Thank you. Good morning, everyone, and welcome to the 2018 Annual Shareholders Meeting. Thank you all for joining us this morning. Before we get started, I'd like to make a few introductions. First, let me start with our board of directors. I'm pleased to introduce them. Hopefully, you all had a chance to meet them this morning. Starting with Gerard Arpey, Ari Bousbib, Jeff Boyd, Frank Brown, Al Carey, Armando Codina, Helena Foulkes, Linda Gooden, Wayne Hewett, Mark Vadon, and our lead director, Greg Brenneman. I'd also like to introduce this morning Stephanie Linnartz, who has been nominated for election to the board today. Welcome. Thank you. I'd also like to take a minute to recognize Karen Katen, who is stepping down from our board today.
Karen Katen has been a member of our board since 2007, and we certainly thank her for her service and dedication to The Home Depot and to our shareholders. Next, I'd like to introduce two members of my senior leadership team who are here with me on stage. First, Carol B. Tomé, our CFO and Executive Vice President of Corporate Services, and Teresa Wynn Roseborough, our Executive Vice President, General Counsel, and Corporate Secretary. Then I'd please ask the other members of our senior leadership team who are present here today to stand, if you would. Thank you. Finally, I'd like to recognize Hector Mojena and Milford McGuirt from KPMG. Thank you for being here. We'll begin today's meeting with the formal business portion of the meeting.
This consists of the election of our directors named in the proxy statement, the ratification of our auditors, as well as consideration of the company's and shareholders' proposals. After that, Carol and I will provide a brief business overview. Then we'll open the floor up for questions. Now, officially, I call the 2018 Home Depot Annual Meeting of Shareholders to order. Teresa is serving as the secretary of the meeting, and Broadridge Investor Communication Solutions is our inspector of elections. As of March 19th, 2018, which is the record date for this meeting, there were approximately 1.15 billion shares of the company's common stock entitled to vote. A majority of these shares is needed for a quorum. Over 87% of these shares are represented today. Therefore we do have a quorum.
Now, if you haven't voted yet and would like to vote today, please raise your hand so that we can give you a ballot. Then we will collect the ballots after all the proposals have been presented. If you've already voted, there's no need to vote again here today. I declare the polls open for voting. There's one over here. Right here in front. Right here in front. Any other needs for ballots? Okay. The first item of business is the election of directors, which is item number 1 on your ballot. The board has nominated the individuals named in the proxy statement to serve for a one-year term through the 2019 annual meeting. Your board recommends that you vote for each of these directors.
The next item is the ratification of the appointment of KPMG as the independent auditors of the company for fiscal 2018. This is item number 2 on your ballot. Your board recommends that you vote for this proposal. The next item is the advisory vote on executive compensation known as Say on Pay, which is item number 3 on the ballot. Specifically, you're being asked to approve the compensation of the company's named executive officers as disclosed in the proxy statement for this meeting. Your board recommends that you vote for this proposal. The next item for consideration is the shareholder proposal regarding the preparation of a semi-annual report for political contributions, which is item number 4 on your ballot. Will the representative of the New York State Common Retirement Fund please step to the microphone and present the proposal? Anybody from the New York State Common Retirement Fund?
Okay. Because this proposal has not been properly presented, according to our bylaws, it doesn't permit us to formally consider it. Now we'll move on to the next proposal. The next item for consideration is the shareholder proposal regarding EEO-1 disclosure, which is item number 5 on your ballot. Will Ms. Lynn Conley, as a representative of the Congregation of the Benedictine Sisters and the other co-proponents, please step to the microphone and present your proposal.
Good morning, Mr. Chair, members of the board and shareholders who are gathered today. I am Lynn Conley, here today representing the Benedictine Sisters from Boerne, Texas. I also represent several members of the Interfaith Center on Corporate Responsibility, who are shareholders and co-filers to this proposal. These groups are long-term shareholders of The Home Depot. Proposal number 5 on the ballot seeks a company review of our company's policies regarding disclosure of equal employment opportunity data, known as EEO-1 data, and public reporting of diversity issues to shareholders. We received 33.65% for last year's proposal, the highest vote this proposal has ever received. Equal employment opportunity is an investment concern. When allegations of discrimination in the workplace burden shareholders with costly litigation and add risk to a company's brand, there is an impact to shareholder value. We contend descriptions don't go far enough to mitigate potential risks.
We mentioned in the resolution that Home Depot has paid out more than $100 million to settle discrimination lawsuits over the past 17 years. Your reports do not give a chart identifying employees by gender and race in each of the EEOC-defined categories. This resolution, which has been filed over the past several years, focuses on the importance of measurement and disclosure of diversity issues to shareholders. To manage diversity, companies have to be able to measure it. That is why we have asked for EEO-1 data, which offers investors a measurement tool. An EEO report is submitted annually by Home Depot to the Equal Employment Opportunity Commission. Providing data to shareholders would not pose an added financial burden. The company actually did provide the information for one year and then stopped.
