# Home Depot, Inc.: Form 10-Q for the period ended Jul 30, 2023

- Company: [Home Depot, Inc.](/companies/hd.md) (CIK 354950)
- Form: 10-Q
- Filed: 2023-08-22
- Accepted by EDGAR: Aug 21, 2023, 17:46 ET
- Period: 2023-07-30
- Accession: 0000354950-23-000185
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/354950/000035495023000185/hd-20230730.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/354950/000035495023000185/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2023-07-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2023-05-01 to 2023-07-30 | $42.92bn | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 6 months, 2023-01-30 to 2023-07-30 | $80.17bn | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2023-05-01 to 2023-07-30 | $28.76bn | us-gaap:CostOfRevenue |
| Cost of revenue | 6 months, 2023-01-30 to 2023-07-30 | $53.46bn | us-gaap:CostOfRevenue |
| Gross profit | 3 months, 2023-05-01 to 2023-07-30 | $14.16bn | us-gaap:GrossProfit |
| Gross profit | 6 months, 2023-01-30 to 2023-07-30 | $26.71bn | us-gaap:GrossProfit |
| Selling, general and administrative | 3 months, 2023-05-01 to 2023-07-30 | $6.92bn | us-gaap:SellingGeneralAndAdministrativeExpense |
| Selling, general and administrative | 6 months, 2023-01-30 to 2023-07-30 | $13.27bn | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2023-05-01 to 2023-07-30 | $6.59bn | us-gaap:OperatingIncomeLoss |
| Operating income | 6 months, 2023-01-30 to 2023-07-30 | $12.14bn | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2023-05-01 to 2023-07-30 | $469.0m | us-gaap:InterestExpense |
| Interest expense | 6 months, 2023-01-30 to 2023-07-30 | $943.0m | us-gaap:InterestExpense |
| Income tax | 3 months, 2023-05-01 to 2023-07-30 | $1.50bn | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 6 months, 2023-01-30 to 2023-07-30 | $2.74bn | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2023-05-01 to 2023-07-30 | $4.66bn | us-gaap:NetIncomeLoss |
| Net income | 6 months, 2023-01-30 to 2023-07-30 | $8.53bn | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2023-05-01 to 2023-07-30 | $4.65 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 6 months, 2023-01-30 to 2023-07-30 | $8.46 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2023-05-01 to 2023-07-30 | $4.66 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 6 months, 2023-01-30 to 2023-07-30 | $8.49 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2023-05-01 to 2023-07-30 | 1,003,000,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 6 months, 2023-01-30 to 2023-07-30 | 1,008,000,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 6 months, 2023-01-30 to 2023-07-30 | $12.21bn | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 6 months, 2023-01-30 to 2023-07-30 | $1.70bn | us-gaap:PaymentsToAcquireProductiveAssets |
| Dividends paid | 6 months, 2023-01-30 to 2023-07-30 | $4.21bn | us-gaap:PaymentsOfDividendsCommonStock |
| Share repurchases | 6 months, 2023-01-30 to 2023-07-30 | $4.95bn | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2023-07-30 | $2.81bn | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2023-07-30 | $31.83bn | us-gaap:AssetsCurrent |
| Total assets | at 2023-07-30 | $76.39bn | us-gaap:Assets |
| Current liabilities | at 2023-07-30 | $24.23bn | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2023-07-30 | $75.05bn | us-gaap:Liabilities |
| Short-term borrowings | at 2023-07-30 | $0 | us-gaap:CommercialPaper |
| Shareholders' equity | at 2023-07-30 | $1.33bn | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 26,908 characters.

