Home Depot, Inc. (NYSE:HD ) 2018 Annual Shareholder Meeting Conference Call May 17, 2018 9:00 AM ET

Craig Menear - Chairman, Chief Executive Officer and President

Lynne Conley - Benedictine Sisters

Dan Willett - International Brotherhood of Teamsters General Fund

Teresa Wynn Roseborough - Executive Vice President, General Counsel and Corporate Secretary

Carol Tomé - Chief Financial Officer & Executive Vice President

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 and 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. And I'd also like to introduce this morning, Stephanie Linnartz, who has been nominated for election to the board today. Welcome.

I'd also like to take a minute to recognize Karen Katen, who is stepping down from our Board today. Karen has been in a number of Boards 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 Tomé, our CFO and Executive Vice President - Corporate Services; and Teresa Wynn Roseborough, our Executive Vice President - General Counsel and Corporate Secretary. And 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.

And finally, I'd like to recognize Hector Mojena and Milford McGuirt from KPMG. Thank you for being here.

We will begin today's meeting with a 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 and then we'll open the floor up for questions.

So now, official our call to 2018 Home Depot Annual Meeting of Shareholders to order. Teresa is serving as the secretary of the meeting and Broadridge Investor Communications Solutions is our inspector of elections.

As of March 19, 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, so 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. And then, we will collect the ballots after all the proposals have been presented. And if you've already voted, there is no need to vote again here today. So I declare the polls open for voting.

Anyone need - and right here in the front, right here in the 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 2018 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 are 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 and 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 of this proposal has not been properly presented, according to our bylaws, it doesn't permit us to formally consider it and I will 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. Lynne Conley as the 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 Lynne Conley here today representing the Benedictine Sisters from Boerne, Texas. I also represent several members on 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. The proposal number 5 on the ballot seeks the 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 burdened shareholders with costly litigation and add risk to the company's brand, there is an impact to shareholder value. We contend descriptions don't go far enough to mitigate potential risk. We mentioned in the resolution that Home Depot has paid out more than $100 million to settle discrimination law suits 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 risk Home Depot faces, nor for that matter, fully identify successful diversity efforts. A number of companies make their EEO-1 available publically. 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 the competitiveness and market share. We ask 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 a 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 Shewetton [ph], please step to the microphone and present the proposal.

Shareholders ask the Board of Directors to take the steps necessary to amend the bylaws and appropriate governing documents to give the owners a total of 10% - 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 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 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 can 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 could be almost impossible to accomplish without an enormous budget from the pocket of shareholders.

Please vote yes on special shareholder meeting improvement, proposal 6. 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 clawback policy, which is Item Number Seven on your ballot. Will Mr. Dan Willett, please step or as a representative of the International Brotherhood of Teamsters General Fund, please step to the microphone and present the proposal.

We call for our company to amend its executive compensation oversight to clawback executive compensation through 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 has 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 cost 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 engaging this fraud are CalCartage and National Freight 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 CalCartage 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 Kendrix 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 the illegal abusive treatment, but day laborers are being harassed and threatened by our company security contractor in the Los Angeles area named Point 2 Point. Many Latinos feel they are being profiled by Point 2 Point, just for having brown skin.

Day laborers are de facto part of Home Depot, playing dual roles of assisting customers and installing their purchases and buying retail product themselves. Our company should treat them with dignity and respect.

Soon, our company will receive petition 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 7. Thank you.

Thank you. Your board recommends you vote against this proposal. If you've received and requested a ballot today, please mark your votes accordingly, sign it where it is indicated. And when you finish, 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.

Now 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, and 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 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 and I declare that the meeting is adjourned. And now, we'll move forward with an overview of our business, and after that, we'll take questions that you may have. And so 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. But before I do that, I'd like to draw your attention to this chart as some of our comments maybe forward-looking or non-GAAP.

So 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. And our diluted earnings per share grew by 13% to $7.29.

Our company continues to generate strong cash flow. And 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. And we use 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.

Now 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 the modest GDP growth in the United States, provides continued tailwinds for our business. Now 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%, and 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. And as Craig will detail, while we're 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-digit every year for the past eight years. And 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%.

So with that, let me turn it back to Craig.

Thank you, Carol. So 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 in an unprecedented rate. And a matter of fact, there's many that say that there has been more change in the last three years than there has been in the last 10 or 20. And clearly, the customer's engaging in an increased way through the digital channel, but brick-and-mortar still matters.

