Home Depot 4Q16 Earnings Call Notes

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Craig A. Menear

Once BOPUS now BODFS

“This quarter, we completed the roll-out of BODFS, or Buy Online Deliver From Store. BODFS was built on the foundation of our new Customer Order Management system, or COM, which was fully deployed in all U.S. stores during the second quarter of 2016. We’re pleased with the positive customer response to this enhanced delivery option, which streamlines the delivery experience for both our customers and our store associates.”

Carol Tome

Home equity up 107% since 2011

” If you look at home equity, since 2011, home equity is up 108%. On average, that equates to $50,000 per household. And we believe that’s contributing – as people use the equity of their house to spend back into their house, we believe that’s contributing to our growth, so we factor that into our guidance, and that’s how we got to the 4.6%.”

There are some categories that haven’t fully recovered from the downturn

“If you look at sales by category, peak to trough, while we’ve more than fully recovered everything we lost during the downturn, we haven’t recovered every category. We still have $1.4 billion of sales that haven’t fully recovered, and those are in low-margin categories. We want that to grow, and if housing continues to grow, it will.”

We think mortgage rates could go up to 7% before affordability is impacted

“Yeah, our analysis would show that for every 25-basis point increase in mortgage rates, it costs the homeowner who’s applied for a mortgage $40 more per month. So that helps sort of dimensionalize the pressure associated with rising rates. With the median home price in the country of $250,000, mortgage rates could go up to 7-ish percent before the Affordability Index would fall at 100 or below. So there’s (42:45) a way to go before we’d be concerned. And you know what, mortgage rates stand today at 4.2%, 4.3%, something like that, the historical mean is 5.8%. So even if a return to the mean, you’re still below that inflection point.”

Mark Holifield

Fuel does look like it’s firming up

” yes, fuel does look like it’s firming up. We use the Department of Energy to base our plans. The forecast there is $2.72 against what it was in 2016, $2.31. And right now, we’re at about $2.58. But that’s incorporated in our guidance.”