In the absence of meaningful disclosure, investors cannot fully assess potential risks The Home Depot faces, nor for that matter, fully identify successful diversity efforts. A number of companies make their EEO-1 data available publicly. In 2015, the U.S. Equal Employment Opportunity Commission reported that racial minorities comprise 37.2% of private industry workforce, but just 14.01% of executives and management. We feel this is a bottom-line issue affecting competitiveness and market share. We ask The Home Depot to report diversity disclosure to all stakeholders. In the past, we met with the corporate secretary and others to offer a way forward and make concrete suggestions. We continue to hope that management will take us up on the ideas we presented. Thank you for your time, and we ask you to vote in favor of stockholder proposal number 5.
Thank you very much. Your board recommends that you vote against this proposal. Next item for consideration is the shareholder proposal to reduce the threshold to call a special shareholder meeting to 10% of outstanding shares, which is item number 6 on your ballot. Will Mr. Michael Williams, as a representative of Mr. John Chevedden, please step to the microphone and present the proposal.
Good morning.
Good morning.
Shareholders ask the board of directors to take the steps necessary to amend the bylaws and appropriate governing documents to give the owners of a total of 10% of the outstanding common stock the power to call a special shareholder meeting. Special meetings allow shareholders to vote on important matters, such as electing new directors, that can arise between annual meetings. This proposal topic won more than 70% support at Edwards Lifesciences and SunEdison in 2013. This proposal topic also won 41% support at the 2017 The Home Depot annual meeting. This 41% support could have been higher, for instance, 46%, if small shareholders had the same access to independent corporate governance recommendations as large shareholders.
Given the size of The Home Depot and its large number of shareholders, it would be challenging and expensive for 25% of the shareholders to organize with funds from their own pockets to call for a special meeting, even if there was an overwhelming necessity. The current 25% requirement to call a special shareholder meeting could mean that more than 50% of the shareholders might need to be contacted in a narrow window of time to exercise this important right. This can be almost impossible to accomplish without an enormous budget from the pockets of shareholders. Please vote yes on special shareholder meeting improvement proposal six. Thank you.
Thank you. Your board recommends that you vote against this proposal. The next item for consideration is the shareholder proposal regarding the amendment of the company's compensation claw-back policy, which is item number seven on your ballot. Will Mr. Dan Willett, as a representative of the International Brotherhood of Teamsters General Fund, please step to the microphone and present the proposal.
Thank you. Good morning.
Good morning.
We call for our company to amend its executive compensation oversight to claw back executive compensation to include conduct that may harm our company's reputation and has implications for long-term shareholder value. An example of the kind of risk our executives are exposing our company to is the disconnect between our company's business code of conduct and ethics and its contracting with logistics firms moving products from ships to our company stores. Our business code of conduct and ethics states that vendors and suppliers should be treated with dignity and appropriate respect. Our company is contracting with port trucking companies and a security firm that are not treating workers with dignity and the appropriate respect. USA Today newspaper called the port trucking system that our company uses a modern-day form of indentured servitude.
In a series that was a finalist for a Pulitzer Prize, the newspaper pointed out that operating costs for delivering our company's goods from ships to warehouses to stores has shifted from trucking companies to port drivers who are mislabeled as independent contractors instead of being given permanent jobs with good pay and benefits. Two companies engaged in this fraud are Cal Cartage and NFI Industries. In California, port drivers have been awarded more than $46 million in recovered stolen wages and penalties by the California Labor Commissioner's Office, but this has not stopped the abuse. We are very concerned about this. When you have companies like Cal Cartage that undercut other companies by breaking the law, it means the whole industry suffers. This results in a race to the bottom. We will not stand by and let this happen.
I am joined today by two unionized delivery drivers, Eric Massaro and Kedrix Murray, members of Teamsters Local 728, who want to make sure that their trucking companies are not penalized for doing the right thing by their drivers. Not only are port drivers encountering illegal abusive treatment, but day laborers are being harassed and threatened by our company's security contractor in the Los Angeles area named Point to Point. Many Latinos feel they are being profiled by Point to Point just for having brown skin. Day laborers are de facto part of The Home Depot, playing dual roles of assisting customers in installing their purchases and buying retail products themselves. Our company should treat them with dignity and respect. Soon our company will receive petitions signed by thousands of port drivers and day laborers and their supporters demanding an end to the abuse.
Our executives have let this go on too long. Their pay should be reduced until they exert leadership and correct these problems. Please vote for item seven. Thank you.
Thank you. Your board recommends you vote against this proposal. If you have received and requested a ballot today, please mark your votes accordingly, sign it where it is indicated, and when you've finished, if you would please raise your hand and we will collect the ballots. Okay. The ballots have been collected and the polls are now closed. I'll ask Teresa to review the preliminary voting results.
Thank you, Craig. The preliminary voting results for the company proposals are as follows. All of the director nominees named in the proxy statement have been elected by a majority of the votes cast. Approximately 98% of the votes cast have voted in favor of the ratification of the appointment of KPMG. Approximately 97% of the votes cast have voted in favor of the compensation of the company's named executive officers. As for the shareholder proposals, the shareholder proposal regarding preparation of a semiannual report on political contributions was not properly presented, therefore it was not voted upon at this meeting. Approximately 48% of the votes cast have voted in favor of the shareholder proposal regarding EEO-1 disclosure.