The following discussion provides an analysis of the Company’s financial condition and results of operations from management's perspective and should be read in conjunction with the consolidated financial statements and related notes included in this report and in the 2022 Form 10-K and with our MD&A included in the 2022 Form 10-K.

|  |  |
| --- | ---: |
| Executive Summary | 13 |
| Results of Operations | 14 |
| Liquidity and Capital Resources | 18 |
| Critical Accounting Estimates | 20 |

### EXECUTIVE SUMMARY

The following table presents quarter-to-date and year-to-date highlights of our financial performance:

*dollars in millions, except per share data*

| July 30, 2023 | Three Months Ended July 31, 2022 | July 30, 2023 | Six Months Ended July 31, 2022 |  |
| --- | ---: | ---: | ---: | ---: |
| Net sales | $42,916 | $43,792 | $80,173 | $82,700 |
| Net earnings | $4,659 | $5,173 | $8,532 | $9,404 |
| Diluted earnings per share | $4.65 | $5.05 | $8.46 | $9.13 |
| Net cash provided by operating activities |  |  | $12,205 | $7,182 |
| Proceeds from long-term debt, net of discounts |  |  | $— | $3,957 |
| Repayments of long-term debt |  |  | $1,130 | $2,366 |

We reported net sales of $42.9 billion in the second quarter of fiscal 2023. Net earnings were $4.7 billion, or $4.65 per diluted share. For the first six months of fiscal 2023, net sales were $80.2 billion and net earnings were $8.5 billion, or $8.46 per diluted share.

During the second quarter of fiscal 2023, we opened two new stores in the U.S. and we had no store closures, resulting in a store count of 2,326 at the end of the quarter. As of July 30, 2023, a total of 317 stores, or 13.6% of our total store count, were located in Canada and Mexico. For the second quarter of fiscal 2023, sales per retail square foot were $684.65, and for the first six months of fiscal 2023, sales per retail square foot were $638.50. Our inventory turnover ratio was 4.4 times at the end of the second quarter of fiscal 2023, compared to 4.5 times at the end of the second quarter of fiscal 2022.

We generated $12.2 billion of cash flow from operations during the first six months of fiscal 2023. This cash flow, together with cash on hand, was used to fund cash payments of $5.0 billion for share repurchases and $4.2 billion for dividends. In addition, we funded $1.7 billion in capital expenditures and repaid $1.1 billion of long-term debt during the first six months of fiscal 2023. In February 2023, we announced a 10% increase in our quarterly cash dividend to $2.09 per share.

Our ROIC for the trailing twelve-month period was 41.5% at the end of the second quarter of fiscal 2023 compared to 45.6% at the end of the second quarter of fiscal 2022. The decrease in ROIC was primarily driven by an increase in average long-term debt along with lower operating income over the respective periods. See the Non-GAAP Financial Measures section below for our definition and calculation of ROIC, as well as a reconciliation of NOPAT, a non-GAAP financial measure, to net earnings (the most comparable GAAP financial measure).

### RESULTS OF OPERATIONS

The following table presents the percentage relationship between net sales and major categories in our consolidated statements of earnings.

### FISCAL 2023 AND FISCAL 2022 THREE MONTH COMPARISONS

*dollars in millions*

|  | Three Months Ended July 30, 2023 $% of Net Sales |  | July 31, 2022 $% of Net Sales |  |
| --- | ---: | ---: | ---: | ---: |
| Net sales | $42,916 |  | $43,792 |  |
| Gross profit | 14,157 | 33.0% | 14,483 | 33.1% |
| Operating expenses: |  |  |  |  |
| Selling, general and administrative | 6,915 | 16.1 | 6,657 | 15.2 |
| Depreciation and amortization | 653 | 1.5 | 616 | 1.4 |
| Total operating expenses | 7,568 | 17.6 | 7,273 | 16.6 |
| Operating income | 6,589 | 15.4 | 7,210 | 16.5 |
| Interest and other (income) expense: |  |  |  |  |
| Interest income and other, net | (41) | (0.1) | (2) | — |
| Interest expense | 469 | 1.1 | 381 | 0.9 |
| Interest and other, net | 428 | 1.0 | 379 | 0.9 |
| Earnings before provision for income taxes | 6,161 | 14.4 | 6,831 | 15.6 |
| Provision for income taxes | 1,502 | 3.5 | 1,658 | 3.8 |
| Net earnings | $4,659 | 10.9% | $5,173 | 11.8% |

