Home Depot, Inc 10-Q for FY2026 Q1
Home Depot, Inc. (HD)
10-Q
2025-05-28
For: 2025-05-04
View Original
Added on
April 02, 2026
About this 10-Q
Home Depot, Inc filed this 10-Q on May 28, 2025, covering the quarter ended May 4, 2025 (FY2026 Q1).
Headline figures
Quarter ended May 4, 2025, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $39.86B
- up 9.4% from $36.42B a year earlier
- Net income
- $3.43B
- down 4.6% from net income of $3.6B a year earlier
- Diluted EPS
- $3.45
- down 5.0% from $3.63 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
For the quarterly period ended May 4, 2025
or
For the transition period from to
Commission File Number: 1-8207
THE HOME DEPOT, INC.
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | ||||||||||||||||
| (Address of principal executive offices) | (Zip Code) | |||||||||||||||||||
(770 ) 433-8211
(Registrant’s telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
| Securities registered pursuant to Section 12(b) of the Act: | |||||||||||||||||
| Title of each class | Trading Symbol | Name of each exchange on which registered | |||||||||||||||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
TABLE OF CONTENTS
| Item 1. | ||||||||
| Item 2. | ||||||||
| Item 3. | ||||||||
| Item 4. | ||||||||
Item 1. | ||||||||
| Item 1A. | ||||||||
| Item 2. | ||||||||
Item 5. | ||||||||
| Item 6. | ||||||||
Fiscal Q1 2025 Form 10-Q | i | | ||||||
COMMONLY USED OR DEFINED TERMS
| Term | Definition | |||||||
| Comparable sales | ||||||||
| Exchange Act | Securities Exchange Act of 1934, as amended | |||||||
| fiscal 2023 | Fiscal year ended January 28, 2024 (includes 52 weeks) | |||||||
fiscal 2024 | Fiscal year ended February 2, 2025 (includes 53 weeks) | |||||||
fiscal 2025 | Fiscal year ending February 1, 2026 (includes 52 weeks) | |||||||
| GAAP | U.S. generally accepted accounting principles | |||||||
| MD&A | Management’s Discussion and Analysis of Financial Condition and Results of Operations | |||||||
| NOPAT | Net operating profit after tax | |||||||
| Restoration Plans | Home Depot FutureBuilder Restoration Plan and HD Supply Restoration Plan | |||||||
| ROIC | Return on invested capital | |||||||
| SEC | Securities and Exchange Commission | |||||||
| Securities Act | Securities Act of 1933, as amended | |||||||
| SG&A | Selling, general, and administrative expenses | |||||||
SRS | SRS Distribution Inc. | |||||||
2024 Form 10-K | Annual Report on Form 10-K for fiscal 2024 as filed with the SEC on March 21, 2025 | |||||||
Fiscal Q1 2025 Form 10-Q | ii | | ||||||
FORWARD-LOOKING STATEMENTS
Certain statements contained herein, as well as in other filings we make with the SEC and other written and oral information we release, including statements regarding our performance, estimates, expectations, beliefs, intentions, projections, strategies for the future, or other events or developments in the future constitute “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on currently available information and our current assumptions, expectations and projections about future events, and use words such as “may,” “will,” “could,” “should,” “would,” “anticipate,” “intend,” “estimate,” “project,” “plan,” “believe,” “expect,” “target,” "prospects,” “potential,” "commit” and "forecast,” or words of similar import or meaning or refer to future time periods.
Forward-looking statements may relate to, among other things, the demand for our products and services, including as a result of macroeconomic conditions and changing customer preferences and expectations; net sales growth; comparable sales; the effects of competition; our brand and reputation; implementation of interconnected retail, store, supply chain technology, innovation and other strategic initiatives, including with respect to real estate; inventory and in-stock positions; the state of the economy; the state of the housing and home improvement markets; the state of the credit markets, including mortgages, home equity loans, and consumer credit; the impact of tariffs, trade policy changes or restrictions, or international trade disputes and efforts and ability to continue to diversify our supply chain; issues related to the payment methods we accept; demand for credit offerings, including trade credit; management of relationships with our associates, jobseekers, suppliers and service providers; cost and availability of labor; costs of fuel and other energy sources; events that could disrupt our business, supply chain, technology infrastructure, or demand for our products and services, such as tariffs, trade policy changes or restrictions or international trade disputes, natural disasters, climate change, public health issues, cybersecurity events, labor disputes, geopolitical conflicts, military conflicts or acts of war; our ability to maintain a safe and secure store environment; our ability to address expectations regarding sustainability and human capital management matters and meet related goals; continuation or suspension of share repurchases; net earnings performance; earnings per share; future dividends; capital allocation and expenditures; liquidity; return on invested capital; expense leverage; changes in interest rates; changes in foreign currency exchange rates; commodity or other price inflation and deflation; our ability to issue debt on terms and at rates acceptable to us; the impact and expected outcome of investigations, inquiries, claims, and litigation, including compliance with related settlements; the challenges of operating in international markets; the adequacy of insurance coverage; the effect of accounting charges; the effect of adopting certain accounting standards; the impact of legal and regulatory changes, including executive orders and other administrative or legislative actions, such as changes to tax laws and regulations; store openings and closures; financial outlook; and the impact of acquired companies, including SRS, on our organization and the ability to recognize the anticipated benefits of any acquisitions.
These statements are not guarantees of future performance and are subject to future events, risks and uncertainties — many of which are beyond our control, dependent on the actions of third parties, or currently unknown to us — as well as potentially inaccurate assumptions that could cause actual results to differ materially from our historical experience and our expectations and projections. These risks and uncertainties include, but are not limited to, those described elsewhere in this report and in Part I, Item 1A. Risk Factors of the 2024 Form 10-K and elsewhere in the 2024 Form 10-K, and also as described from time to time in reports subsequently filed with the SEC. You should read such information in conjunction with our consolidated financial statements and related notes and Part I, Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations in this report. There also may be other factors that we cannot anticipate or that are not described herein, generally because we do not currently perceive them to be material. Such factors could cause results to differ materially from our expectations. Forward-looking statements speak only as of the date they are made, and we do not undertake to update these statements other than as required by law. You are advised, however, to review any further disclosures we make on related subjects in our filings with the SEC and in our other public statements.
Fiscal Q1 2025 Form 10-Q | iii | | ||||||
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements.
THE HOME DEPOT, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
| in millions, except per share data | May 4, 2025 | February 2, 2025 | |||||||||
| Assets | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Receivables, net | |||||||||||
| Merchandise inventories | |||||||||||
| Other current assets | |||||||||||
| Total current assets | |||||||||||
Net property and equipment | |||||||||||
| Operating lease right-of-use assets | |||||||||||
| Goodwill | |||||||||||
| Intangible assets, net | |||||||||||
| Other assets | |||||||||||
| Total assets | $ | $ | |||||||||
Liabilities and Stockholders' Equity | |||||||||||
| Current liabilities: | |||||||||||
| Short-term debt | $ | $ | |||||||||
| Accounts payable | |||||||||||
| Accrued salaries and related expenses | |||||||||||
| Sales taxes payable | |||||||||||
| Deferred revenue | |||||||||||
| Income taxes payable | |||||||||||
| Current installments of long-term debt | |||||||||||
| Current operating lease liabilities | |||||||||||
| Other accrued expenses | |||||||||||
| Total current liabilities | |||||||||||
| Long-term debt, excluding current installments | |||||||||||
| Long-term operating lease liabilities | |||||||||||
| Deferred income taxes | |||||||||||
| Other long-term liabilities | |||||||||||
| Total liabilities | |||||||||||
Common stock, par value $ | |||||||||||
| Paid-in capital | |||||||||||
| Retained earnings | |||||||||||
| Accumulated other comprehensive loss | ( | ( | |||||||||
Treasury stock, at cost, | ( | ( | |||||||||
| Total stockholders’ equity | |||||||||||
Total liabilities and stockholders’ equity | $ | $ | |||||||||
—————
See accompanying notes to consolidated financial statements.
Fiscal Q1 2025 Form 10-Q | 1 | | ||||||
THE HOME DEPOT, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
| Three Months Ended | |||||||||||||||||||||||
| in millions, except per share data | May 4, 2025 | April 28, 2024 | |||||||||||||||||||||
Net sales | $ | $ | |||||||||||||||||||||
| Cost of sales | |||||||||||||||||||||||
| Gross profit | |||||||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||
| Selling, general and administrative | |||||||||||||||||||||||
| Depreciation and amortization | |||||||||||||||||||||||
| Total operating expenses | |||||||||||||||||||||||
| Operating income | |||||||||||||||||||||||
| Interest and other (income) expense: | |||||||||||||||||||||||
| Interest income and other, net | ( | ( | |||||||||||||||||||||
| Interest expense | |||||||||||||||||||||||
| Interest and other, net | |||||||||||||||||||||||
| Earnings before provision for income taxes | |||||||||||||||||||||||
| Provision for income taxes | |||||||||||||||||||||||
| Net earnings | $ | $ | |||||||||||||||||||||
| Basic weighted average common shares | |||||||||||||||||||||||
| Basic earnings per share | $ | $ | |||||||||||||||||||||
| Diluted weighted average common shares | |||||||||||||||||||||||
| Diluted earnings per share | $ | $ | |||||||||||||||||||||
—————
See accompanying notes to consolidated financial statements.
Fiscal Q1 2025 Form 10-Q | 2 | | ||||||
THE HOME DEPOT, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
| Three Months Ended | |||||||||||||||||||||||
| in millions | May 4, 2025 | April 28, 2024 | |||||||||||||||||||||
| Net earnings | $ | $ | |||||||||||||||||||||
| Other comprehensive income (loss), net of tax: | |||||||||||||||||||||||
| Foreign currency translation adjustments | ( | ||||||||||||||||||||||
| Cash flow hedges | |||||||||||||||||||||||
| Total other comprehensive income (loss), net of tax | ( | ||||||||||||||||||||||
| Comprehensive income | $ | $ | |||||||||||||||||||||
—————
See accompanying notes to consolidated financial statements.
Fiscal Q1 2025 Form 10-Q | 3 | | ||||||
THE HOME DEPOT, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited)
| Three Months Ended | |||||||||||||||||||||||
| in millions | May 4, 2025 | April 28, 2024 | |||||||||||||||||||||
| Common Stock: | |||||||||||||||||||||||
| Balance at beginning of period | $ | $ | |||||||||||||||||||||
Shares issued under employee stock plans, net | |||||||||||||||||||||||
| Balance at end of period | |||||||||||||||||||||||
| Paid-in Capital: | |||||||||||||||||||||||
| Balance at beginning of period | |||||||||||||||||||||||
Shares issued under employee stock plans, net | ( | ( | |||||||||||||||||||||
| Stock-based compensation expense | |||||||||||||||||||||||
| Balance at end of period | |||||||||||||||||||||||
| Retained Earnings: | |||||||||||||||||||||||
| Balance at beginning of period | |||||||||||||||||||||||
| Net earnings | |||||||||||||||||||||||
Cash dividends | ( | ( | |||||||||||||||||||||
| Balance at end of period | |||||||||||||||||||||||
Accumulated Other Comprehensive Loss: | |||||||||||||||||||||||
| Balance at beginning of period | ( | ( | |||||||||||||||||||||
| Foreign currency translation adjustments, net of tax | ( | ||||||||||||||||||||||
| Cash flow hedges, net of tax | |||||||||||||||||||||||
| Balance at end of period | ( | ( | |||||||||||||||||||||
| Treasury Stock: | |||||||||||||||||||||||
| Balance at beginning of period | ( | ( | |||||||||||||||||||||
| Repurchases of common stock | ( | ||||||||||||||||||||||
| Balance at end of period | ( | ( | |||||||||||||||||||||
Total stockholders’ equity | $ | $ | |||||||||||||||||||||
—————
See accompanying notes to consolidated financial statements.