Approximately 44% of the votes cast have voted in favor of the shareholder proposal to reduce the threshold to call a special shareholder meeting, and approximately 44% of the votes cast have voted in favor of the shareholder proposal regarding the amendment of the company's compensation clawback policy. Based on the preliminary vote count, all of the nominees for the board of directors have been elected. The appointment of KPMG as the company's independent auditors for fiscal 2018 has been ratified, and a majority of the votes cast approved our executive compensation. None of the shareholder proposals have been approved. Please note that the ballots collected at the meeting will be verified and tabulated by our Inspector of Elections, and final results of the vote will be available in a Form 8-K, which we will file next week.
This concludes the formal business, I declare that the meeting is adjourned. Now we'll move forward with an overview of our business, after that, we'll take questions that you may have. Now I'd like to ask Carol if she would come up and do a financial overview.
Thank you, Craig. Good morning, everyone. Let me add my welcome to our shareholders. We are glad that you joined us today. It's my pleasure to share with you our financial results for 2017 and our outlook for 2018. Before I do that, I'd like to draw your attention to this chart, as some of our comments may be forward-looking or non-GAAP. With that, let's get started. Fiscal 2017 was a great year for The Home Depot. We reported the highest sales and earnings in our company history. Looking at this chart, you can see that we grew our sales by over $6 billion to $100.9 billion. Our net earnings grew approximately $600 million to $8.6 billion, our diluted earnings per share grew by 13% to $7.29.
Our company continues to generate strong cash flow, we have a disciplined and balanced approach when it comes to allocating our cash. In fiscal 2017, we generated approximately $12.3 billion of cash from the business, we used that cash, as well as $3.3 billion of net debt proceeds to invest $2.3 billion back into the business, pay $4.2 billion of dividends to our shareholders, and repurchase $8 billion of outstanding shares. The power of our company can be seen in our cash flow. Let's look at our outlook for fiscal 2018. We continue to believe that the U.S. home improvement market is healthy. That, coupled with modest GDP growth in the United States, provides continued tailwinds for our business. Fiscal 2018 will include a 53rd week, so the fourth quarter of fiscal 2018 will consist of 14 weeks.
For the year, we expect our sales to grow by approximately 6.7%, with the extra week adding about $1.6 billion in sales. For the year, we expect our total comp, or same-store sales, to grow 5%, we are planning to open three new stores. For earnings per share, we expect our 2018 diluted earnings per share to grow approximately 28% to $9.31. As Craig will detail, while we are accelerating investments in support of our strategic activities, our capital allocation philosophy has not changed. In 2018, we will invest in support of our strategic initiatives while at the same time remaining laser-focused on creating value for you, our shareholders. Part of creating value for our shareholders is paying a dividend. Our dividend has increased double digits every year for the past eight years.
In February, our board announced a 15.7% increase in our quarterly dividend, yielding an annual dividend of $4.12. We are pleased that our business performance and our commitment to return value to our shareholders has yielded a shareholder return over the past five years of approximately 247%. With that, let me turn it back to Craig.
Thank you, Carol. Let me discuss the changing retail environment for a second in which we operate today and what it really means for our strategy going forward. As you can see here, the retail landscape is changing at an unprecedented rate. Matter of fact, there's many that say that there's been more change in the last three years than there has been in the last 10 or 20. Clearly, the customer's engaging in an increased way through the digital channel, but brick and mortar still matters. The way the customer is researching product has changed. Instead of going to a store and browsing in aisles, customers research their product through reviews and ratings online. The level of delivery and fulfillment options that our customers expect in terms of availability has changed drastically as well.
All of these changes have to be reflected and really brought to life in the customer shopping experience. Within the context of this changing retail environment, customer expectations are increasing, for sure, and it's imperative that we address these evolving needs with more increased speed. More customers now expect an improved product delivery process. The shopping experience needs to be tailored to their specific needs, and they're looking for a frictionless checkout experience, whether that's in store or online. What all these changes in terms of the customer experience means for The Home Depot is that we too must evolve, and we must adapt, and we must invest to deliver the best customer experience, no matter how the customer chooses to engage with us.
Now, when I spoke to you last year, I shared with you our two primary objectives that you see here: to grow share with our pro and our consumer, and to deliver on shareholder value. As we move forward, these objectives aren't changing. Now, while our objectives aren't changing, the customer demands and the current retail environment requires us to step up our investments to position ourselves for the future. This chart views really how the customer thinks about The Home Depot as one The Home Depot. Candidly, that's not how we were built. We were actually built in silos, with the store serving as our original platform in the business, as you can see on the far left of this chart. Then adding the online component over the years, but yet still in a siloed capacity, and you see that in the middle of the chart.