#### Note: Certain percentages may not sum to totals due to rounding.

| Selected financial and sales data: | Three Months Ended July 30, 2023 | July 31, 2022 | % Change |
| --- | ---: | ---: | ---: |
| Comparable sales (% change) | (2.0)% | 5.8% | N/A |
| Comparable customer transactions (% change) (1) | (2.0)% | (3.1)% | N/A |
| Comparable average ticket (% change) (1) | 0.1% | 9.0% | N/A |
| Customer transactions (in millions) (1) | 459.1 | 467.4 | (1.8)% |
| Average ticket (1) (2) | $90.07 | $90.02 | 0.1% |
| Sales per retail square foot (1) (3) | $684.65 | $700.62 | (2.3)% |
| Diluted earnings per share | $4.65 | $5.05 | (7.9)% |

#### (1) Does not include results for HD Supply.

*(2) Average ticket represents the average price paid per transaction and is used by management to monitor the performance of the Company, as it represents a primary driver in measuring sales performance.*

*(3) Sales per retail square foot represents annualized sales divided by retail store square footage. Sales per retail square foot is a measure of the efficiency of sales based on the total square footage of our stores and is used by management to monitor the performance of the Company’s retail operations as an indicator of the productivity of owned and leased square footage for these retail operations.*

### Sales

We assess our sales performance by evaluating both net sales and comparable sales.

***Net Sales.*** Net sales for the second quarter of fiscal 2023 were $42.9 billion, a decrease of 2.0% from $43.8 billion for the second quarter of fiscal 2022. The decrease in net sales for the second quarter of fiscal 2023 reflects the impact of a negative comparable sales environment, primarily driven by a decrease in comparable customer transactions as well as the impact from lumber price deflation.

Online sales, which consist of sales generated through our websites and mobile applications for products picked up at our stores or delivered to customer locations, represented 14.4% of net sales during the second quarter of fiscal 2023 and increased by 1.2% compared to the second quarter of fiscal 2022.

A weaker U.S. dollar positively impacted net sales by $39 million during the second quarter of fiscal 2023.

***Comparable Sales.*** Comparable sales is a measure that highlights the performance of our existing locations and websites by measuring the change in net sales for a period over the comparable prior period of equivalent length. Comparable sales includes sales at all locations, physical and online, open greater than 52 weeks (including remodels and relocations) and excludes closed stores. Retail stores become comparable on the Monday following their 52nd week of operation. Acquisitions are typically included in comparable sales after they have been owned for more than 52 weeks. Comparable sales is intended only as supplemental information and is not a substitute for net sales presented in accordance with GAAP.

Total comparable sales for the second quarter of fiscal 2023 decreased 2.0%, reflecting a 2.0% decrease in comparable customer transactions slightly offset by a 0.1% increase in comparable average ticket compared to the second quarter of fiscal 2022. The decrease in comparable customer transactions reflects the impact of macroeconomic factors including the broader inflationary environment and moderating demand. Comparable average ticket was primarily impacted by inflation across several product categories, offset by U.S. lumber price deflation, which negatively impacted average ticket growth by approximately 160 basis points.

During the second quarter of fiscal 2023, six of our 14 merchandising departments—Building Materials, Outdoor Garden, Hardware, Plumbing, Tools, and Millwork—posted positive comparable sales compared to the second quarter of fiscal 2022. All of our other merchandising departments posted negative comparable sales during the second quarter of fiscal 2023, with our Lumber department posting a double-digit comparable sales decline primarily resulting from lumber price deflation, partially offset by higher unit sales.

### Gross Profit

Gross profit for the second quarter of fiscal 2023 decreased 2.3% to $14.2 billion from $14.5 billion for the second quarter of fiscal 2022. Gross profit as a percentage of net sales, or gross profit margin, was 33.0% for the second quarter of fiscal 2023 compared to 33.1% for the second quarter of fiscal 2022. The decrease in gross profit margin during the second quarter of fiscal 2023 was primarily driven by inventory management actions along with pressure from shrink, partially offset by lower supply chain costs and favorable product mix.