Fiscal Q1 2025 Form 10-Q | 4 | | ||||||
THE HOME DEPOT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| Three Months Ended | |||||||||||
| in millions | May 4, 2025 | April 28, 2024 | |||||||||
| Cash Flows from Operating Activities: | |||||||||||
| Net earnings | $ | $ | |||||||||
| Reconciliation of net earnings to net cash provided by operating activities: | |||||||||||
Depreciation and amortization, excluding amortization of intangible assets | |||||||||||
Intangible asset amortization | |||||||||||
| Stock-based compensation expense | |||||||||||
| Changes in receivables, net | ( | ( | |||||||||
| Changes in merchandise inventories | ( | ( | |||||||||
| Changes in other current assets | ( | ||||||||||
| Changes in accounts payable and accrued expenses | |||||||||||
| Changes in deferred revenue | |||||||||||
| Changes in income taxes payable | ( | ||||||||||
| Changes in deferred income taxes | ( | ||||||||||
| Other operating activities | ( | ||||||||||
| Net cash provided by operating activities | |||||||||||
| Cash Flows from Investing Activities: | |||||||||||
Capital expenditures | ( | ( | |||||||||
| Payments for businesses acquired, net | ( | ||||||||||
| Other investing activities | |||||||||||
| Net cash used in investing activities | ( | ( | |||||||||
| Cash Flows from Financing Activities: | |||||||||||
(Repayments of) proceeds from short-term debt, net | ( | ||||||||||
| Proceeds from long-term debt, net of discounts | |||||||||||
| Repayments of long-term debt | ( | ( | |||||||||
| Repurchases of common stock | ( | ||||||||||
| Proceeds from sales of common stock | |||||||||||
Cash dividends | ( | ( | |||||||||
| Other financing activities | ( | ( | |||||||||
Net cash used in financing activities | ( | ( | |||||||||
| Change in cash and cash equivalents | ( | ||||||||||
| Effect of exchange rate changes on cash and cash equivalents | ( | ||||||||||
| Cash and cash equivalents at beginning of period | |||||||||||
| Cash and cash equivalents at end of period | $ | $ | |||||||||
| Supplemental Disclosures: | |||||||||||
| Cash paid for interest, net of interest capitalized | $ | $ | |||||||||
| Cash paid for income taxes | |||||||||||
—————
See accompanying notes to consolidated financial statements.
Fiscal Q1 2025 Form 10-Q | 5 | | ||||||
THE HOME DEPOT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
Reclassifications
Effective July 28, 2024, we began separately presenting intangible asset amortization on the statements of cash flows, which was previously included in the depreciation and amortization line item. Prior period amounts have been reclassified to conform to the current year’s financial statement presentation.
Receivables, net
The following table presents components of receivables, net:
| in millions | May 4, 2025 | February 2, 2025 | |||||||||
| Card receivables | $ | $ | |||||||||
| Rebate receivables | |||||||||||
| Customer receivables | |||||||||||
| Other receivables | |||||||||||
| Receivables, net | $ | $ | |||||||||
Supplier Finance Program
Income Taxes
Fiscal Q1 2025 Form 10-Q | 6 | | ||||||
Recent Accounting Pronouncements
We did not adopt any new accounting pronouncements during the three months ended May 4, 2025 that had a material impact on our consolidated financial condition, results of operations, or cash flows. There have been no significant changes in accounting pronouncements not yet adopted as disclosed in the 2024 Form 10-K, and those not discussed in the 2024 Form 10-K are either not applicable or are not expected to have a material impact on our consolidated financial condition, results of operations, or cash flows.
2.SEGMENT REPORTING AND NET SALES
Segment Reporting
The Company defines its segments based on how internally reported financial information is regularly reviewed by the chief operating decision maker (“CODM”), our President and Chief Executive Officer, to analyze financial performance, make decisions, and allocate resources.
Primary Segment. We are engaged in the operation of retail stores and sell a wide assortment of building materials, home improvement products, lawn and garden products, décor products, and facilities maintenance, repair and operations products both in stores and online. We also provide a number of services, including home improvement installation services, and tool and equipment rental. We currently conduct these operations in the U.S. (including the Commonwealth of Puerto Rico and the territories of the U.S. Virgin Islands and Guam), Canada, and Mexico, each of which represents an operating segment. For disclosure purposes, we aggregate these three geographic operating segments into one reportable segment (the “Primary segment”) due to the similar nature of their operations and economic characteristics.
Other. As discussed in Note 10, in June 2024, we acquired SRS, a leading residential specialty trade distribution company across several verticals serving the professional roofer, landscaper and pool contractor through its branches located throughout the U.S. SRS is organized as three different lines of business: roofing and complementary building products, landscape, and pool. We have determined that each of these three lines of business represents an operating segment, none of which meets the thresholds prescribed under Topic 280 to be deemed a reportable segment. Therefore, results from our SRS operating segments are presented in “Other” beginning from the acquisition date of June 18, 2024.
Segment Information. Assets are reviewed by our CODM on a total company consolidated basis and not by segment. The accounting policies of our Primary segment are the same as those described in our summary of significant accounting policies.
The following table presents net sales, significant expenses, and operating income for our Primary segment:
| Three Months Ended | |||||||||||
| in millions | May 4, 2025 | April 28, 2024 | |||||||||
Net sales | $ | $ | |||||||||
Cost of sales | |||||||||||
Selling, general and administrative | |||||||||||
Depreciation and amortization | |||||||||||
Primary segment operating income | $ | $ | |||||||||
Fiscal Q1 2025 Form 10-Q | 7 | | ||||||
The following table presents a reconciliation of certain Primary segment information to our consolidated totals:
| Three Months Ended | |||||||||||||||||||||||||||||||||||
| May 4, 2025 | |||||||||||||||||||||||||||||||||||
| in millions | Primary Segment | Other | Consolidated | ||||||||||||||||||||||||||||||||
Net sales | $ | $ | $ | ||||||||||||||||||||||||||||||||
Operating income | |||||||||||||||||||||||||||||||||||
Interest income and other, net | ( | ||||||||||||||||||||||||||||||||||
Interest expense | |||||||||||||||||||||||||||||||||||
Earnings before provision for income taxes | $ | ||||||||||||||||||||||||||||||||||
Depreciation and amortization (1) | $ | $ | $ | ||||||||||||||||||||||||||||||||
—————
(1)Includes depreciation and finance lease amortization in cost of sales. Also includes intangible asset amortization expense of $52 million in our Primary segment and $87 million in Other.
Net sales presented in Other relate to the sale of products by SRS, with roofing and related products accounting for approximately 63 % of net sales in Other during the three months ended May 4, 2025.
Prior to the SRS acquisition, our total Company consolidated results represented our Primary segment. Therefore, a reconciliation to our consolidated totals is not applicable for the three months ended April 28, 2024.
Net Sales
The following table presents our Primary segment major product lines and the related merchandising departments (and related services):
| Major Product Line | Merchandising Departments | |||||||
| Building Materials | Building Materials, Electrical, Lumber, Millwork, and Plumbing | |||||||
| Décor | Appliances, Bath, Flooring, Kitchen & Blinds, Lighting, and Paint | |||||||
| Hardlines | Hardware, Indoor Garden, Outdoor Garden, Power, and Storage & Organization | |||||||
The following table presents net sales by major product line (and related services) within our Primary segment, as well as Other net sales:
| Three Months Ended | |||||||||||||||||||||||
| in millions | May 4, 2025 | April 28, 2024 | |||||||||||||||||||||
| Building Materials | $ | $ | |||||||||||||||||||||
| Décor | |||||||||||||||||||||||
| Hardlines | |||||||||||||||||||||||
Primary segment net sales | |||||||||||||||||||||||
Other net sales (1) | |||||||||||||||||||||||
Net sales | $ | $ | |||||||||||||||||||||
(1) See above for further discussion of Other net sales.
Note: During the first quarter of fiscal 2025, we made changes that realigned certain product categories across our merchandising departments and major product lines within our Primary segment. As a result, prior-year amounts have been updated to conform with the current-year presentation. These changes had no impact on our consolidated net sales.
The following table presents net sales, classified by geography:
| Three Months Ended | |||||||||||||||||||||||
| in millions | May 4, 2025 | April 28, 2024 | |||||||||||||||||||||
Net sales – in the U.S. | $ | $ | |||||||||||||||||||||
Net sales – outside the U.S. | |||||||||||||||||||||||
Net sales | $ | $ | |||||||||||||||||||||
Fiscal Q1 2025 Form 10-Q | 8 | | ||||||
The following table presents net sales by products and services:
| Three Months Ended | |||||||||||||||||||||||
| in millions | May 4, 2025 | April 28, 2024 | |||||||||||||||||||||
| Net sales – products | $ | $ | |||||||||||||||||||||
| Net sales – services | |||||||||||||||||||||||
Net sales | $ | $ | |||||||||||||||||||||
Deferred Revenue
For products and services sold in stores or online, payment is typically due at the point of sale. When we receive payment before the customer has taken possession of the merchandise or the service has been performed, the amount received is recorded as deferred revenue until the sale or service is complete. Such performance obligations are part of contracts with expected original durations of typically three months or less. As of May 4, 2025 and February 2, 2025, deferred revenue for products and services was $1.8 billion and $1.5 billion, respectively.
We further record deferred revenue for the sale of gift cards and recognize the associated revenue upon the redemption of those gift cards, which generally occurs within six months of gift card issuance. As of May 4, 2025 and February 2, 2025, our performance obligations for unredeemed gift cards were $1.0 billion and $1.1 billion, respectively. Gift card breakage income, which is our estimate of the portion of our outstanding gift card balance not expected to be redeemed, is recognized in net sales and was immaterial during the three months ended May 4, 2025 and April 28, 2024.
3.PROPERTY AND LEASES
Net Property and Equipment
Net property and equipment included accumulated depreciation and finance lease amortization of $29.8 billion as of May 4, 2025 and $29.1 billion as of February 2, 2025.
Leases
The following table presents certain consolidated balance sheet information related to operating and finance leases:
| in millions | Consolidated Balance Sheet Classification | May 4, 2025 | February 2, 2025 | |||||||||||
| Assets: | ||||||||||||||
| Operating lease assets | Operating lease right-of-use assets | $ | $ | |||||||||||
Finance lease assets (1) | Net property and equipment | |||||||||||||
| Total lease assets | $ | $ | ||||||||||||
| Liabilities: | ||||||||||||||
| Current: | ||||||||||||||
| Operating lease liabilities | Current operating lease liabilities | $ | $ | |||||||||||
| Finance lease liabilities | Current installments of long-term debt | |||||||||||||
| Long-term: | ||||||||||||||
| Operating lease liabilities | Long-term operating lease liabilities | |||||||||||||
| Finance lease liabilities | Long-term debt, excluding current installments | |||||||||||||
| Total lease liabilities | $ | $ | ||||||||||||
—————
The following table presents supplemental non-cash information related to leases:
| Three Months Ended | |||||||||||
| in millions | May 4, 2025 | April 28, 2024 | |||||||||
| Lease assets obtained in exchange for new operating lease liabilities | $ | $ | |||||||||
| Lease assets obtained in exchange for new finance lease liabilities | |||||||||||
Fiscal Q1 2025 Form 10-Q | 9 | | ||||||
4.GOODWILL AND INTANGIBLE ASSETS
Goodwill
The following table presents the changes in the carrying amount of our goodwill:
| in millions | Primary Segment | Other (3) | Consolidated | ||||||||||||||||||||||||||||||||
Goodwill, balance at February 2, 2025 | $ | $ | $ | ||||||||||||||||||||||||||||||||
Acquisitions (1) | |||||||||||||||||||||||||||||||||||
Other (2) | ( | ||||||||||||||||||||||||||||||||||
Goodwill, balance at May 4, 2025 | $ | $ | $ | ||||||||||||||||||||||||||||||||
—————
(1) Activity includes the preliminary determination of goodwill related to immaterial acquisitions completed during the three months ended May 4, 2025.
(2) Primarily reflects the net impact of foreign currency translation as well as immaterial measurement period adjustments related to acquisitions completed in the prior fiscal year.