In order for us to continue the journey to create the one Home Depot experience, we must de-silo this effort and leverage our scale and invest to drive an interconnected growth. The chart on the right depicts what that looks like in the future. Let's talk about what this means for our investments as we go forward. We will still invest in our physical stores, our associates, product and innovation, in our professional customer, in our services business, and in our supply chain. Underlying all of this is the continued investment in IT to create a seamless one Home Depot experience. All in all, over the next three years, we will invest $11.1 billion in support of creating the one Home Depot. Let me share with you some of our investment plans.
First, when it comes to the physical store, it needs to be a great environment for our customers. Our stores must be completely interconnected to allow us to leverage the scale that we have in our total asset base, which includes the physical real estate as well as our digital properties. We will invest in the physical experience and the capabilities necessary to provide a great one Home Depot interconnected shopping experience. Lots of customers that visit our stores know exactly what they want, and they just want to get in and get out quickly. We are investing in the front-end experience within the stores to facilitate a fast checkout and to drive productivity in the business as well.
Many of our customers choose to pick up the orders that they've created on homedepot.com in our stores, and we will invest in capabilities to make that an easy experience. The Home Depot store is also a hub of complex transactions that take place within home improvement. Think about a plumbing problem or an electrical problem or trying to solve a complex configuration like a kitchen. We will lean into this opportunity by continuing to invest in our associates. Many of these complex transactions have actually required, historically, our employees to have knowledge of burdensome, complex systems. We're investing to simplify those systems for our associates so that those tools can help them provide improved customer service and productivity in support of what we call our first day or universal associate.
Our goal is to make it easier for our associates to serve our customers and provide outstanding experience for them when they're in our stores. Our associates are at the very heart of Home Depot, and we will continue to invest in them. We'll continue to invest in wage, we'll invest in more scheduling flexibility, and we'll invest in tools to drive efficiency. Product is still king, and the art side of the art and science of retail is hugely important. We intend to use our merchants to add value in a curated assortment across channels, as this has been an effective strategy for us to compete against all competition in the past. When we think about selling products, we need to have localization. We need to have speed in the business in terms of bringing product to market, and we will invest to achieve a first-to-market approach.
We'll invest to enhance the digital experience around product to improve search and the selection capability within categories. All of this has to be done within the context of an interconnected experience which we know drives customers to the physical world. The changing demographics in the U.S. offer us an opportunity in our professional customer and in our services business. The aging baby boomers are more frequently looking to have it done for them, and either by hiring a pro or by hiring The Home Depot services to actually do that work for them. Our services business has largely been connected to our physical stores, and what we have to invest in is connecting that business to the digital world, as that is where the shopping experience now begins for that category. Our pro and DIY customers are expecting retailers to adapt to their changing delivery needs.
Our intent will be to leverage the capabilities that we've built in our upstream network while significantly improving our downstream supply chain, leveraging both our scale and our convenient locations. The goal here is to create the fastest, most efficient delivery in home improvement. While our comments today are largely U.S.-centric, the capabilities that we've been discussing here extend into our investments in both Canada and Mexico as well. They are facing exactly the same challenges and changes in the retail environment that we have here in the U.S. We will lean into supply chain, into the digital experience, and creating the interconnected one The Home Depot experience in both those countries as well. Today, I've talked to you about the change and our need to stay ahead of that change.
As we invest in the one The Home Depot experience, I'd also like to share with you what's not changing, and that's our culture. Our culture is the greatest gift that we ever received from our founders, and I truly believe it is a competitive advantage for us in the marketplace. Our culture is represented by these two very powerful symbols. Our values wheel, which guides the decision-making process that we use, and our inverted pyramid, which defines who's most important in our business, and that's our customers and our frontline associates. With that, I'd like to thank you all very much for attending this meeting. Now I'd be happy to take whatever questions you may have. Please step to the mic.
Good morning.
Good morning.
My name is Charles Miller. I'm a long-term stockholder.
Good morning.
As a result of the voting outcomes that you talked about earlier, it seems to me that some of the shareholder proposals are getting an increasingly large measure of support. I would like the board to seriously consider some of those proposals, particularly the EEO situation. You talked largely this morning about investing in associates in your stores. I think an EEO proposal that is adopted by Home Depot will go a long way towards exhibiting the actual support that the board needs to give those associates. The same can be said for the other one relating to the supply situation and distribution. The second point I would like to make is that I would like to see Home Depot create a kind of Waze situation for people coming into the store.
Many times, I would go into The Home Depot and not know where a particular item is. I think if you would consider something like a Waze within the store, it would help people like me get to the point of purchase quickly. Furthermore, if you could accentuate that situation by having an in-store relationship between the product and the purchaser so that they can look at various products and quantify and qualify those items that most meet their needs. Thank you.
Sure. Thank you very much for your comments. Let me address both of those. Let me start with the second one first. What I'd share with you is if you actually go on to homedepot.com, whether that is through mobile web or download our app that we have, we actually show where you can actually find product in our stores. We identify the bay location and aisle within where that product is. You can do that both by typing in, or you can actually do voice search. For example, say, "Where are hammers?" As you're localized to that store, it will show you where that is, it'll come up on a map for you. We're seeing an increased usage of that in a huge way. By the way, we also show you how much inventory we have there. Okay?