### Operating Expenses

Our operating expenses are composed of SG&A and depreciation and amortization.

***Selling, General & Administrative.*** SG&A for the second quarter of fiscal 2023 increased $258 million, or 3.9%, to $6.9 billion from $6.7 billion for the second quarter of fiscal 2022. As a percentage of net sales, SG&A was 16.1% for the second quarter of fiscal 2023 compared to 15.2% for the second quarter of fiscal 2022, primarily reflecting previously executed wage investments for hourly associates and deleverage from a negative comparable sales environment, partially offset by lower incentive compensation.

***Depreciation and Amortization.*** Depreciation and amortization for the second quarter of fiscal 2023 increased $37 million, or 6.0%, to $653 million from $616 million for the second quarter of fiscal 2022. As a percentage of net sales, depreciation and amortization was 1.5% for the second quarter of fiscal 2023 compared to 1.4% for the second quarter of fiscal 2022, primarily reflecting increased depreciation expense from investments in the business and deleverage from a negative comparable sales environment.

### Interest and Other, net

Interest and other, net, for the second quarter of fiscal 2023 increased $49 million, or 12.9%, to $428 million from $379 million for the second quarter of fiscal 2022. As a percentage of net sales, interest and other, net was 1.0% for the second quarter of fiscal 2023 compared to 0.9% for the second quarter of fiscal 2022, primarily due to increased variable rate interest on floating rate debt resulting from interest rate swaps, higher debt balances, and deleverage from a negative comparable sales environment, partially offset by higher interest income.

### Provision for Income Taxes

Our combined effective income tax rate was 24.4% for the second quarter of fiscal 2023 compared to 24.3% for the second quarter of fiscal 2022.

### Diluted Earnings per Share

Diluted earnings per share were $4.65 for the second quarter of fiscal 2023 compared to $5.05 for the second quarter of fiscal 2022. The decrease in diluted earnings per share was driven by lower net earnings during the second quarter of fiscal 2023, partially offset by lower diluted shares due to share repurchases.

### FISCAL 2023 AND FISCAL 2022 SIX MONTH COMPARISONS

*dollars in millions*

|  | Six Months Ended July 30, 2023 $% of Net Sales |  | July 31, 2022 $% of Net Sales |  |
| --- | ---: | ---: | ---: | ---: |
| Net sales | $80,173 |  | $82,700 |  |
| Gross profit | 26,714 | 33.3% | 27,628 | 33.4% |
| Operating expenses: |  |  |  |  |
| Selling, general and administrative | 13,270 | 16.6 | 13,267 | 16.0 |
| Depreciation and amortization | 1,304 | 1.6 | 1,222 | 1.5 |
| Total operating expenses | 14,574 | 18.2 | 14,489 | 17.5 |
| Operating income | 12,140 | 15.1 | 13,139 | 15.9 |
| Interest and other (income) expense: |  |  |  |  |
| Interest income and other, net | (74) | (0.1) | (5) | — |
| Interest expense | 943 | 1.2 | 753 | 0.9 |
| Interest and other, net | 869 | 1.1 | 748 | 0.9 |
| Earnings before provision for income taxes | 11,271 | 14.1 | 12,391 | 15.0 |
| Provision for income taxes | 2,739 | 3.4 | 2,987 | 3.6 |
| Net earnings | $8,532 | 10.6% | $9,404 | 11.4% |