Intangible Assets
The following table presents information regarding our intangible assets:
| May 4, 2025 | February 2, 2025 | ||||||||||||||||||||||||||||||||||
| in millions | Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | |||||||||||||||||||||||||||||
| Definite-Lived Intangible Assets: | |||||||||||||||||||||||||||||||||||
| Customer relationships | $ | $ | ( | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||
| Trade names | ( | ( | |||||||||||||||||||||||||||||||||
| Other | ( | ( | |||||||||||||||||||||||||||||||||
| Indefinite-Lived Intangible Assets: | |||||||||||||||||||||||||||||||||||
| Trade names | |||||||||||||||||||||||||||||||||||
Total Intangible Assets | $ | $ | ( | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||
Our intangible asset amortization expense was $139 million and $52 million during the first quarter of fiscal 2025 and fiscal 2024, respectively.
The following table presents the estimated future amortization expense related to definite-lived intangible assets as of May 4, 2025:
| in millions | Amortization Expense | ||||
Fiscal 2025 - remaining | $ | ||||
Fiscal 2026 | |||||
Fiscal 2027 | |||||
Fiscal 2028 | |||||
Fiscal 2029 | |||||
| Thereafter | |||||
Total | $ | ||||
Fiscal Q1 2025 Form 10-Q | 10 | | ||||||
5.DEBT AND DERIVATIVE INSTRUMENTS
Short-Term Debt
We have a commercial paper program that allows for borrowings up to $7.0 billion and is supported by $7.0 billion of back-up credit facilities. At the beginning of fiscal 2025, these backup credit facilities consisted of a five-year $3.5 billion credit facility scheduled to expire in July 2027, a 364 -day $2.0 billion credit facility scheduled to expire in May 2025, and a 364 -day $1.5 billion credit facility scheduled to expire in July 2025. On May 6, 2025, we terminated all three back-up credit facility agreements and simultaneously entered into a new five-year $3.5 billion credit facility scheduled to expire in May 2030 and a new 364 -day $3.5 billion credit facility scheduled to expire in May 2026.
All of our short-term borrowings during the first three months of fiscal 2025 were under our commercial paper program, and the maximum amount outstanding at any time was $1.1 billion. At May 4, 2025, we had $38 million of outstanding borrowings under our commercial paper program with a weighted average interest rate of 2.9 % and no outstanding borrowings under our back-up credit facilities. At February 2, 2025, we had $316 million of outstanding borrowings under our commercial paper program with a weighted-average interest rate of 4.4 % and no outstanding borrowings under our back-up credit facilities.
Long-Term Debt
We did not have any new issuances of senior notes during the first three months of fiscal 2025. In April 2025, we repaid our $500 million 2.70 % and $500 million 5.125 % senior notes at maturity.
Derivative Instruments and Hedging Activities
We use derivative instruments as part of our normal business operations in the management of our exposure to fluctuations in foreign currency exchange rates and interest rates on certain debt. Our objective in managing these exposures is to decrease the volatility of cash flows affected by changes in the underlying rates and to minimize the risk of changes in the fair value of certain senior notes.
We had outstanding interest rate swap agreements with combined notional amounts of $5.4 661 million and $795 million, respectively, all of which are recognized in other long-term liabilities on our consolidated balance sheets. All of our interest rate swap agreements designated as fair value hedges meet the shortcut method requirements under GAAP. Accordingly, the changes in the fair values of these agreements offset the changes in the fair value of the hedged long-term debt. At May 4, 2025 and February 2, 2025, the carrying amount of our long-term debt, excluding current installments, subject to fair value hedges was $14.5 billion and $14.3 billion, respectively.
During the three months ended May 4, 2025, there was no new material hedging activity or material change to any other hedging arrangement disclosed in our 2024 Form 10-K, and all related activity was immaterial for the periods presented within this report.
Collateral. We generally enter into master netting arrangements, which are designed to reduce credit risk by permitting net settlement of transactions with the same counterparty. To further limit our credit risk, we enter into collateral security arrangements that provide for collateral to be received or posted when the net fair value of certain derivative instruments exceeds or falls below contractually established thresholds. The cash collateral posted by the Company related to derivative instruments under our collateral security arrangements was $532 million and $668 million as of May 4, 2025 and February 2, 2025, respectively, which was recorded in other current assets on our consolidated balance sheets. We did not hold any cash collateral as of May 4, 2025 or February 2, 2025.
Fiscal Q1 2025 Form 10-Q | 11 | | ||||||
6.STOCKHOLDERS' EQUITY
Stock Rollforward
The following table presents a reconciliation of the number of shares of our common stock outstanding and cash dividends per share:
| shares in millions | Three Months Ended | ||||||||||||||||||||||
| May 4, 2025 | April 28, 2024 | ||||||||||||||||||||||
| Common stock: | |||||||||||||||||||||||
Shares at beginning of period | |||||||||||||||||||||||
Shares issued under employee stock plans, net | |||||||||||||||||||||||
Shares at end of period | |||||||||||||||||||||||
| Treasury stock: | |||||||||||||||||||||||
Shares at beginning of period | ( | ( | |||||||||||||||||||||
| Repurchases of common stock | ( | ||||||||||||||||||||||
Shares at end of period | ( | ( | |||||||||||||||||||||
| Shares outstanding at end of period | |||||||||||||||||||||||
| Cash dividends per share | $ | $ | |||||||||||||||||||||
Share Repurchases
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 May 4, 2025, approximately $11.7 billion of the $15.0 billion share repurchase authorization remained available. In March 2024, we paused share repurchases and have not resumed share repurchase activity as of May 4, 2025.
7.FAIR VALUE MEASUREMENTS
The fair value of an asset is considered to be the price at which the asset could be sold in an orderly transaction between unrelated knowledgeable and willing parties. A liability’s fair value is defined as the amount that would be paid to transfer the liability to a new obligor, rather than the amount that would be paid to settle the liability with the creditor. Assets and liabilities recorded at fair value are measured using a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. The levels of the fair value hierarchy are:
•Level 1: observable inputs such as quoted prices in active markets for identical assets or liabilities;
•Level 2: inputs other than quoted prices in active markets in Level 1 that are either directly or indirectly observable; and
•Level 3: unobservable inputs for which little or no market data exists, therefore requiring management judgment to develop the Company’s own models with estimates and assumptions.
Assets and Liabilities Measured at Fair Value on a Recurring Basis
The following table presents the assets and liabilities that are measured at fair value on a recurring basis:
| May 4, 2025 | February 2, 2025 | ||||||||||||||||||||||||||||||||||
| in millions | Fair Value (Level 2) | Fair Value (Level 2) | |||||||||||||||||||||||||||||||||
| Derivative agreements – assets | $ | $ | |||||||||||||||||||||||||||||||||
| Derivative agreements – liabilities | ( | ( | |||||||||||||||||||||||||||||||||
| Total | $ | ( | $ | ( | |||||||||||||||||||||||||||||||
The fair values of our derivative instruments are determined using an income approach and Level 2 inputs, which primarily include the respective interest rate forward curves and discount rates. Our derivative instruments are discussed further in Note 5.
Fiscal Q1 2025 Form 10-Q | 12 | | ||||||
Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis
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 months ended May 4, 2025 or April 28, 2024.
Other Fair Value Disclosures
The carrying amounts of cash and cash equivalents, receivables, accounts payable, and short-term debt approximate fair value due to their short-term nature.
The following table presents the aggregate fair values and carrying values of our senior notes:
| May 4, 2025 | February 2, 2025 | ||||||||||||||||||||||
| in millions | Fair Value (Level 1) | Carrying Value | Fair Value (Level 1) | Carrying Value | |||||||||||||||||||
| Senior notes | $ | $ | $ | $ | |||||||||||||||||||
8.WEIGHTED AVERAGE COMMON SHARES
The following table presents the reconciliation of our basic to diluted weighted average common shares as well as the number of anti-dilutive securities excluded from diluted weighted average common shares:
| in millions | Three Months Ended | ||||||||||||||||||||||
| May 4, 2025 | April 28, 2024 | ||||||||||||||||||||||
| Basic weighted average common shares | |||||||||||||||||||||||
Effect of potentially dilutive securities (1) | |||||||||||||||||||||||
| Diluted weighted average common shares | |||||||||||||||||||||||
| Anti-dilutive securities excluded from diluted weighted average common shares | |||||||||||||||||||||||
—————
(1) Represents the dilutive impact of stock-based awards.
9.CONTINGENCIES
We are involved in litigation arising in the normal course of business. In management’s opinion, any such litigation is not expected to have a material adverse effect on our consolidated financial condition, results of operations, or cash flows.
10.ACQUISITIONS
SRS Acquisition
On June 18, 2024, we completed the acquisition of SRS, a leading residential specialty trade distribution company across several verticals serving the professional roofer, landscaper and pool contractor, for total purchase consideration of $18.0 billion. We primarily used a combination of proceeds from commercial paper borrowings, the issuance of long-term debt, as well as cash on hand to fund the acquisition. In fiscal 2024, we recorded a preliminary allocation of the purchase price to the assets acquired and liabilities assumed based on their estimated acquisition date fair values. Adjustments to this preliminary purchase price allocation recognized during the first quarter of fiscal 2025 were immaterial, and our purchase price allocation is now finalized.
Fiscal Q1 2025 Form 10-Q | 13 | | ||||||
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
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 2024 Form 10-K and with our MD&A included in the 2024 Form 10-K.
TABLE OF CONTENTS
EXECUTIVE SUMMARY
We reported net sales of $39.9 billion in the first quarter of fiscal 2025. Net earnings were $3.4 billion, or $3.45 per diluted share.
We opened three new stores in the U.S. during the first quarter of fiscal 2025, resulting in a total store count of 2,350 at May 4, 2025. A total of 322 stores, or 13.7%, were located in Canada and Mexico. Our inventory turnover ratio was 4.3 times at the end of the first quarter of fiscal 2025, compared to 4.5 times at the end of the first quarter of fiscal 2024.
We generated $4.3 billion of cash flow from operations during the first three months of fiscal 2025. This cash flow, together with cash on hand, was used to fund cash payments of $2.3 billion for dividends, repay $1.1 billion of long-term debt, and repay $278 million of net commercial paper borrowings. In addition, we funded $806 million in capital expenditures. In February 2025, we announced a 2.2% increase in our quarterly cash dividend to $2.30 per share.
Our ROIC for the trailing twelve-month period was 31.3% at the end of the first quarter of fiscal 2025 and 37.1% at the end of the first quarter of fiscal 2024. The decrease in ROIC was primarily driven by higher average long-term debt and higher average equity due to the financing of the SRS acquisition in the second quarter of fiscal 2024. See the Non-GAAP Financial Measures section below for our definition and calculation of ROIC.
Tariffs and Other Trade Policy Matters
We are closely monitoring developments with respect to tariffs and other trade policy matters. Over the last decade, we have worked diligently to diversify our global supply chain. Based on estimates using recent purchase data, we believe over 50% of product purchases for the substantial majority of our U.S. operations are currently sourced in the U.S. We intend to continue diversifying our global supply chain, including further limiting our concentration of product purchases for the substantial majority of our U.S. operations within any single country outside the U.S. We believe these actions, along with our scale, vendor relationships, and experienced internal teams, position us to effectively mitigate the impact that tariffs in effect as of the date of this filing could have on our business, as well as allow for maximum flexibility as our global sourcing strategies evolve.
While tariff and other trade policy developments since the beginning of fiscal 2025 have not had a meaningful financial impact on our business to date, trade policy discussions are ongoing. As a result, we cannot predict with certainty their ultimate impact on our business in future periods, including our results of operations and cash flows. For more information on these risks and uncertainties see Part I, Item 1A. “Risk Factors” of our 2024 Form 10-K.
Fiscal Q1 2025 Form 10-Q | 14 | | ||||||
RESULTS OF OPERATIONS
The following table presents the percentage relationship between net sales and major categories in our consolidated statements of earnings.