On the first comment, thank you again for those comments. We certainly, as a board, will take into account the results and look at our approach going forward considering what has happened with the results for sure. I appreciate your comments on that. Thank you. Next up question. Yes.
Good morning, Craig.
Good morning. How are you?
I'm good. I'm Gary Patton.
Yeah
I'm from store 1104 in Greenville. 26 years with The Home Depot.
Congratulations.
Thank you.
That's awesome.
I pretty much decided for me to use my time and money to come to Atlanta to come to the board meeting or the shareholder meeting, I need to at least stand up and say something. This time I apologize, but I've got quite a bit to say.
Okay.
If you all bear with me, I'm a little nervous, and I'm kind of a country boy. I hadn't really prepared it as well as Charles or any of these presenters did just now. My first question is from the slides earlier. We're going to open, and Carol was talking about three new stores.
Can you give us just a general location? Is that North America or Canada or Mexico?
Yeah. Sure
Mexico?
We opened one in Stamford, Connecticut, just recently. Store, by the way, is off to an unbelievable start. We will open two more in Mexico.
Okay, good.
Yeah.
Second that just came up. On the chart you used, and you showed the two silos and then the conglomeration of everything. Just something I thought of. You had the product number one on the two silos, associates at the bottom. I've been told by, not necessarily you, but I believe you think just the same, our founders and, not Bob, but Frank. Yeah. That he cared a lot about his long-term employees and our opinions. Something I'm going to say here in just a moment, our input, our ability to have knowledge and talents into the company. I would have liked to seen the associates not on the bottom, but underneath the product. That would have been better for me.
No, I appreciate that, Gary. I will tell you, I'm not sure we thought through that chart that way. We were trying to demonstrate that you need to connect all those things-
I understand
You can serve our customers no matter where you're at.
Over on the right-hand side, we were right in the middle.
Yeah.
That was good.
Appreciate it.
Not sure how much more often I'll be able to come back. I was telling our head HR, Mr. Tim, earlier, this is, I think, my 20th shareholder.
Wow.
I think it's between 16 and 20. I didn't want to mislead him. I wanted to thank Arthur last year. I mentioned I needed his signature in my Built from Scratch. He took care of that. I sent him the book. He got it back to me. I appreciate that. I want to thank you for buying my lunch last year when I wanted to go take a tour. The two fine ladies that gave me a great tour of the museum.
Awesome.
I still have a missing pair of shoes that I donated for the museum that they don't know where they're at, and they didn't get put up. I'd like to have those back if they ever show up again.
Okay. We got a note on that.
A good friend of mine in Greenville keeps saying, "Hey, did you get your shoes back?" Tim said he could help me get Ken Langone's signature. It's the only one left in the book. I have yours.
We can make that happen.
Many authors and Ken just wrote a book. I learned yesterday.
Yes
that he loves capitalism. I love capitalism. I think it's the best form of economics in the world. I know there's some detractors out there. I've been reading some things on the internet. It's the best thing. Mr. Bottoms, I wanted to congratulate him and your new mayor. These are things that have gone and Go Braves. Braves has been doing great here lately. I watched in the SMM video that you had on the homepage. Dave, I met him last year, and he had a great video on his product walks. I think that was a great thing. You had a video, unscripted, that just came out this year. I wanted to congratulate you on that.
Thank you.
Someone who's not around anymore, who I had a good relationship with, Steve McKelvey. Met him a number of times at the meeting and a couple of times talked to him, he helped me with one of my ideas that came up one time about the American flag. That got implemented, and I got credit, that was when Frank was CEO, in the homepage. I wanted to thank that. I wanted to tell you a little bit about my rewarding before I get to the meat of my question. Career here at Home Depot, just thank you for all that old-timers have meant to me and officers and people here. I've been with Home Depot 26 years, and on the clock, I've worked in approximately 30 stores.
Wow
doing resets, inventory prep, grand openings, closing downs, things like that. I've had approximately 25 or 21 store managers. Most of them are not even with The Home Depot anymore. A few of them are now district managers. One, I think, is still with the company from 1992. Y'all might could tell me, is Pat Dixon. I think he's still with the company. He was a great store manager. I've been to my first couple of shareholder meetings when Bernie and Arthur were president and CEO, or Arthur and Bernie were president and CEO, because they used to switch around every year, I think. I wanted to say all those things just to say that I am a long-term employee, and I've been told that my opinion as an employee matters. Wanted to congratulate you.
I think you've gone 20 years, you're a long-term employee at The Home Depot. I wanted to brag a little bit. You told me from my lips to God's ears, the $200 stock price that I predicted last year by the end of the year, I was a little off. I think it happened on January 18th.
Just a little.
Yeah. From my lips to God's ears happens frequently, he does listen, he answers those requests that I make, I thank him for that, too.
Yes.