#### Note: Certain percentages may not sum to totals due to rounding.

| Selected financial and sales data: | Six Months Ended July 30, 2023 | July 31, 2022 | % Change |
| --- | ---: | ---: | ---: |
| Comparable sales (% change) | (3.2)% | 4.1% | N/A |
| Comparable customer transactions (% change) (1) | (3.4)% | (5.7)% | N/A |
| Comparable average ticket (% change) (1) | 0.1% | 10.0% | N/A |
| Customer transactions (in millions) (1) | 850.1 | 878.1 | (3.2)% |
| Average ticket (1) (2) | $90.92 | $90.82 | 0.1% |
| Sales per retail square foot (1) (3) | $638.50 | $661.27 | (3.4)% |
| Diluted earnings per share | $8.46 | $9.13 | (7.3)% |

#### (1) Does not include results for HD Supply.

*(2) Average ticket represents the average price paid per transaction and is used by management to monitor the performance of the Company, as it represents a primary driver in measuring sales performance.*

*(3) Sales per retail square foot represents annualized sales divided by retail store square footage. Sales per retail square foot is a measure of the efficiency of sales based on the total square footage of our stores and is used by management to monitor the performance of the Company’s retail operations as an indicator of the productivity of owned and leased square footage for these retail operations.*

### Sales

We assess our sales performance by evaluating both net sales and comparable sales.

***Net Sales.*** Net sales for the first six months of fiscal 2023 were $80.2 billion, a decrease of 3.1% from $82.7 billion for the first six months of fiscal 2022. The decrease in net sales for the first six months of fiscal 2023 reflects the impact of a negative comparable sales environment, primarily driven by a decrease in comparable customer transactions as well as the impact from lumber price deflation.

Online sales, which consist of sales generated through our websites and mobile applications for products picked up in our stores or delivered to customer locations, represented 14.4% of net sales during the first six months of fiscal 2023 and decreased by 0.7% compared to the first six months of fiscal 2022.

A weaker U.S. dollar positively impacted net sales by $14 million for the first six months of fiscal 2023.

***Comparable Sales.*** Total comparable sales for the first six months of fiscal 2023 decreased 3.2%, reflecting a 3.4% decrease in comparable customer transactions slightly offset by a 0.1% increase in comparable average ticket compared to the first six months of fiscal 2022. The decrease in comparable customer transactions reflects the impact of macroeconomic factors including the broader inflationary environment and moderating demand. Comparable average ticket was primarily impacted by inflation across several product categories, offset by U.S. commodity price deflation, which negatively impacted average ticket growth by approximately 240 basis points, driven primarily by lumber.

During the first six months of fiscal 2023, five of our 14 merchandising departments—Building Materials, Hardware, Outdoor Garden, Plumbing, and Millwork—posted positive comparable sales compared to the first six months of fiscal 2022. All of our other merchandising departments posted negative comparable sales during the first six months of fiscal 2023, with our Lumber department posting a double-digit comparable sales decline primarily resulting from lumber price deflation, partially offset by higher unit sales.

### Gross Profit

Gross profit for the first six months of fiscal 2023 decreased 3.3% to $26.7 billion from $27.6 billion for the first six months of fiscal 2022. Gross profit as a percentage of net sales, or gross profit margin, was 33.3% for the first six months of fiscal 2023 compared to 33.4% for the first six months of fiscal 2022. The decrease in gross profit margin during the first six months of fiscal 2023 was primarily driven by higher supply chain costs along with pressure from shrink, partially offset by favorable product mix.

### Operating Expenses

Our operating expenses are composed of SG&A and depreciation and amortization.

***Selling, General & Administrative.*** SG&A was $13.3 billion for the first six months of both fiscal 2023 and fiscal 2022. As a percentage of net sales, SG&A was 16.6% for the first six months of fiscal 2023 compared to 16.0% for the first six months of fiscal 2022, primarily reflecting deleverage from a negative comparable sales environment along with previously executed wage investments for hourly associates, partially offset by the one-time benefit from the favorable settlement of litigation with a vendor as well as lower incentive compensation.

***Depreciation and Amortization.*** Depreciation and amortization for the first six months of fiscal 2023 increased $82 million, or 6.7%, to $1.3 billion from $1.2 billion for the first six months of fiscal 2022. As a percentage of net sales, depreciation and amortization was 1.6% for the first six months of fiscal 2023 and 1.5% for the first six months of fiscal 2022, primarily reflecting increased depreciation expense from investments in the business and deleverage from a negative comparable sales environment.