FISCAL 2025 AND FISCAL 2024 THREE MONTH COMPARISONS
| Three Months Ended | |||||||||||||||||||||||
| May 4, 2025 | April 28, 2024 | ||||||||||||||||||||||
| dollars in millions | $ | % of Net Sales | $ | % of Net Sales | |||||||||||||||||||
| Net sales | $ | 39,856 | $ | 36,418 | |||||||||||||||||||
| Gross profit | 13,459 | 33.8 | % | 12,433 | 34.1 | % | |||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||
| Selling, general and administrative | 7,530 | 18.9 | 6,667 | 18.3 | |||||||||||||||||||
| Depreciation and amortization | 796 | 2.0 | 687 | 1.9 | |||||||||||||||||||
| Total operating expenses | 8,326 | 20.9 | 7,354 | 20.2 | |||||||||||||||||||
| Operating income | 5,133 | 12.9 | 5,079 | 13.9 | |||||||||||||||||||
| Interest and other (income) expense: | |||||||||||||||||||||||
| Interest income and other, net | (24) | (0.1) | (57) | (0.2) | |||||||||||||||||||
| Interest expense | 615 | 1.5 | 485 | 1.3 | |||||||||||||||||||
| Interest and other, net | 591 | 1.5 | 428 | 1.2 | |||||||||||||||||||
| Earnings before provision for income taxes | 4,542 | 11.4 | 4,651 | 12.8 | |||||||||||||||||||
| Provision for income taxes | 1,109 | 2.8 | 1,051 | 2.9 | |||||||||||||||||||
| Net earnings | $ | 3,433 | 8.6 | % | $ | 3,600 | 9.9 | % | |||||||||||||||
—————
Note: Certain percentages may not sum to totals due to rounding.
| Three Months Ended | |||||||||||||||||
| Selected financial and sales data: | May 4, 2025 | April 28, 2024 | % Change | ||||||||||||||
Comparable sales (% change) | (0.3) | % | (2.8) | % | N/A | ||||||||||||
Comparable customer transactions (% change) (1) | (0.5) | % | (1.5) | % | N/A | ||||||||||||
Comparable average ticket (% change) (1) (2) | — | % | (1.3) | % | N/A | ||||||||||||
Customer transactions (in millions) (1) | 394.8 | 386.8 | 2.1 | % | |||||||||||||
Average ticket (1) (2) | $ | 90.71 | $ | 90.68 | — | % | |||||||||||
Diluted earnings per share | $ | 3.45 | $ | 3.63 | (5.0) | % | |||||||||||
—————
(1)Customer transactions and average ticket measures do not include results from HD Supply or SRS.
(2)Average ticket represents the average price paid per transaction and is used by management to monitor the performance of the Company, as it represents a primary driver in measuring sales performance.
Sales
We assess our sales performance by evaluating both net sales and comparable sales. In fiscal 2025, there is a one-week calendar shift as a result of the 53rd week in fiscal 2024. For purposes of the following discussion, comparable sales, comparable customer transactions, and comparable average ticket are based upon the comparable 13-week period from fiscal 2024.
Net Sales. Net sales for the first quarter of fiscal 2025 were $39.9 billion, an increase of 9.4% from $36.4 billion for the first quarter of fiscal 2024. The increase in net sales for the first quarter of fiscal 2025 was primarily driven by SRS, which was acquired in the second quarter of fiscal 2024 and contributed $2.6 billion of net sales during the first quarter of fiscal 2025. Additionally, due to the 53rd week in fiscal 2024, the first quarter of fiscal 2025 included one less week of winter and one additional week of spring, which further contributed to the increase in net sales in the first quarter of fiscal 2025.
Fiscal Q1 2025 Form 10-Q | 15 | | ||||||
Online sales, which consist of sales of products generated through websites and mobile applications, represented 15.5% of net sales during the first quarter of fiscal 2025 and increased by 10.9% compared to the first quarter of fiscal 2024, which includes the benefit of the seasonal timing shift. Calculated on a comparable week basis relative to fiscal 2024, online sales increased by 8.3%.
A stronger U.S. dollar compared to the first quarter of fiscal 2024 negatively impacted net sales by $275 million during the first quarter of fiscal 2025.
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. Fiscal 2025 includes 52 weeks and fiscal 2024 included 53 weeks. For our calculation of comparable sales in fiscal 2025, we will compare weeks 1 through 52 in fiscal 2025 against weeks 2 through 53 in fiscal 2024. Comparable sales is intended only as supplemental information and is not a substitute for net sales presented in accordance with GAAP. The method of calculating comparable sales varies across the retail industry. As a result, our method of calculating comparable sales may not be the same as similarly titled measures reported by other companies.
Total comparable sales for the first quarter of fiscal 2025 decreased 0.3%, primarily reflecting a 0.5% decrease in comparable customer transactions and a flat comparable average ticket compared to the first quarter of fiscal 2024. Foreign exchange rates negatively impacted comparable sales by approximately 70 basis points for the quarter. Our comparable sales performance continues to reflect the impact of macroeconomic uncertainties and other macroeconomic factors, including a persisting high interest rate environment pressuring home improvement demand.
During the first quarter of fiscal 2025, our Appliances, Plumbing, Indoor Garden, Electrical, Outdoor Garden and Building Materials merchandising departments posted positive comparable sales compared to the first quarter of fiscal 2024. All of our other merchandising departments posted negative comparable sales during the first quarter of fiscal 2025 compared to the first quarter of fiscal 2024.
Gross Profit
Gross profit for the first quarter of fiscal 2025 increased 8.3% to $13.5 billion from $12.4 billion for the first quarter of fiscal 2024. Gross profit as a percentage of net sales, or gross profit margin, was 33.8% for the first quarter of fiscal 2025 compared to 34.1% for the first quarter of fiscal 2024. The decrease in gross profit margin primarily reflects the inclusion of SRS in our consolidated results, partially offset by lower shrink and supply chain productivity within our Primary segment.
Operating Expenses
Our operating expenses are composed of SG&A and depreciation and amortization.
Selling, General & Administrative. SG&A for the first quarter of fiscal 2025 increased $863 million, or 12.9%, to $7.5 billion from $6.7 billion for the first quarter of fiscal 2024. As a percentage of net sales, SG&A was 18.9% for the first quarter of fiscal 2025 compared to 18.3% for the first quarter of fiscal 2024, primarily reflecting the impact of a non-recurring legal-related benefit recognized in the first quarter of fiscal 2024 as well as higher payroll costs in the first quarter of fiscal 2025 within our Primary segment.
Depreciation and Amortization. Depreciation and amortization for the first quarter of fiscal 2025 increased $109 million, or 15.9%, to $796 million from $687 million for the first quarter of fiscal 2024. As a percentage of net sales, depreciation and amortization was 2.0% for the first quarter of fiscal 2025 compared to 1.9% for the first quarter of fiscal 2024, primarily reflecting increased intangible asset amortization expense related to SRS.
Interest and Other, net
Interest and other, net for the first quarter of fiscal 2025 increased $163 million, or 38.1%, to $591 million from $428 million for the first quarter of fiscal 2024. As a percentage of net sales, interest and other, net was 1.5% for the first quarter of fiscal 2025 compared to 1.2% for the first quarter of fiscal 2024, primarily reflecting higher interest expense driven by higher long-term debt.
Fiscal Q1 2025 Form 10-Q | 16 | | ||||||
Provision for Income Taxes
Our combined effective income tax rate was 24.4% for the first quarter of fiscal 2025 compared to 22.6% for the first quarter of fiscal 2024. The increase in our effective tax rate was driven by certain discrete tax benefits recognized during the first quarter of fiscal 2024.
Diluted Earnings per Share
Diluted earnings per share were $3.45 for the first quarter of fiscal 2025 compared to $3.63 for the first quarter of fiscal 2024. The decrease in diluted earnings per share was primarily driven by lower net earnings during the first quarter of fiscal 2025.
NON-GAAP FINANCIAL MEASURES
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.
Return on Invested Capital
We believe ROIC is meaningful for management, investors and ratings agencies because it measures how effectively we deploy our capital base. ROIC is a non-GAAP 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.
The following table presents the calculation of ROIC, together with a reconciliation of NOPAT to net earnings (the most comparable GAAP financial measure):
Twelve Months Ended (3) | |||||||||||
| dollars in millions | May 4, 2025 (2) | April 28, 2024 | |||||||||
| Net earnings | $ | 14,639 | $ | 14,870 | |||||||
| Interest and other, net | 2,283 | 1,752 | |||||||||
| Provision for income taxes | 4,658 | 4,595 | |||||||||
| Operating income | 21,580 | 21,217 | |||||||||
Income tax adjustment (1) | (5,151) | (5,021) | |||||||||
| NOPAT | $ | 16,429 | $ | 16,196 | |||||||
| Average debt and equity | $ | 52,413 | $ | 43,629 | |||||||
| ROIC | 31.3 | % | 37.1 | % | |||||||
—————
(1)Income tax adjustment is defined as operating income multiplied by our effective tax rate for the trailing twelve months.
(2)The twelve months ended May 4, 2025 include operating results for SRS since the acquisition date of June 18, 2024, consistent with our consolidated financial statements.
(3)The fourth quarter of fiscal 2024 includes 14 weeks. All other quarters include 13 weeks.
LIQUIDITY AND CAPITAL RESOURCES
At May 4, 2025, we had $1.4 billion in cash and cash equivalents, of which $811 million 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.
Fiscal Q1 2025 Form 10-Q | 17 | | ||||||
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 connection with the acquisition of SRS and do not have plans to resume share repurchases in fiscal 2025.
During the first three months of fiscal 2025, we invested approximately $806 million back into our business in the form of capital expenditures. In line with our expectation of approximately 2.5% of fiscal 2025 net sales, we plan to invest approximately $4 billion back into our business in the form of capital expenditures in fiscal 2025. We expect to make these investments across initiatives to improve the customer experience, including through technology and development of other differentiated capabilities, to continue to mature and build out Pro customer capabilities, as well as to build new stores. 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. We may also utilize strategic acquisitions to help accelerate our strategic initiatives.
In February 2025, we announced a 2.2% increase in our quarterly cash dividend from $2.25 to $2.30 per share. During the first three months of fiscal 2025, we paid cash dividends of $2.3 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 May 4, 2025, approximately $11.7 billion of the $15.0 billion share repurchase authorization remained available.
DEBT
We have a commercial paper program that allows for borrowings up to $7.0 billion and is supported by $7.0 billion of back-up credit facilities. At the beginning of fiscal 2025, these back-up credit facilities consisted of a five-year $3.5 billion credit facility scheduled to expire in July 2027, a 364-day $2.0 billion credit facility scheduled to expire in May 2025, and a 364-day $1.5 billion credit facility scheduled to expire in July 2025. On May 6, 2025, we terminated all three back-up credit facility agreements and simultaneously entered into a new five-year $3.5 billion credit facility scheduled to expire in May 2030 and a new 364-day $3.5 billion credit facility scheduled to expire in May 2026.
All of our short-term borrowings in the first three months of fiscal 2025 were under our commercial paper program, and the maximum amount outstanding at any time was $1.1 billion. At May 4, 2025, we had $38 million of outstanding borrowings under our commercial paper program with a weighted average interest rate of 2.9%, we had no outstanding borrowings under our back-up credit facilities, and we were in compliance with all of the covenants contained in our back-up credit facilities, none of which are expected to impact our liquidity or capital resources.
We also issue senior notes from time to time as part of our capital management strategy. We did not have any issuances of senior notes during the first three months of fiscal 2025. In April 2025, we repaid our $500 million 2.70% and $500 million 5.125% senior notes at maturity.
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 of the covenants are expected to impact our liquidity or capital resources. We were in compliance with all such covenants at May 4, 2025. See Note 5 to our consolidated financial statements for further discussion of our debt arrangements.
CASH FLOWS SUMMARY
Operating Activities
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.
