Appliances and Loss of Market Share
David Strasser – Janney Montgomery Scott asked: When talking appliances, it seems to have been a very volatile category in the third quarter. There appears to have been winners and losers throughout the industry. How did Home Depot do that in area?
Craig Menear – EVP, Merchandising responded: We were mid single-digit negative in appliances and we believe we lost just a little bit of share in the quarter.
Strasser followed up: When losing market share there, do you think it’s because of an unwillingness to match on price or do you think there was something structural? Do you think it was near-term pricing?
Menear responded: I don’t think there is anything structural there. I think it’s the activity in the marketplace. We have a portfolio strategy and we’re comfortable with the position that we take in appliances. We’re not looking to be the leader in that business.
Carol Tome – EVP, Corporate Services and CFO added: I think that’s the key. We’re number three and we’re happy with it.
Michael Baker – Deutsche Bank asked: Regarding the cadence of the buyback, I think you’re saying about $3.5 billion this year and then $6.8 billion through 2014 equates to approximately the $2.3 billion range–a significant slowdown.
Is there an upside to that number or is it really just a signal that you’re just going to buyback less annually?
Another question about the appliance business. I think hhgregg and Sears were pretty aggressive in the quarter. What are you seeing in November, particularly from your biggest competitor in terms of pricing in general and specifically on appliances, do they seem to be signaling a more aggressive posture?
Carol Tome – EVP, Corporate Services and CFO responded: For the cadence on the buybacks, we’re spending $2.5 billion with cash generated from the business to buy back shares this year. You should therefore assume at least $2.5 billion next year, $2.5 billion in ‘13 and the remaining $1.4 billion in ‘14. However with increased earnings, we will have borrowing capacity just like we did this year.
We raised $1 billion to take us to the full $3.5 billion. As we look to next year, we’ll have borrowing capacity which would allow us to accelerate some of the share repurchases. I don’t want to tell you the day while we sit here in November, because we want to be opportunistic in terms of debt capital raising.
There is clearly an opportunity to accelerate it, but hopefully, this is helpful from a modeling perspective.
Craig Menear – EVP, Merchandising responded: On the appliance front, we’ve seen a fairly aggressive market. We see that it’s off to a strong start in terms of promotional activity as we head into the holiday season. We’re candidly pretty comfortable with the plans that we’ve put together for the business in the fourth quarter.
Our plans fit within our portfolio strategy overall.