And so the way the customer is researching product has changed, instead of going to the store and browsing in aisles, customers research their product through reviews and ratings online. And the level of delivery and fulfillment options that our customers expect in terms of availability has changed drastically as well. And so, all of these changes have to be reflected and really brought to life in the customer shopping experience.

So within the context of this changing retail environment, customer expectations are increasing for sure. And it's imperative that we address of 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.

And 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 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 Home Depot as One Home Depot.

But 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. And 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.

Now, 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. And the chart in the right depicts what that looks like in the future. So 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. And 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. So 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.

So 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. So we are investing in the frontend 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. And we're investing to simply 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 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.

And so, 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'll 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. And 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., offers 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 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.

And 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 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 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 is most important in our business, and that's our customers and our front-line associates.

And with that, I'd like to thank you all very much for attending this meeting. And now, I'd be happy to take whatever questions you may have. Please step to the mike.

My name is Charles Mueller [ph] and I'm a long-term stockholder.

As a result of the voting outcomes that you've talked about earlier, it seems to me that some of the shareholder proposals are getting an increasingly large measure of support. And I would like the Board to seriously consider some of those proposals, particularly the EEO situation. You've talked largely this morning about investing in associates in your stores. And I think an EEO proposal that is adopted by the Home Depot will go a long way towards exhibiting the actual support that the Board needs to give those associates. And 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. And I think if you would consider something like Waze within the store, it would help people like get to the point of purchase quickly. And 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. And 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 identified 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.

And as you're localized for that store, it will show you where that is and it will come up on a map for you. We're seeing an increased usage of that in a huge way. And by the way it will 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. So I appreciate your comments on that. Thank you.

Good morning. How are you, Henry [ph]?

I'm good. I'm Gary Patton [ph] from Store 1104 in Greenville, 26 years at The Home Depot.

Thank you. And I pretty much decided for me to use my time and money to come to Atlanta, to come to the Board - or the shareholder meeting, I need to at least stand up and say something. And this time, I apologize, but I've got quite a bit to say, if you all bear with me. I'm a little nervous and I'm kind of a country boy, hadn't really prepared 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 or...?

Sure, we opened one in Stamford, Connecticut just recently. The store by way is off to an unbelievable start and we will open two more in Mexico.

Okay. Good. Second that just came up, on the chart you used and you showed the two silos and then the conglomeration of everything. It's just something I thought of. You have 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 its 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. So I would have liked just seeing the associates not on the bottom, but underneath the product. That would have been better…

Now, I appreciate that. Gary, I will tell you. I'm not sure we thought through the chart that way. We were trying to demonstrate that you need to connect all those things that you can serve our customers no matter where you're at.

And over in the right hand side, we were right in the middle. That was good.

Yeah. Okay. I 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 - I think it's between 16 and 20, so I didn't want to mislead him. But I wanted to thank Arthur last year. I mentioned I needed his signature and might build from scratch. He took care of that. I sent him the boat. He got it back to me and I appreciate that.

I want to thank you for buying my lunch last year, when I wanted to go take a tour, and the two fine ladies that gave me a great tour of the museum.

I still have a missing pair of shoes that I donated for the museum. But they don't know where they're at and they didn't get put up. So 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? And I wanted to - 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.

…Bernie and Arthur's. And Ken just wrote a book. I learned yesterday that he loves capitalism. I love capitalism. I think it's the best form of economics in the world. I know there are some detractors out there up and reading some things on the Internet. But it's the best thing. Mr. Bottoms, I wanted to congratulate him and your new mayor. So these are things that have gone and go Brave. Brave 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, WOPs [ph]. I think that was a great thing. And you had a video, unscripted, that just came out this year. I wanted to congratulate you on that.

Someone who is not around anymore, who I had a good relationship with, Steve McKelvey [ph]. I met him a number of times and at the meeting and a couple times talked to him. And he helped me with one of my ideas that came up one time about the American flag. And that got implemented and I got credit that was when Frank was CEO, in the homepage. So I wanted to thank that. And I wanted to tell you a little bit about my rewarding, before I get to the meat of my question.

Career here at The Home Depot and just thank you for all the old-timers had meant to me and officers, and people here. I've been with Home Depot 26 years. And on the clock, I have worked in approximately 30 stores doing research, inventory, inventory prep, grand openings, closing downs, things like that.

I've had approximate 25 or 21, 21 store managers. Most of them are not even with Home Depot anymore. A few of them are now district managers. One I think is still with the company from 1992. You all, Mike could tell me it's Pat Dixon. I think he's still with the company. He was a great store manager.