Fiscal Q1 2025 Form 10-Q | 18 | | ||||||
Net cash provided by operating activities decreased by $1.2 billion in the first three months of fiscal 2025 compared to the first three months of fiscal 2024, primarily due to changes in working capital. Changes in working capital were primarily driven by increased inventory levels during the first three months of fiscal 2025 along with the deferral of our fourth quarter fiscal 2024 estimated federal tax payment to the first quarter of fiscal 2025.
Investing Activities
Net cash used in investing activities increased by $101 million in the first three months of fiscal 2025 compared to the first three months of fiscal 2024, primarily resulting from immaterial business acquisitions in fiscal 2025, partially offset by lower capital expenditures.
Financing Activities
Net cash used in financing activities in the first three months of fiscal 2025 primarily reflected $2.3 billion of cash dividends paid, $1.1 billion of repayments of long-term debt, and $278 million of net repayments of commercial paper borrowings. Net cash used in financing activities in the first three months of fiscal 2024 primarily reflected $2.2 billion of cash dividends paid, $1.2 billion of long-term debt repayments, and $649 million of share repurchases prior to pausing share repurchases in March 2024.
CRITICAL ACCOUNTING ESTIMATES
During the first three months of fiscal 2025, there were no changes to our critical accounting estimates or our significant accounting policies as disclosed in the 2024 Form 10-K. Our significant accounting policies are disclosed in Note 1 to our consolidated financial statements.
ADDITIONAL INFORMATION
For information on accounting pronouncements that have impacted or may materially impact our consolidated financial condition, results of operations, or cash flows, see Note 1 to our consolidated financial statements.
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
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 three months of fiscal 2025, there have been no material changes to our market risks from those disclosed in the 2024 Form 10-K.
Item 4. Controls and Procedures.
Under the direction and with the participation of our Chief Executive Officer and Chief Financial Officer, we evaluated our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) and concluded that our disclosure controls and procedures were effective as of May 4, 2025.
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.
Except as described above, there were no other changes in our internal control over financial reporting during the fiscal quarter ended May 4, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Fiscal Q1 2025 Form 10-Q | 19 | | ||||||
PART II – OTHER INFORMATION
Item 1. Legal Proceedings.
There were no material changes during the first three months of fiscal 2025 to our disclosure in Part I, Item 3. “Legal Proceedings” of our 2024 Form 10-K.
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. Accordingly, below we have provided an update regarding the civil consent decree we entered into with the U.S. Department of Justice, the U.S. Environmental Protection Agency (the “EPA”), and the states of Utah, Massachusetts, and Rhode Island in April 2021.
As previously reported, the decree required certain changes to lead-safe work practices in our installation services business and provided for stipulated penalties for failure to perform by third-party installers. In the first quarter of fiscal 2023, the EPA informed us that it believes we owe certain penalties for violations by third-party installers of documentation requirements under the decree. We are discussing with the EPA the basis for the stipulated penalties we allegedly owe under the decree and the aggregate amount of any stipulated penalties owed for the 42-month duration of the decree. We expect the decree to be terminated thereafter. While we cannot predict the aggregate amount of stipulated penalties we may ultimately owe to the EPA under the decree, such payments to date have totaled approximately $1.5 million, and we do not expect any such penalties to have a material adverse effect on our consolidated financial condition, results of operations, or cash flows. Further, we have collected fines from our installers for the approximately $1.5 million paid to date, and we expect to recoup any additional amount we ultimately owe from corresponding fines we levy against our third-party installers.
Item 1A. Risk Factors.
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 2024 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 2024 Form 10-K.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
ISSUER PURCHASES OF EQUITY SECURITIES
The following table presents the number and average price of shares purchased in each fiscal month of the first quarter of fiscal 2025:
| Period | Total Number of Shares Purchased(1) | Average Price Paid Per Share(1) | 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) | ||||||||||||||||||||||
| February 3, 2025 – March 2, 2025 | 10,784 | $ | 391.62 | — | $ | 11,657,503,041 | ||||||||||||||||||||
| March 3, 2025 – March 30, 2025 | 283,821 | 356.11 | — | 11,657,503,041 | ||||||||||||||||||||||
| March 31, 2025 – May 4, 2025 | 28,396 | 360.55 | — | 11,657,503,041 | ||||||||||||||||||||||
| 323,001 | 357.69 | — | ||||||||||||||||||||||||
—————
(1)These amounts include deemed 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 applicable plan 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. As previously disclosed, we paused share repurchases in March 2024 and have not resumed share repurchase activity as of May 4, 2025.
(3)Excludes excise taxes incurred on share repurchases.
Fiscal Q1 2025 Form 10-Q | 20 | | ||||||
SALES OF UNREGISTERED SECURITIES
During the first quarter of fiscal 2025, we issued 512 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 first quarter of fiscal 2025 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 the plan.
During the first quarter of fiscal 2025, we credited 873 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.
Item 5. Other Information.
Trading Arrangements
During the fiscal quarter ended May 4, 2025, no director or officer (as defined in the rules under Section 16 of the Exchange Act) of the Company adopted terminated
Item 6. Exhibits.
Exhibits marked with an asterisk (*) are incorporated by reference to exhibits or appendices previously filed with the SEC, as indicated by the references in brackets. All other exhibits are filed or furnished herewith.
| Exhibit | Description | |||||||
*‡ | [Form 10-Q filed on May 21, 2024, Exhibit 2.1] | |||||||
* | [Form 10-Q filed on September 1, 2011, Exhibit 3.1] | |||||||
* | [Form 8-K filed on February 28, 2023, Exhibit 3.2] | |||||||
† | ||||||||
| 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) | |||||||
—————
‡ Certain schedules and other similar attachments to this exhibit have been omitted from this filing pursuant to Item 601(a)(5) of Regulation S-K. The registrant will provide a copy of such omitted documents to the SEC upon request.
† Management contract or compensatory plan or arrangement.
Fiscal Q1 2025 Form 10-Q | 21 | | ||||||
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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: | May 27, 2025 | ||||
Fiscal Q1 2025 Form 10-Q | 22 | | ||||||
Exhibit 10.1
THE HOME DEPOT, INC.
EQUITY AWARD TERMS AND CONDITIONS AGREEMENT
Executive Officers – U.S.
GRANTED TO: <NAME>
GRANT DATE: <DATE>
GRANT TYPE: Nonqualified Stock Option Award
VESTING SCHEDULE: 25% on 2nd, 3rd, 4th, and 5th Anniversaries of the Grant Date
NUMBER OF SHARES OF THE HOME DEPOT, INC. COMMON STOCK: <X,XXX>
OPTION PRICE PER SHARE: <$AMOUNT>
EXPIRATION DATE: <DATE>
GRANT TYPE: Performance-Based Restricted Stock Award
VESTING SCHEDULE: 50% on 30th Month Anniversary of the Grant Date,
and 50% on 60th Month Anniversary of the Grant Date
NUMBER OF SHARES OF THE HOME DEPOT, INC. COMMON STOCK: <X,XXX>
GRANT TYPE: Performance Share Award
VESTING SCHEDULE: Performance Period of 3 Fiscal Years Beginning with <YEAR>
PERFORMANCE PERIOD: <YEAR-YEAR>
NUMBER OF SHARES OF THE HOME DEPOT, INC. COMMON STOCK: Target Award: <X,XXX>
In recognition of the value of your continued service as a key employee, The Home Depot, Inc., a Delaware corporation, on and as of the date specified above (the “Grant Date”), hereby grants to you, an employee of The Home Depot, Inc. or one of its subsidiaries, affiliates, or related entities (collectively the “Company”), pursuant to this Equity Award Terms and Conditions Agreement (this “Award Agreement”), the following awards (individually referred to as the “Award” and collectively referred to as the “Awards”), a summary of which has been delivered to you:
•A non-qualified stock option award (the “Option”) to purchase from the Company the above-stated number of shares of Common Stock at the price per share stated above (the “Option Price”), which Option will expire on the expiration date stated above (the “Expiration Date”), unless it expires earlier in accordance with the terms and conditions described below;
•A performance-based restricted stock award of the above-stated number of shares of Common Stock (“Restricted Stock”) subject to the terms and conditions described below; and
•A performance share award (the “Performance Shares”) of up to 200% of the above-stated Target Award, which may be earned in accordance with the performance vesting and other terms and conditions described below.
In addition to the terms and conditions set forth herein, the Award is subject to and governed by the terms and conditions set forth in the Company’s Omnibus Stock Incentive Plan, as Amended and Restated May 19, 2022 (the “Plan”), a summary of which has been delivered to you, and the Plan is incorporated herein by reference. Unless defined in the Award Agreement or the context otherwise requires, capitalized terms used in this Award Agreement will have the meanings set forth in the Plan.
You will be deemed to have accepted, and agree to comply with, all the terms and conditions of this Award Agreement upon your acceptance of the Award(s) granted herein.
A.NONQUALIFIED STOCK OPTION TERMS AND CONDITIONS
1.Vesting. The Option will become exercisable in installments, as follows: 25% of the total number of shares subject to the Option will become exercisable on each of the second (2nd), third (3rd), fourth (4th), and fifth (5th) anniversaries of the Grant Date.
2.Change in Employment Status; Termination for Cause. If (a) your employment with the Company terminates for reasons other than death, Disability, or Retirement, (b) you violate Section D.6.(a), D.6.(c), D.7.(a), D.7.(b), or D.7. (c) of this Award Agreement, or (c) your employment is terminated for Cause, then all Option shares granted to you pursuant to this Award that have not become exercisable as of your Termination Date will immediately lapse. Option shares that are exercisable as of your Termination Date will lapse unless exercised within a period of three (3) months from your Termination Date. Upon attaining Retirement Eligibility, all Option shares that are not exercisable will continue to vest according to the schedule set forth in Section A.1. of this Award Agreement, and all Option shares will remain exercisable until the Expiration Date. Upon your death or the termination of your employment by reason of Disability, all Option shares will immediately become fully exercisable as of the date of death or termination on account of Disability and will lapse unless exercised within a period of one (1) year from the date of death or your Termination Date. In no event will the above time periods extend beyond the Expiration Date. After attaining Retirement Eligibility, if you violate Section D.6.(a), D.6.(c), D.7.(a), D.7.(b), or D.7.(c) of this Award Agreement, are discharged for Cause, or the Company discovers after your Termination Date that grounds existed for Cause as of your Termination Date, all Option shares, whether presently exercisable or not, will immediately lapse and become null and void on and as of the earlier of (a) your Termination Date, (b) or if applicable, the date of such violation of Section D.6.(a), D.6.(c), D.7.(a), D.7.(b), or D.7.(c).
3.Change in Control. All unvested options will vest immediately upon your termination of employment without Cause within twelve (12) months following the occurrence of a Change in Control and will remain exercisable until the Expiration Date.
4.Exercise of the Option. You may exercise the vested portion of your Option in whole or in part (but in no event with respect to a fractional share) from time to time until the Expiration Date. In order to exercise your Option, you must provide written notice of exercise to the Company, specifying the number of shares to be purchased, the Option Price of each share, and the aggregate Option Price for all shares being purchased under such Option. This notice must be accompanied by payment of the aggregate Option Price for the number of shares purchased. Such exercise (subject to Section D.5. hereof) will be effective upon the actual receipt of such payment and notice to the Company. The aggregate Option Price for all shares purchased pursuant to an exercise of the Option may be paid by check payable to the order of the Company or shares of Common Stock held by you for at least six (6) months, the fair market value of which at the time of such exercise is equal to the aggregate Option Price (or portion thereof to be paid with previously owned shares of Common Stock). In addition, the aggregate Option Price for all shares purchased pursuant to your exercise of the Option may be paid from the proceeds of sale through a bank or broker on the date of exercise of some or all of the shares to which the exercise relates. Payment of the Option Price in shares of Common Stock may be made by delivering properly endorsed stock certificates to the Company or otherwise causing such Common Stock to be transferred to the account of the Company, either physically or through attestation. The Company may, in its discretion, require that you furnish, along with the notice of exercise, such documents as the Company deems necessary to assure compliance with applicable rules and regulations of any stock exchange or governmental authority. No rights or privileges of a shareholder of the Company in respect to such shares issuable upon the exercise of any part of the Option will accrue to you unless and until such shares have been registered in your name.