I wanted to know if you have anything in the works. To help new hires and to help department heads and stuff, there's been a number of pay increases. You've gone up three or four times to help new hires come up to a higher standard in the pay. I know you've gone up once or twice to help department heads, $1, $2, $3 in the range. Those of us long-term, that have been with the company for a while, you're spending millions of dollars to get new I've got it written down here. $20 million so we can have 20,000 tradespeople trained. Great idea. Just like the children's workshop. We get them when they're young. That was a great idea when that happened back in the 1990s, I thought. I've taught a number of those.
What are you doing, or do you have anything in the works to help those of us that are not getting pay increases? You can come to work for the company, work three years, and there's been three pay increases for new hires. You've gotten $0.25, $0.30 a year. All of a sudden, they're coming in at $3 increase from what you started at, and you've got three years of knowledge and ability, and there's brand-new starting with no knowledge, no ability, and they're making almost what you're making. Or in my case, at 26 years, it's still coming up, and I'm right here, and they're just coming closer. Not that they'll ever pass, because I appreciate my wage compensation and all the benefits. The Home Depot has great benefits. It's been happening for a long time.
I would like to ask you what you can say about that.
Sure, Gary. Thank you, and thank you for your comments. Gary, we're going to continue to invest in our associates. We obviously have a balancing act with how do you attract and continue to be competitive as you bring new people in and retain our long-term associates. We invested and we did our bonus program that we did an incremental bonus this year based on tenure to recognize the tenure of our associates.
Thank you for the $1,000, too.
Yes, sir.
I forgot to mention that.
We continue to make sure we invest over $1 billion in the last five years in our success sharing, which goes to all of our associates as well. That is part of what we're trying to accomplish. We're going to continue throughout the year to look at other investments, other benefits that we can invest, particularly in our long-term associates that take advantage of our benefits program. There will be more to come in 2018, Gary.
We can expect something in the works for the future?
Yeah. We're continuing to look at our merit increases and how we can make adjustments there, as well as look at our benefits programs overall so we continue to support our long-term associates. Obviously.
Specifically-
We're investing in training, we want to continue to grow this business so that our associates have opportunities to develop their careers.
Thank you. Specifically targeted toward those of us in the middle.
Yeah
the longer term.
Yeah.
Thank you very much.
You betcha, Gary. Thank you. Appreciate you being here. Thank you. Yes, sir.
Well, that's a hard act to follow. I'm Bill McLean. I'm a long-term investor and one of the original customers. I've started shopping at the first, the second, the third The Home Depot-
Thank you
Shopped at them around the country, actually. I've been in the computer business for 50 years. When I see a computer system that has weaknesses, it's really annoying to me. I want to give you a quick thing to look at from a direct experience I had two years ago with your new attempts at One Home Depot. I went to buy a toilet over at one of the local Home Depots. I shopped through the aisles. I got advice from the helpful employees there. I went home, studied the Consumer Reports, the research studies, the reviews and everything, decided on the one I wanted, and they only had six at that store. I thought just in case, I would go ahead and reserve it from home and make sure I got there when I was able to go after work the next day.
I did that. I got there and they said, "Oh, you ordered this through online Home Depot. We can't give you one of our six." I said, "What?
That's a problem.
They started involving managers. It took 2 hours for the managers to put my order on hold from The Home Depot and let me buy one directly out of the store. I said, "Okay, I want the guys to install." That was the first problem. The second one was, I said, "Okay, I'll let these guys install it. It's kind of a different toilet." I went home, and they scheduled the time. I waited there 2 hours the next day and had the toilet all laid out and everything for the guys, and they walk in the door about an hour and a half after they're supposed to be there. They took one look at the box and did a U-turn and walked out. They said, "We don't do that one." I said, "Excuse me, you guys didn't. I gave you the model number.
You had the model number." "Oh, we don't do that one." There was no recourse. I had to box it up and take it back. That obviously is a very poor integration of online, the service, and the big core store. Those are just examples of minor problems that you need to do to really truthfully talk about a one The Home Depot. Thank you.
First of all, thank you for your comments, and I apologize for the experience that you had. There was clearly some things that you experienced that is not part of what we're trying to create. We are A significant portion of the $11.1 billion investment that we're making over the next three years is to bring those systems together so we can, in fact, improve upon that and make that a seamless experience in connecting both the digital and the physical world. Love to connect. We've got our care team here, who'd like to get a little more details from you if we could and connect with you afterwards, and see what we can make sure we have all the information.
One minor point in that was that the 2 hours I had to wait was because they had to pull in 3 or 4 different managers to approve the canceling, the reordering and everything. One manager did not have the authority to say, "Oh, I see the problem. Let me correct this." It should have been there. That authority should have been there. They shouldn't have had to call managers from all over the store to get this problem solved.
Actually, they should have just been able to pull the product for you. That's why I'd like to connect with you. Thank you.
How you doing? Thank you.
Good.
I'm here representing the International Brotherhood of Teamsters Local 710 pension fund. We're here to support the port drivers in both Savannah and L.A. I'm also a UPS package car driver, 18 years, and I know you said you're investing in online services. We see an increased volume of your packages. We appreciate that. I deliver to people's houses every day.