I've been to - went 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. But 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.

I wanted to congratulate you. I think you've gone 20 years, so 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 that 200 stock price that I predicted last year. By the end of the year, and I was a little off. I think that happened in January 2018?

Just a little. Just a little.

Yeah. But from my lips to God's ears happens frequently and he does listen. And he answers us request that I make, and I think him for that, too. I wanted to know, if you have anything in the works, because 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.

And those of us, long-term, there's been in 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 trades-people 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 1990's, I thought. I've taught a number of those.

But 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, worked 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 those 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, but it's been happening for a long time. So I would like to ask you what you could say about that.

Sure, Gary, thank you, and thank you for your comments. So we'll - 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 in the incremental bonus this year based on tenure to recognize the tenure of our associates.

Thank you for the dollars, too. I forgot to mention that.

Yes, sir. And we continue to make sure we invest over $1 billion in last five years in our success sharing, which goes to all of our associates as well. And that is part of what we're trying to accomplish. And 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, so there will be more to come in 2018, Gary.

So we can expect something in the works for the future.

Yeah, we are 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. And obviously we're investing in training and 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, the longer term. Thank you very much.

Yeah. You bet, Gary. Thank you. Appreciate you being here. Thank you. Yes, sir?

Well, that's a hard act to follow. I am Bill McLain. I'm a long-term investor and one of the original customers. I've started shopping at the first, the second and third Home Depot, and…

Shopped at them around the country. I actually been on - I've been in the computer business for 50 years, and when I see a computer system that has a weakness, as 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, pored the research studies, reviews and everything, decided on the one I wanted, and they only had six at that store.

So 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, and 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?

So they started involving managers. It took two hours for the managers to put my order on hold from Home Depot and let me buy one directly out of the store. And I said, okay, I want you guys to install. That was the first problem. The second one was, I said, okay, I'll let these guys install, it's kind of a different toilet. So I went home and they scheduled the time. I waited there two hours the next day and had the toilet all laid out and everything for the guys. And they walked in the door about 1.5 hours after they were 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 have been - I gave you the model number, you had the model number. Oh, we don't do that one. So there was no recourse. I had to box it up and take it back. Now 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 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. But 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 digital and the physical world. Love to connect. Well, 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 two hours I had to wait was because they had to pull in three or four 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, he should have been able to pull the product for you. So we'll tell - we'd like to connect with you. Thank you.

How are you doing? Thank you. I'm here representing the International Brotherhood of the Teamsters Local 710 Pension Fund. We are here to support the port drivers in both Savannah and LA. And 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 houses every day.

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 use - they're misclassifying their drivers. They're using contract labor. These people are making less than minimum wage. And they are - we are online. I mean, we move your product.

And in your business - this is your question for all three of you, please. In your Business Code of Conduct and Ethics, it's states vendors and suppliers will be treated with dignity and appropriate respect. What is your definition of appropriate respect? And I mean, because they are not being treated with - I mean, so what is - that's my question?

So we expect all of our suppliers not just in transportation, but all of our suppliers, to not only abide by our laws, all regulations and code of conduct that we impose upon them. I mean, that is a core element of doing business for The Home Depot, whenever we find out that is not the case. We will take appropriate action and have done so in the past.

Dan here had mentioned that California, they did sue and win $49 million. So they did break the law and they continue to break the law. So please, we ask you, just put pressure on your vendors and suppliers.

Thank you. Thank you for your comments.

Thank you for the presentation. I'm Dr. Laura Shield, and I'm here on behalf of PETA, People for the Ethical Treatment of Animals. I have a question about The Home Depot 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. But not only that, glue traps are dangerous for human health. The Center for Disease Control and Prevention warns against their use, because trapped animals lose control of their bodily function, thereby exposing people to diseases. We're pleased that The Home Depot recently committed to start promoting the glue traps and ironically won't to use them, a decision which was made after employees witnessed firsthand a mouse struggling in a glue trap in one of its store and have to deal with ending the animal's life. It's inconsistent. And more questionable to process from a product that the company deemed too cruel to use.

So 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 that the glue traps cause egregious suffering to animals, when will it stop selling them altogether? Thank you.

Yeah. Thank you for your question. The Home Depot offers a wide variety of choice within product categories that we operate in and that is actually done based on customer demand. I know that, you are in conversations with Ron. We'll continue to talk with you and work through your concerns. But really, our decisions on assortment are made based on customer demand.