5.Transferability. Except as otherwise provided in the Plan, the Option may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner, other than by will or under the laws of descent and distribution, whether by the operation of law or otherwise. An option may be exercised, during your lifetime, only by you or your legal representative. You may, however, transfer the Option, in whole or in part, to a spouse or
lineal descendant (a “Family Member”), a trust for the exclusive benefit of you and/or your Family Members, a partnership or other entity in which all the beneficial owners are you and/or your Family Members, or any other entity affiliated with you that may be approved by the Committee. Upon any attempt to do anything prohibited by this paragraph, the Option will immediately become null and void.
B.PERFORMANCE-BASED RESTRICTED STOCK TERMS AND CONDITIONS
1.Restrictions. To the extent not previously forfeited as provided in Section B.2., the Restricted Shares will vest and become transferable as follows: 50% of the shares granted will vest and become transferable upon the 30th month anniversary of the Grant Date; and 50% of the shares granted will vest and become transferable upon the 60th month anniversary of Grant Date, provided that if Company operating profit (as defined under the Company’s Management Incentive Plan), for the fiscal year in which this Award is granted, is less than 90% of the target operating profit under the Company’s Management Incentive Plan in which you participate for such fiscal year, as certified by the Committee, all Restricted Shares granted to you pursuant to this Award will be forfeited on the date of such certification by the Committee. Restricted Shares that have not vested may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated.
2.Change in Employment Status or Change in Control; Termination for Cause. If (a) your employment with the Company terminates for reasons other than death, Disability, or Retirement, (b) you violate Section D.6.(a), D.6.(c), D.7.(a), D.7.(b), or D.7.(c) of this Award Agreement, or (c) your employment is terminated for Cause, then all Restricted Shares granted to you pursuant to this Award that have not yet become vested and transferable as of your Termination Date will be immediately forfeited. Upon attaining Retirement Eligibility, all unvested Restricted Shares will continue to vest in accordance with the vesting conditions set forth in Section B.1. of this Award Agreement, provided that a sufficient number of shares will vest at the time your Restricted Shares become taxable to cover applicable tax withholding required pursuant to Section D.2.; further provided, that if after attaining Retirement Eligibility, you violate Section D.6.(a), D.6.(c), D.7.(a), D.7.(b), or D.7.(c) of this Award Agreement, are discharged for Cause, or the Company discovers after the termination of your employment that grounds existed for Cause at your Termination Date, all unvested Restricted Shares (including shares that are continuing to vest as provided above) will be immediately forfeited. Notwithstanding any other provision of this Award Agreement, in the event the Company terminates your employment without Cause within twelve (12) months after a Change in Control, or in the event of employment termination on account of your death or Disability, any unvested Restricted Shares will immediately vest and become transferable by you or your estate.
3.Establishment of an Account. Within a reasonable time after the date of this Award, the Company will instruct its broker to establish an account representing the Restricted Shares in your name effective as of the Grant Date, provided that the Company will retain control of such account until the Restricted Shares have become vested in accordance with the Award.
4.Shareholder Rights. Upon the effective date of the account entry pursuant to Section B.3., you will have all of the rights of a shareholder with respect to the Restricted Shares, including the right to vote the shares and to receive all dividends or other distributions paid or made available with respect to such shares, provided, however, that prior to a certification by the Committee that the Company has achieved the operating profit target set forth in Section B.1., all dividends will be accumulated, and upon such certification, will be paid to you in cash, without interest, within 90 days following such certification. Notwithstanding the foregoing, any stock dividends or other in-kind dividends or distributions will be held by the Company until the related Restricted Shares have become vested in accordance with this Award and will remain subject to the forfeiture provisions applicable to the Restricted Shares to which such dividends or distributions relate.
5.Transferability. Except as otherwise provided in this Section B., the Restricted Shares cannot be sold, pledged, assigned, hypothecated, transferred or disposed of in any manner, whether by the operation of law or otherwise. Subsequent transfers of the Restricted Shares will be prohibited except in accordance with this Section B. Any attempted transfer of the Restricted Shares prohibited by this Section B.5. will be null and void.
C.PERFORMANCE SHARE TERMS AND CONDITIONS
1.Performance Vesting.
(a) Average Operating Profit. Up to <XX>% of the Performance Share Target Award may be earned upon achievement of the Average Operating Profit target for the Performance Period. Each year’s actual target value will be set following the conclusion of the prior year by applying the pre-approved target growth rates, shown below, to actual results and calculating the next year’s target. Each year’s performance against target will be calculated and actual performance for each of the three years will be averaged for use in calculating the payout percentage.
| Prior Year Actual | Fiscal Year 1 | Fiscal Year 2 | Fiscal Year 3 | |||||||||||
| Operating Profit $ (% vLY) | [$ in Millions] | [ -- ] | [ -- ] | [ -- ] | ||||||||||
| Average Operating Profit | Threshold (<XX>% of Target) | Target | Maximum (<XX>% of Target) | ||||||||
| Payout as a % of Target | <XX>% | <XX>% | <XX>% | ||||||||
The Committee will certify Average Operating Profit and vest any earned Performance Shares as soon as administratively practical, but not later than the 90th day following the end of the Performance Period. The percentage of the Performance Share Target Award earned between Threshold and Target and Target and Maximum is based on interpolation.
(b) Average ROIC. Up to <XX>% of the Performance Share Target Award may be earned upon achievement of the Average ROIC target for the Performance Period. Each year’s actual target value will be set following the conclusion of the prior year by applying the pre-approved target growth rates, shown below, to actual results and calculating the next year’s target. Each year’s performance against target will be calculated and actual performance for each of the three years will be averaged for use in calculating the payout percentage.
| Prior Year Actual | Fiscal Year 1 | Fiscal Year 2 | Fiscal Year 3 | |||||||||||
| ROIC % (bps vLY) | [%] | [ -- ] | [ -- ] | [ -- ] | ||||||||||
| Average Operating Profit | Threshold (<XX>% of Target) | Target | Maximum (<XX>% of Target) | ||||||||
| Payout as a % of Target | <XX>% | <XX>% | <XX>% | ||||||||
The percentage of the Performance Share Target Award earned between Threshold and Target and Target and Maximum is based on interpolation. The Committee will certify Average ROIC and vest any earned Performance Shares as soon as administratively practical, but not later than the 90th day following the end of the Performance Period.
2.Delivery of Shares. The number of shares of Common Stock that you earn under this Section C. will be delivered to you as soon as administratively practicable, but not later than the 90th day following the end of the Performance Period. Before such delivery, the Committee will certify in writing the number of Performance Shares that you have earned. No fractional shares will be delivered pursuant to this Award and any fractional shares earned will be paid in cash.
3.Employment Termination. If (a) your employment with the Company terminates during the Performance Period for reasons other than death, Disability, or Retirement as provided in Section C.4. below, (b) you violate Section D.6.(a), D.6.(c), D.7.(a), D.7.(b), or D.7.(c) of this Award Agreement, or (c) your employment is terminated for Cause, then this Performance Share award will be immediately forfeited.
4.Death, Disability or Retirement; Termination for Cause. If your employment with the Company terminates during the Performance Period, because of your death, Disability, or Retirement, in each case at or after Retirement Eligibility, you will be entitled to all of the Performance Shares earned in accordance with Section C.1., determined at the end of the Performance Period. Such shares will be delivered to you (or your estate) as soon as administratively practicable, but not later than December 31, after the end of the Performance Period. If your employment with the Company terminates during the Performance Period due to your death or Disability before Retirement Eligibility, you will be entitled to a prorated portion of the Performance Shares earned in accordance with Section C.1., determined at the end of the Performance Period and based on the ratio of the number of days you are employed during the Performance Period to the total number of days in the Performance Period. Such payments will be paid to you (or your estate) as soon as administratively practicable, but not later than December 31, after the end of the Performance Period. Notwithstanding the foregoing, if you violate Section D.6.(a), D.6.(c), D.7.(a), D.7.(b), or D.7.(c) of this Award Agreement, are discharged for Cause, or the Company discovers after the termination of your employment that grounds existed for Cause as of your Termination Date, then all Performance Shares will be immediately forfeited.
5.Change in Control. Unless previously forfeited, the Performance Share award will vest upon your termination of employment without Cause, as defined below, within twelve (12) months following the occurrence of a Change in Control in that number of Performance Shares determined as follows: (i) the number of Performance Shares that would have been earned under Section C.1., treating the date of the Change in Control as the last day of the Performance Period and prorating the Performance Share award based on the ratio of the number of days during the Performance Period before the Change in Control to the total number of days in the Performance Period absent such Change in Control; plus (ii) the number of Performance Shares representing the Performance Share Target Award and prorating the Performance Share Target Award based on the ratio of the number of days during the Performance Period after the Change in Control to the total number of days in the Performance Period absent such Change in Control. As soon as administratively practicable, but not later than the 90th day after your Termination Date, the Company will deliver to you one share of Common Stock for each such vested Performance Share, which payment will be in lieu of any payment under Section C.1.
6.Transferability. The Performance Shares may not be sold, pledged, assigned, hypothecated, transferred or disposed of in any manner, whether by the operation of law or otherwise. Any attempted transfer of the Performance Shares prohibited by this Section C.6. will be null and void.
7.Adjustment for Dividends. Upon the payment of any cash dividend on the Common Stock before the Company’s broker establishes an account in your name representing the earned Performance Shares, the number of performance shares will be increased by the number obtained by dividing (x) the aggregate amount of the dividend that would be payable if each Performance Share were issued and outstanding and entitled to dividends on the dividend payment date, by (y) the closing stock price of the Common Stock on the dividend payment date.
8.Performance Share Definitions.
a)“Average Operating Profit” means the Company’s average Operating Profit for the Performance Period, determined by adding the Operating Profit for each fiscal year during the Performance Period (based on each year’s respective weeks basis commencing at the start of the fiscal year) and dividing by three.
b)“Average ROIC” means the Company’s average ROIC for the Performance Period, determined by adding the ROIC for each fiscal year during the Performance Period (based on each year’s respective weeks basis commencing at the start of the fiscal year) and dividing by three.
c)“Operating Profit” means, for any fiscal year, “operating profit” as defined by the Committee for the Company’s Management Incentive Plan for that fiscal year.
d)“Performance Period” means the Company’s three (3) consecutive fiscal years commencing with the first day of the fiscal year of the Grant Date shown on page one.
e)“Performance Share” means a bookkeeping entry that records the equivalent of one (1) share of Common Stock.
f)“Performance Share Target Award” means that target number of Performance Shares awarded to you pursuant to the cover page of this Award Agreement and which may be earned in accordance with Section C.1.
g)“Performance Share Maximum Award” means that maximum number of Performance Shares awarded to you pursuant to this Award Agreement and which may be earned in accordance with Section C.1., representing 200% of the Performance Share Target Award.
h)“ROIC” means, for a fiscal year, the Company’s return on invested capital, as defined by the Committee during the first 90 days of such fiscal year.
9.Rights Unsecured. You will have only the Company’s unfunded, unsecured promise to pay pursuant to the Performance Share terms. Your rights will be that of an unsecured general creditor of the Company, and you will not have any security interest in any assets of the Company.
D.GENERAL TERMS AND CONDITIONS
1.Limitation of Rights. The granting of this Award will not give you any rights to similar grants in future years or any right to be retained in the employ or service of the Company or interfere in any way with the right of the Company to terminate your employment at any time.
2.Withholding. You are responsible for all applicable federal, state and local income and employment taxes (including taxes of any foreign jurisdiction) which the Company is required to withhold at any time with respect to your Award to satisfy statutory withholding requirements. Such payment will be made by withholding shares of Common Stock then due to be delivered to you. Shares withheld or tendered as payment of required withholding will be valued at the closing price per share of the Common Stock on the date such withholding obligation arises, or if there were no sales on such date, the closing price on the nearest preceding date on which sales occurred.