Thank you.
Just some of that $11.1 billion you mentioned you'll be investing in the upcoming years, I think the shareholders and everyone needs to put pressure on the supply chain companies you use because they're misclassifying their drivers. They're using contract labor. These people are making less than minimum wage. We are online. We move your product. This is your question for all three of you, please. In your business code of conduct and ethics, it states vendors and suppliers will be treated with dignity and appropriate respect. What is your definition of appropriate respect? That's my question.
Sir, we expect all of our suppliers, not just in transportation, but all of our suppliers, to not only abide by all laws, all regulations, and a code of conduct that we impose upon them. That is a core element of doing business with The Home Depot. Whenever we find out that that is not the case, we will take appropriate action and have done so in the past.
Dan here mentioned that California did sue and win $49 million. They did break the law, and they continue to break the law. Please, we ask to just put pressure on your vendors and suppliers.
Thank you. Thank you for your comments.
Good morning.
Good morning.
Thank you for the presentation.
Sure.
I'm Dr. Laura Shields, and I'm here on behalf of PETA, People for the Ethical Treatment of Animals. I have a question about The Home Depot's sale of glue traps, which are among the cruelest devices on the market. Glue traps are rodent control devices that use an extremely strong adhesive to trap animals, and as animals wander across them, they become ensnared. They panic, and they struggle mightily to escape, often tearing flesh and breaking bones, and some chew off their own limbs in an effort to be free. Animals can suffer for days before they die. Not only that, glue traps are dangerous for human health. The Centers for Disease Control and Prevention warns against their use because trapped animals lose control of their bodily functions, thereby exposing people to diseases.
We're pleased that The Home Depot recently committed to stop promoting the glue traps and ironically won't use them, a decision which was made after employees witnessed firsthand a mouse struggling in a glue trap in one of its stores and had to deal with ending the animal's life. It's inconsistent and morally questionable to profit from a product that the company deemed too cruel to use. My question is this: Since The Home Depot won't use glue traps in its stores and has agreed to not promote the sale of them because it knows the glue traps cause egregious suffering to animals, when will it stop selling them altogether? Thank you.
Thank you for your question. The Home Depot offers a wide variety of choice within product categories that we operate in. That is actually done based on customer demand. I know that you're in conversations with Ron. We'll continue to talk with you and work through your concerns. Really our decisions on assortment are made based on customer demand.
Yes. My name is Clark Davis. I've been a stockholder and a customer since the 1980s. I want to thank you for the job you're doing and the presentation this morning. My question is fairly simple. It's been a while since we've had a stock split and with a market capitalization of over $215 billion and price again approaching $200 a share, what are your thoughts on a split?
I could tell you that that's probably not something that we're considering at this time. With all the changes that have happened in how trades are made and the reduction in cost for less than 100 shares, it just doesn't work the way it used to work in the past. I don't think you'll see a split in the stock anytime soon.
Keep up the good work.
Thank you, sir.
Good morning.
Good morning.
I'm Jack Edwards, a 30-plus year stockholder. It's been a great investment. The discussion you had, going over investing in the business was very good, but I view most of those as process improvements or efficiencies. For years, The Home Depot has had huge stock buybacks and huge dividend increases. It was pointed out in the chart, three dividend increases. Personally, I don't need the dividends, but a lot of people do. I would like to see more of that money, more of that cash retained and invested in ways to grow the business. At some point in the future, it may not be possible to continue the huge stock buybacks and the dividend increases. If we don't grow the business, three stores planned for 2018 is a drop in the bucket. Of course, for years now, the market's saturated.
We sold HD Supply years ago, which I think was a mistake. Maybe not, but I think it was. Does the company, does upper management have any plans, or do you all regularly have discussions on ways to grow the business rather than to squeeze out incremental efficiencies and improvements? Growing the business, I think, is critical 20, 30 years from now. Can you give us some comments on that?
Yes, sir. Certainly. First and foremost, we are focused on growing the business. If you look at, we ended the fiscal 2015 at $88.5 billion in total sales. We ended fiscal 2017 at $100.9 billion in total sales. We went to our entire investment community in December of this past year and laid out the roadmap for the next three years. We have shared with them that we will continue to focus on growing this business six-ish plus percent, which means that we'll get to $120 billion in sales by 2020. Our first and primary focus on capital in the business is to invest in the business to be able to drive growth, candidly. Over half of the investment of the $11.1 billion is going into our stores to drive growth in our stores.
We have to be able to connect both the physical and digital worlds to be able to make that happen. In addition to that, as we shared last year, we purchased Interline Brands, which gets us into the maintenance, repair, and operations products for multifamily, hospitality, and institutional. In those three areas alone, that's a $50 billion market opportunity in terms of sales, which we own roughly less than 5% of. We think there are billions of dollars' worth of growth opportunity in that space as well. The investments that we're making will drive growth both in the digital world as well as in the physical world. We have an enormous professional business that is a terrific business. But we think we're in the 17% share range there in terms of the customer spend in the professional side of the business.