Yes, my name is [Clark Davis] [ph]. I've been a stockholder and a customer since the 1980s, and 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 can tell you 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. So I don't think, you will see a split the stock any time soon.

Keep up the good work.

I am Jack Edwards, a 30-plus-year stockholder. It's been a great investment. The - in the discussion you had a while ago about investing in the business, they're very good. But I get most of those as process improvements or efficiencies. For years, Home Depot has had huge stock buybacks and huge dividend increases, it was pointed out in the chart for - the dividend increases. And firstly, I don't need the dividend, but most - 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 with that huge stock buybacks and dividend increases. And if we don't grow the business, three stores planned for 2018 is a drop in a bucket. And of course, for years now, the markets exaggerated, I mean, and we [sold 80 supply] [ph] years ago, which I think was a mistake. Maybe not, but I think it was. There's a company upper management, and we need plans - or did you all regularly have discussions on ways to grow the business? Revenues squeeze out. Incremental efficiencies and improvements, but growing a business, I think, is critical 20, 30 years from now. Can you give us some comments on that?

Yes, sir, certainly. So 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. And we went to our entire investment community in December of this past year and laid out the roadmap for the next three years, and we have shared with them that we will continue to focus on growing this business 6%-ish plus, which means that we'll get to $120 billion in sales by 2020.

And our first and primary focus on capital in the business is to investing the business to be able to drive growth, candidly. And over half of the investment of $11.1 billion is going into our stores to drive growth in our stores. And we have to be able to connect both the physical and digital world 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%.

So we think there are billions of dollars' worth of growth opportunity in that space as well. And 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 of dollars' worth of opportunity and growth, which is why we're making these investments. So you were 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.

So just kind of your track record for stores outside of North America or [indiscernible], even though I'm not a big fan of stock buybacks and dividend increases, I think they are very good when the company doesn't - when a 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. But I'd love to see growing the business as much as possible. Thank you.

It's the main focus. Thanks, sir.

My name is [Keises Murray] [ph]. And just to piggyback on what my partner Eric said, I'm a fellow driver also. Are there - who oversees the fair and dignity [ph] treatment of your suppliers? Does the board of directors or do you have a committee or somebody that sees the treatment or deal with complaints?

So as a management team and depending on the area, we focus on that. In addition to that, we have a group that is involved and Ron Jarvis, who heads up our environmental and social responsibility that oversees us as well. And 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 Braxma] [ph]. I'm a long-time customer, shorter-time minor shareholder. As minor shareholder, I can guarantee you that do you know that neither you nor Arthur Blank has me on speed dial? But in terms of your geographical footprint, over the last six months we made a transition that's kind of miniscule, that's 300 miles from Miami to Jacksonville. That has involved the improvement and renovation of a single-family home. And it caused me to reflect on the radically different culture of customer service between the two locations.

And 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.

And 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? Because I have to tell you, moving - 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, that 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. And 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.

The second in that is just goes exactly two speakers ago. One of the other things my eyes have been opened to is, just within the last couple of months is the even existence of HD Supply, which, as - or even in this meeting kind of flies under the radar. I haven't even heard…

That's not. That's not us by the way.

How come everybody tells me that's a Home Depot company?

It's not a Home Depot company.

So 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.

Okay. So we have - I have been misinformed on that. And I thank you for that clarification.

All right, thank you, sir. I appreciate it, again, sorry for not meeting your expectation. Yes, Ma'am.

I'm a very satisfied shareholder. I am an ex customer of Home Depot. And 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 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've 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. Thank you.

All righty and with that - yes.

I'll make just one quick comment, please.

I need to talk to someone if they would get with me after the meeting if they didn't mind, who have a replacement of equipment in the store, resets or something like that, maybe concerning the Beam Team or something like that.

Yeah, okay. Very good. Yes, sir.

Just a quick comment. So I would love to see in earnings reports every quarter earnings per share calculated, excluding stock buybacks. Here in 2018, so the 2017 earnings per share had a huge increase, a good bit that - I could easily calculate it myself - but a good bit of that is due to stock buybacks. So 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 be a huge - cause a huge increase in earnings per share also. So when you're comparing 2018 to 2017, it was not considered as - it is not a good comparison. So I'd love to see that in the quarterly reports what earnings per share would be compared to apples-to-apples.

Yeah, we will do that, yeah.

Yeah, very good. So 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.