3.Limitation of Actions. Any lawsuit with respect to any matter arising out of or relating to this Award must be filed no later than one (1) year after the date that the Company and/or its affiliates denies your claim or any earlier date that the claim otherwise accrues.
4.Adjustments. The Award will be subject to adjustment or substitution in accordance with Section 12 of the Plan.
5.Delivery of Shares. The Company will not be required to deliver any shares, or establish an account representing such shares, pursuant to this Award if, in the opinion of counsel for the Company, such issuance would violate (i) the Securities Act of 1933 or any other applicable federal, state or foreign laws or regulations; or (ii) the requirements of any stock exchange or authority upon which the securities of the Company may then be listed or traded. Prior to the issuance of any shares pursuant to this Award, the Company may require that you (or your legal representative upon your death or Disability) enter into such written representations, warranties and agreements as the Company may reasonably request in order to comply with applicable securities laws or with this Award Agreement.
6.Your Obligations to the Company Regarding the Handling of Confidential Information, Trade Secrets, and Work Product.
a.Protection of Trade Secrets and Confidential Information of the Company. You acknowledge that through your employment with the Company, you will acquire and have access to Confidential Information of the Company. You agree to use any Confidential Information of the Company that you acquire or have access to only for the purpose of conducting and completing your duties for the Company. You agree not to use any Confidential Information of the Company in any other manner or for any other purpose. You agree that you will not disclose any Confidential Information to any third party, other than as required for the purpose of conducting or completing your duties for the Company, subject to obtaining the appropriate approvals and implementing appropriate safeguards, and you further agree to return all documents or any other item or source containing Confidential Information or any other property of the Company, to the Company immediately upon termination for any reason of your employment with the Company. This obligation shall remain in effect, both during and after your employment, for as long as the information or materials you have acquired or to which you have access retain their status as Confidential Information. This Award Agreement is not intended to, and does not, alter either the Company’s rights or your obligations under any state or federal statutory or common law regarding trade secrets and unfair trade practices. You agree that the Company may prevent the use or disclosure of its Confidential Information through use of an injunction or other means and acknowledge that the Company has taken reasonable steps necessary to protect the secrecy of the Confidential Information.
b.Non-Interference with Protected Rights. Notwithstanding anything to the contrary in this Award Agreement (including but not limited to other provisions of Section D.6. or Section D.7.), or any other agreement between you and the Company, or any provision of any Company code of conduct, employee manual, policy, or similar Company document, you have the right to: (i) report, file a charge, or otherwise respond or provide information to or cooperate with an investigation into possible violations of state or federal laws or regulations within the jurisdiction of any governmental agency or entity, including but not limited to the U.S. Congress, the Department of Justice, the Securities and Exchange Commission (“SEC”) and/or its Office of the Whistleblower (www.sec.gov/whistleblower; Office of the Whistleblower Hotline at 202-551-4790), the Commodities Futures Trading Commission, any other similar office of a federal or state agency, or to the Equal Employment Opportunity Commission or any other governmental agency that investigates or enforces employment discrimination laws; (ii) report (either with or without a lawyer) possible violations of the federal securities laws or regulations to any governmental agency or entity, either anonymously or otherwise; (iii) make disclosures that are protected or required under the whistleblower provisions or other provisions of any relevant federal, state or local law or regulation; (iv) cooperate voluntarily with, or respond to any inquiry from, or provide testimony before, the SEC, or any other federal, state or local regulatory or law enforcement authority; (v) make any reports or disclosures to law enforcement or regulatory authorities, or otherwise take any of the actions described in this Section 6(b), all without prior authorization of, or notice to, the Company; (vi) use Company confidential information in making reports or disclosures, or taking any other action, described in this Section 6(b); or (vii) receive a whistleblower award or other monetary payment from a federal government agency for reporting information to such agency. For the avoidance of doubt, nothing in this agreement prevents you from discussing or disclosing information about unlawful acts in the workplace to a government agency, such as harassment or discrimination or any other conduct that you have reason to believe is unlawful.
Pursuant to 18 U.S.C. § 1833(b), nothing in this Award Agreement shall be interpreted to expose you to criminal or civil liability under Federal or state trade secret law for disclosure, in confidence, of trade secrets (i) to Federal, state, and local government officials, directly or indirectly, or to an attorney, solely for the purpose of reporting or investigating a suspected violation of law, or (ii) in a complaint or other document filed in a lawsuit or other proceeding, provided the filing is made under seal and otherwise protected from disclosure except pursuant to court order. If you file a lawsuit for retaliation for reporting a suspected violation of law, you may disclose trade secrets to your attorney and use the trade secret information in a court proceeding, provided that you file any document containing the trade secret under seal and you do not otherwise disclose the trade secret, except pursuant to court order.
c.Ownership of “Work Product”. You acknowledge and agree that any new work product, including without limitation concepts, designs, notes, reports, documentation, drawings, computer programs (source code, object code, and listings), ideas, inventions (whether or not patentable), trade secrets, improvements, creations, scientific and mathematical models, writings, works, works of authorship (whether or not copyrightable), theses, books, lectures, illustrations, devices, masks, models, work-in-process, photographs, pictorial, graphical or audiovisual works or sound recordings or video recordings, prints, and deliverables, and any other subject matter which is or may become legally protectable or recognized as a form of property, and all materials contained therein and prepared in connection therewith and/or therefrom, whether in draft or final form (collectively, “Work Product”), which are designed, created, conceived, developed or reduced to practice, writing, or publication by you, either solely or jointly with others, during your employment with the Company, which relate to or are useful in the Company’s business, or which derive in any way from using Company property, shall be considered works made for hire and shall be owned by, and deemed the exclusive property of, the Company. Without in any way limiting the foregoing, and without any further compensation, in the event that it is determined that any Work Product does not qualify as a work made for hire or that it is not otherwise owned by the Company, you agree to assign and do hereby assign to the Company, your right, title, and interest in and to any Work Product, whether now existing or created in the future, that arises from your employment with the Company, or that derives in any way from using Company property. You further agree to execute any additional documents that the Company deems, in its sole discretion, necessary to vest ownership of Work Product with the Company or perfect such intellectual property rights in the United States and any other jurisdiction worldwide.
d.Protection of Information that Belongs to Others. You understand that it is not the intention of the Company to receive or obtain any trade secrets, proprietary information, or other confidential information of others. Accordingly, you agree that you will not disclose or use during or in connection with your employment with the Company any trade secrets, proprietary information, or confidential information to which you may have been exposed or that you may have acquired in connection with your prior employment or engagement as an independent contractor or consultant. Further, you agree that you will not bring the Company any documents or materials in any form containing trade secrets, proprietary information, or confidential information from a prior employer, client, or customer.
7.Post-Employment Restrictive Covenants.
a.Non-Competition. By accepting these Awards, you acknowledge and agree that, as a key executive of the Company, you will receive specialized training and Confidential Information regarding, among other things, the Company’s operations, services, information technology, computer systems, marketing, advertising, e-commerce, interconnected retail, technical, financial, human resources, personnel, staffing, payroll, information about employee compensation and performance, merchandising, pricing, strategic planning, product, vendor, supplier, customer or store planning data, construction, data security information, private brands, supply chain, and/or other business processes, and that you have been and will be provided and entrusted with access to the Company’s customer and employee relationships and goodwill. You further acknowledge that such Confidential Information, including trade secrets and other business processes, are utilized by the Company throughout the entire United States and in other locations in which it conducts business. You further acknowledge and agree that the Company’s Confidential Information, customer, service provider, vendor and employee relationships, and goodwill are valuable assets of the Company and are legitimate business interests that are properly subject to protection through the covenants contained in this Award Agreement. Consequently, you agree that during the Restricted Period you shall not, directly or indirectly, enter into or maintain an employment, contractual or other business relationship, in the United States, Canada, or Mexico, in which you:
(A)own an equity interest in a Competitor greater than one percent (1%) of its outstanding equity;
(B)manage, operate, finance, or control a Competitor; or
(C) provide services or perform duties for a Competitor that
(i) are the same as or similar to the services or job duties you performed for the Company at any point during the two-year period prior to your Termination Date, or
(ii) involve executive, managerial, financial, or other significant leadership responsibilities.
b.Non-Solicitation of Company Employees. You agree that during the Non-Solicitation Period, you will not directly or indirectly, on your own behalf or on behalf of any other entity or person, Solicit in the Territory any person who is, or during the last twelve (12) months of your employment with the Company was, an employee of the Company, with whom you had material contact during your employment, or with respect to whom you obtained or had authorized access to Confidential Information while employed with the Company, to terminate his or her employment or other relationship with the Company, or to refer any such employee to anyone, without the prior written approval from the Executive Vice President - Human Resources. For purposes of this paragraph, “Solicit” shall include any solicitation, enticement, or encouragement whatsoever, regardless of which party initiated the initial contact, as well as any direct or indirect involvement in the recruitment, referral, interviewing, hiring, or setting of the initial terms and conditions of employment.
c.Cooperation. Except as provided in Section 6(b), you agree that you will reasonably cooperate with the Company during and after your employment with the Company in any internal or external investigation or in the defense or prosecution of any threatened, pending, or future claim, dispute, litigation, arbitration, or other legal proceeding (collectively, “claims or actions”) that relates to any events or occurrences that occur or occurred during your employment with the Company or about which you may have knowledge or information by virtue of your employment with the Company. Your reasonable cooperation in connection with claims or actions will include, but not be limited to, participating in conferences with the Company’s outside counsel, members of the Company’s legal department or other Company personnel, participating in interviews, depositions or acting as a witness on behalf of the Company, and responding to any inquiries and providing the Company access to information about claims or actions. Subject to the Company’s prior approval, the Company will reimburse you for reasonable out-of-pocket expenses incurred by you in complying with this Section. You understand that you would not be compensated for the substance of your testimony.
d.Remedies for Breach.
i.Injunctive Relief. You acknowledge and agree that quantifying the damages suffered by the Company for your breach of Section D.6.(a), D.6.(c), D.7.(a), D.7.(b), or D.7.(c), might not be possible or feasible, or provide adequate compensation to the Company at law and that the balance of the hardships tips in favor of enforcing such section(s). You agree that the Company shall be entitled, if any such breach shall occur or be either threatened or attempted, if it so elects, to seek from a court a temporary, preliminary, and permanent injunction, without being required to post a bond, enjoining and restraining such breach or threatened or attempted breach.
ii.Liquidated Damages. Because of the potential difficulty in quantifying damages that the Company may suffer in the event of a breach by you of Section D.6.(a), D.6.(c), D.7.(a), D.7.(b), or D.7.(c) you and the Company agree that it is appropriate to reasonably estimate such damages in advance and set an amount of liquidated damages that you will owe the Company in the event of a breach. Accordingly, after due consideration, you and the Company agree that, if you breach Section D.6.(a), D.6.(c), D.7.(a), D.7.(b), or D.7.(c) you shall pay the Company, upon demand, an amount specified by the Company, up to the sum of the then-current market value of the shares of Common Stock granted under this Award Agreement and the aggregate after-tax proceeds you received upon the sale or other disposition of any shares of Common Stock granted under this Award Agreement.
iii.Other Remedies. In addition to any and all other remedies at law or equity, including monetary damages, liquidated damages, and the return of the consideration under this Award Agreement as restitution, the Company shall be entitled to recover its reasonable attorney fees if it succeeds in obtaining an injunction against you for breach or threatened breach of Section D.6.(a), D.6.(c), D.7.(a), D.7.(b), or D. 7.(c), or otherwise proving in court that you violated any provision of Section D.6.(a), D.6.(c), D.7.(a), D.7.(b), or D. 7.(c).
You acknowledge that the purpose and effect of Section D.7.(a) or D.7.(b) would be frustrated by measuring the duration of the Restricted Period or the Non-Solicitation Period from your Termination Date if you were to fail to honor your obligation(s) until directed to do so by court order. Should legal proceedings be initiated by the Company to enforce Section D.7.(a), Section D.7.(b), or D.7.(c), the commencement of the Restricted Period or the Non-Solicitation Period shall be tolled and extended and will instead begin on the date of the entry of an order granting the Company injunctive, monetary or other relief from your actual or threatened breach of this Agreement.