There's $ billions worth of opportunity and growth, which is why we're making these investments. You are dead on. We need to drive growth, and we will do that. We're just not doing that through new square footage. We don't need to add square footage to be able to do that.
One more comment.
Yes, sir.
The company's track record for stores outside of North America, as you know, has been poor.
Even though I'm not a big fan of stock buybacks and dividend increases, I think they are very good when the company does not have good ideas for growing their business. If they don't have a better use for the cash, it's better to give it back to investors. I'd love to see growing the business as much as possible.
Yep.
Thank you.
It's the main focus. Thank you, sir.
Good morning.
Good morning.
My name is Kedrix Murray. Just to piggyback on what my partner Eric said, I'm a fellow driver also. Who oversees the fair and dignity treatment of your suppliers? Does the board of directors, or do you have a committee or somebody that sees the treatment or deals with complaints?
As a management team, depending on the area, we focus on that. In addition to that, we have a group that is involved, Ron Jarvis, who heads up our environmental and social responsibility, that oversees us as well. Then we actually report out to the audit committee on that.
Okay. Thank you very much.
You bet, sir. Thank you. Yes, sir.
My name is Doug Broxma. I'm a longtime customer, shorter time minor shareholder. As a minor shareholder, I can guarantee you that neither you nor Arthur Blank has me on speed dial. In terms of your geographical footprint, over the last 6 months, we've made a transition that's kind of minuscule. 300 miles from Miami to Jacksonville. That has involved the improvement and renovation of a single-family home, and it's caused me to reflect on the radically different culture of customer service between the two locations. I think your director in the front row, Mr. Codina from Miami, would attest to the fact that when he traveled 600 miles from Miami to here, he transitioned from a very different culture from before he got on that airplane to when he got off.
My question to you, first of all, is this: How do you deal with regional differences in culture and expectations of customer service and what customer service means? I have to tell you, going that 300 miles to Jacksonville has opened my eyes to what customer service really should be and has not been.
Well, first of all, I'm sorry that we have let you down, obviously, in an area. That is certainly not our intent, and it's something that we work on every single day in terms of setting expectations, and we have a structure of field leadership that we work with to reinforce what our expectations are and help teach, train, and coach our associates to make sure we're trying to deliver a consistent experience. As you can appreciate, with 2,285 stores and over 420,000 associates, that's something we have to work on every single day. I apologize that we've obviously not met your expectations in certain locations. Ann-Marie is here. She heads up our U.S. stores, as well as Hector Padilla, who is our division president. We'd love to talk to you afterwards.
Well, the reality is, for 36 years in Miami, I didn't even know you weren't meeting my expectations.
Fair point.
Now, a second point, and I think this goes back to two speakers ago.
Yeah.
One of the other things my eyes have been opened to just within the last couple of months is the even existence of HD Supply, which is, even in this meeting, kind of flies under the radar.
That's not us. That's not us, by the way.
How come everybody tells me that's a Home Depot company?
It is not a Home Depot company.
That's a blatant lie.
It was way back. It is no longer. We are not involved in that company. Matter of fact, they're a competitor to us.
I've been misinformed on that, and I thank you for that clarification.
No problem.
Thank you.
All right. Thank you, sir. Appreciate it. Again, sorry for not meeting your expectation. Yes, ma'am.
I'm Ann-Marie Campbell.
Hi, Ann-Marie.
I'm a very satisfied shareholder.
Thank you.
I am an ex-customer of The Home Depot.
Okay.
I will add one more thing to that. Whenever I have sent a letter to the CEO over a problem that was not being resolved, I didn't expect to get to him or her, but I expected to get to someone who acted in his respect and took care of the problem. At The Home Depot, the letter was received and totally unacknowledged until I had called again about the problem and they said, "Oh, I have your letter here.
Well, I'm very sorry that we have let you down, and obviously not what we strive to do, and we would love to connect with you after the meeting as well. We have our customer care associates here.
That would be fine.
Thank you. All righty. With that Yes.
Could I make just one quick comment, please?
Yes.
I need to talk to someone, if they would get with me after the meeting, if they didn't mind, who handles the placement of equipment in the store. Resets or something like that. Maybe concerning The Beam Team.
Beams?
Something like that.
Yeah.
The Beam Team.
Okay. All right.
Something like that.
Yep.
Please.
Okay. Very good. Yes, sir.
A quick comment. I love to see in earnings reports every quarter, earnings per share calculated excluding stock buybacks. Here in 2018, the 2017 earnings per share, the huge increase, a good bit of that I could easily calculate it myself, but a good bit of that is due to stock buybacks. It's not as good as it looks. In 2018, with the reduction in corporate income tax rate, was it 21%, I think, that's going to cause a huge increase in earnings per share also.
When you're comparing 2018 to 2017, if it's not considered, it's not a good comparison. I'd love to see that in the quarterly reports, what the earnings per share would be compared apples to apples.
Yep. We will do that. Yep.
Thanks.
Yep. Very good. With that, thank you all very much for attending the meeting, and we'll see you in our meeting in 2019. Thank you very much.