say we might try to do better, but that's the plan.Mark Holifield-Executive VP-Supply chain and product development is just one thing, just the color on the inventory, one thing to keep in mind is that last year our West Coast port was interrupted, causing people to reduce inventory, so we are actually very satisfied with our inventory, besides, we are very satisfied with our inventory in-Compared to last year, we did see improvements in materialsBecause we overlap with last year's Port disruption.Gregory merrich.Evercore ISIGreat.So it is fair to say that $10 billion in cash from operations may include hundreds of millions of dollars from working capital, but in any case there is no large-scale action?Carol B.Tomé -Chief Financial Officer & EVP-This is correct.Gregory merrich.Very good luck.Carol B.Tomé -Chief Financial Officer & EVP-Thank you for your service.Craig A.Menear -Thank you, president and chief executive.Diane Dayhoff -Vice President-Investor Relations thank you for attending our conference call today and we look forward to reporting our first quarter earnings as we speak to you at that time.This is the end of today's meeting, ladies and gentlemen.Thank you for your participation today.