You further agree to waive and not assert any claim for advancement of legal fees, costs, or expenses pursuant to the Company’s by-laws or based on other authority in the event the Company initiates a legal action against you for violation of Section D.6.(a), D.6.(c), D.7.(a), D.7.(b), or D. 7.(c).
e.Reasonableness of Restrictions. You acknowledge and agree that each of the covenants in this Award Agreement is reasonable, appropriate, and narrowly tailored to protect the Company’s legitimate interests, including but not limited to protecting the Company’s Confidential Information, and that your full compliance with such restrictions will not unduly or unreasonably interfere with your ability to obtain and undertake other gainful future employment. You and the Company acknowledge and agree that there are a number of unique circumstances that provide the Company with protectable interests that justify and necessitate the 24-month Restricted Period in Section E.11 and the 36-month Non-Solicitation Period in Section E.10. As one of the Company’s senior-most officers, you will be involved in developing, and have unique access to, the Company’s Confidential Information, including its plans and strategies for the business, personnel leadership, talent management, and succession. This involvement and access enables you to learn information about the skills, capabilities, strengths, and weaknesses of Company personnel, as well as information about their compensation, bonuses, and performance, and Company plans and strategies for same. In addition, your senior position at the Company provides you with unique and special access to the Company’s non-public business plans, strategies, and methods. Furthermore, your role with the Company enables you to utilize the Company’s goodwill to develop relationships with subordinate employees throughout the Company.
Accordingly, you agree that these and other facts and circumstances associated with your position justify the scope and duration of the restrictions in Sections D.7.(a) and D.7.(b). You further agree that, with respect to the 36-month Non-Solicitation Period in Section D.7.(b), the above facts and circumstances are sufficient to overcome any presumption of unreasonableness under the Georgia Restrictive Covenant Act, O.C.G.A. § 13-8-50 et seq., for restrictions lasting longer than 24 months.
With respect to Section D.7.(a), in the event you wish to enter into any relationship or employment on or before the end of the Restricted Period that would potentially violate the restrictions in Section D.7.(a), you agree to request written permission from the Company’s Executive Vice President, Human Resources before entering any such relationship or employment. The Company may approve or not approve of the relationship or employment at its absolute discretion.
You and the Company agree that the amounts set forth in Section D.7.(d)(ii) for a breach of Section D.6.(a), D.6.(c), D.7.(a), D.7.(b), or D. 7.(c) shall represent a fair and reasonable measure of the Company's estimated damages for your breach, shall be deemed to have been fully negotiated and established bilaterally by you and the Company through such negotiations, and shall not constitute a penalty.
If you are a practicing lawyer, nothing in Section D.7(a) shall apply in a way that would interfere with or limit your ability to represent any client in the practice of law.
In the event that any or all of the Awards in this Award Agreement are forfeited or fail to vest, regardless of the reason, you and the Company agree that this Award Agreement shall remain supported by adequate consideration for your promises and obligations herein, including those in Section D.6.(a), D.6.(c), D.7.(a), D.7.(b), or D. 7.(c).
f.Reformation, Severability, and “Blue-Penciling.” If any of the provisions of Section D.6.(a), D.6.(c), D.7.(a), D.7.(b), or D. 7.(c) should ever be held by a court of competent jurisdiction to exceed the scope permitted by applicable law, you agree such provision or provisions shall first be modified to such lesser scope as the court may deem just and proper for the reasonable protection of the Company’s legitimate business interests. In the alternative, if modification is not available, you and the Company agree that the court may sever such provision from this Award Agreement and enforce the remaining provisions. If the amounts set forth in Section D.7.(d)(ii) should be deemed for any reason by a court of competent jurisdiction not to constitute a permissible liquidated damage, you and the Company agree that the court may establish a liquidated damage in such lesser amount that is in accordance with applicable law.
8.Severability. If any term, provision, covenant or restriction contained in the Award Agreement is held by a court or a federal regulatory agency of competent jurisdiction to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions contained in the Award Agreement will remain in full force and effect, and will in no way be affected, impaired or invalidated.
9.Controlling Law. This Award will be construed, interpreted and applied in accordance with the law of the State of Georgia, without giving effect to the choice of law provisions thereof. You agree to irrevocably submit any dispute arising out of or relating to this Award to the exclusive jurisdiction of the Atlanta Division of the U.S. District Court for the Northern District of Georgia, or, if federal jurisdiction is not available, the Superior Court of Cobb County, Georgia. You also irrevocably waive, to the fullest extent permitted by applicable law, any objection you may now or hereafter have to the laying of venue of any such dispute brought in such court or any defense of inconvenient forum for the maintenance of such dispute, and you agree to accept service of legal process from the courts of Georgia. You agree to accept service of process by mail or by any other means sufficient to ensure that you receive a copy of the items served.
10.Construction. The Award Agreement and the Plan contain the entire understanding between the parties with respect to this Award. There are no other representations, agreements, arrangements or understandings, oral or written, between and among the parties hereto relating to this Award which are not fully expressed herein.
11.Headings. Section and other headings contained in the Award Agreement are for reference purposes only and are in no way intended to describe, interpret, define or limit the scope, extent or intent of the Award Agreement or any provision hereof.
12.Disclaimer of Rights. Nothing contained herein will constitute an obligation for continued employment.
13.Offset. The Company may deduct from amounts otherwise payable under this Award all amounts owed by you to the Company and its affiliates to the maximum extent permitted by applicable law.
14.Terms of Plan. The Award is subject to the terms and conditions set forth in the Plan, which are incorporated into and will be deemed to be a part of this Award Agreement, without regard to whether such terms and conditions (including, for example, provisions relating to certain changes in capitalization of the Company) are otherwise set forth in this Award Agreement. In the event that there is any inconsistency between the provisions of this Award Agreement and of the Plan, the provisions of the Plan will govern.
15.Code Section 409A Compliance. To the extent applicable, it is intended that this Award and the Plan not be subject to, or alternatively comply with, the provisions of Code Section 409A, so that the income inclusion provisions of Code Section 409A(a)(1) do not apply. This Award and the Plan will be interpreted and administered
in a manner consistent with this intent, and any provision that would cause the Award or the Plan to fail to satisfy Code Section 409A will have no force and effect until amended to comply with Code Section 409A (which amendment may be retroactive to the extent permitted by Code Section 409A and may be made by the Company without your consent).
16.Notice. Any written notice required or permitted by this Award Agreement must be mailed, certified mail (return receipt requested) or hand-delivered, addressed to Company’s Executive Vice President – Human Resources at Company’s corporate headquarters at 2455 Paces Ferry Road, Atlanta, Georgia 30339-4024, or to you at your most recent home address on record with the Company. Notices are effective upon receipt.
E.AWARD DEFINITIONS
As used herein, the following terms will be defined as set forth below:
1.“Board” means the Company’s Board of Directors.
2.“Cause” means a finding by the Company that you have (i) committed any felony or committed a misdemeanor involving theft or moral turpitude, (ii) committed any act or omission that constitutes neglect or misconduct with respect to your employment duties which results in economic harm to the Company, (iii) violated the Company’s code of conduct (including, but not limited to, policies prohibiting sexual harassment, discrimination, workplace violence, or threatened violence), (iv) violated any of the Company’s substance abuse, compliance or any other policies applicable to you, which may be in effect at the time of the occurrence, or (v) breached any material provision of any offer letter, award agreement, employment, non-competition, intellectual property or other agreement, in effect at the time of the breach, between you and the Company.
3.“Code” means the Internal Revenue Code of 1986, as amended.
4.“Committee” means the Leadership Development and Compensation Committee of the Board.
5.“Common Stock” means the Company’s $.05 par value common stock.
6.“Competitive Products or Services” means anything of commercial value of the type offered, provided or sold by the Company, in the United States, Canada, or Mexico, within two (2) years prior to your Termination Date and during the Restricted Period, including, without limitation: goods; personal, real, or intangible property; services; financial products; business opportunities or assistance; or any other object or aspect of business conducted or provided by Company.
7.“Competitor” shall mean:
(X) the following companies or entities, including their subsidiaries, affiliates, franchisees, or business units: Lowe’s Companies, Inc.; Amazon.com; Menard, Inc.; Floor & Décor; Canadian Tire; Wayfair; and Walmart Inc.;
(Y) any company or entity that sells or offers Competitive Products or Services that, in combination with its subsidiaries, affiliates, franchisees, or business units (a) operates more than 100 retail outlets across the United States, Canada, and Mexico or (b) generates more than $500 million in annual revenue; or
(Z) any company or entity that is formed through, or as a result of, a sale, merger, combination, renaming, restructuring, spin-off, or other corporate transaction involving a business or entity defined in clause (X) or (Y) of this sentence, and which sells Competitive Products or Services.
8.“Confidential Information” means any data or information that belongs and is valuable to the Company and not generally known to competitors of the Company or other outsiders, regardless of whether the Confidential Information is in printed, written or electronic form, retained in your memory or has been compiled or created by you, including but not limited to information related to: operations, services, information technology, computer systems, marketing, advertising, e-commerce, interconnected retail, technical, financial, human resources,
personnel, staffing, payroll, information about employee compensation and performance, merchandising, pricing, strategic planning, product, vendor, supplier, customer or store planning data, construction, data security information, private brands, supply chain, or other information similar to the foregoing. For the avoidance of doubt, Confidential Information does not include your general training, knowledge, skill, or experience gained during your employment with the Company.
9.“Disability” means that you have been found to be “Disabled” by the Company’s long-term disability carrier or third-party administrator, or if you are not a participant in the Company’s long-term disability plan, under the criteria used by the Company’s long-term disability plan.
10.“Non-Solicitation Period” shall mean the period during which you are employed with the Company and for a period of thirty-six (36) months following your Termination Date.
11.“Restricted Period” shall mean the period during which you are employed with the Company and for a period of twenty-four (24) months following your Termination Date, regardless of the reason for such termination.
12.“Retirement” means termination of employment, other than for Cause, with the Company on or after your attainment of age 60 and having at least five (5) years of continuous service with the Company.
13.“Retirement Eligibility” means attainment of age 60 and completion of at least five (5) years of continuous service with the Company.
14.“Termination Date” means the date of your termination of employment or separation from employment with the Company, as shown in the Company’s payroll records.
15.“Territory” means the United States.
Exhibit 31.1
CERTIFICATION
I, Edward P. Decker, certify that:
1.I have reviewed this quarterly report on Form 10-Q of The Home Depot, Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: May 27, 2025
| /s/ Edward P. Decker | ||
| Edward P. Decker | ||
| Chair, President and Chief Executive Officer | ||
Exhibit 31.2
CERTIFICATION
I, Richard V. McPhail, certify that:
1.I have reviewed this quarterly report on Form 10-Q of The Home Depot, Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: May 27, 2025
| /s/ Richard V. McPhail | ||
| Richard V. McPhail | ||
| Executive Vice President and Chief Financial Officer | ||
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of The Home Depot, Inc. (the “Company”) on Form 10-Q (“Form 10-Q”) for the period ended May 4, 2025 as filed with the Securities and Exchange Commission, I, Edward P. Decker, Chair, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:
(1)The Form 10-Q fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)The information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.
| /s/ Edward P. Decker | ||
| Edward P. Decker | ||
| Chair, President and Chief Executive Officer | ||
| May 27, 2025 | ||
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of The Home Depot, Inc. (the “Company”) on Form 10-Q (“Form 10-Q”) for the period ended May 4, 2025 as filed with the Securities and Exchange Commission, I, Richard V. McPhail, Executive Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:
(1)The Form 10-Q fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)The information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.
| /s/ Richard V. McPhail | ||
| Richard V. McPhail | ||
| Executive Vice President and Chief Financial Officer | ||
| May 27, 2025 | ||