### Interest and Other, net

Interest and other, net for the first six months of fiscal 2023 increased $121 million, or 16.2%, to $869 million from $748 million for the first six months of fiscal 2022. As a percentage of net sales, interest and other, net was 1.1% for the first six months of fiscal 2023 and 0.9% for the first six months of fiscal 2022, primarily due to increased variable rate interest on floating rate debt resulting from interest rate swaps, higher debt balances, and deleverage from a negative comparable sales environment, partially offset by higher interest income.

### Provision for Income Taxes

Our combined effective income tax rate was 24.3% for the first six months of fiscal 2023 compared to 24.1% for the first six months of fiscal 2022.

### Diluted Earnings per Share

Diluted earnings per share were $8.46 for the first six months of fiscal 2023, compared to $9.13 for the first six months of fiscal 2022. The decrease in diluted earnings per share was driven by lower net earnings during the first six months of fiscal 2023, partially offset by lower diluted shares due to share repurchases.

### NON-GAAP FINANCIAL MEASURES

To provide clarity on our operating performance, we supplement our reporting with certain non-GAAP financial measures. However, this supplemental information should not be considered in isolation or as a substitute for the related GAAP measures. Non-GAAP financial measures presented herein may differ from similar measures used by other companies.

### Return on Invested Capital

We believe ROIC is meaningful for investors and management because it measures how effectively we deploy our capital base. We define ROIC as NOPAT, a non-GAAP financial measure, for the most recent twelve-month period, divided by average debt and equity. We define average debt and equity as the average of beginning and ending long-term debt (including current installments) and equity for the most recent twelve-month period.

The following table presents the calculation of ROIC, together with a reconciliation of NOPAT to net earnings (the most comparable GAAP measure):

*dollars in millions*

|  | Twelve Months Ended July 30, 2023 | July 31, 2022 |
| --- | ---: | ---: |
| Net earnings | $16,233 | $16,885 |
| Interest and other, net | 1,683 | 1,397 |
| Provision for income taxes | 5,124 | 5,477 |
| Operating income | 23,040 | 23,759 |
| Income tax adjustment (1) | (5,555) | (5,758) |
| NOPAT | $17,485 | $18,001 |
| Average debt and equity | $42,084 | $39,485 |
| ROIC | 41.5% | 45.6% |

*(1) Income tax adjustment is defined as operating income multiplied by our effective tax rate for the trailing twelve months.*

### LIQUIDITY AND CAPITAL RESOURCES

At July 30, 2023, we had $2.8 billion in cash and cash equivalents, of which $1.0 billion was held by our foreign subsidiaries. We believe that our current cash position, cash flow generated from operations, funds available from our commercial paper program, and access to the long-term debt capital markets should be sufficient not only for our operating requirements, any required debt payments, and satisfaction of other contractual obligations, but also to enable us to invest in the business, fund dividend payments, and fund any share repurchases through the next several fiscal years. In addition, we believe that we have the ability to obtain alternative sources of financing, if necessary.

Our material cash requirements include contractual and other obligations arising in the normal course of business. These obligations primarily include long-term debt and related interest payments, operating and finance lease obligations, and purchase obligations.

In addition to our cash requirements, we follow a disciplined approach to capital allocation. This approach first prioritizes investing in the business, followed by paying dividends, with the intent of then returning excess cash to shareholders in the form of share repurchases. For fiscal 2023, we plan to invest approximately $3 billion back into the business in the form of capital expenditures, in line with our expectation of approximately two percent of net sales on an annual basis. However, we may adjust our capital expenditures to support the operations of the business, to enhance long-term strategic positioning, or in response to the economic environment, as necessary or appropriate. Capital expenditures were $1.7 billion for the first six months of fiscal 2023.

In February 2023, we announced a 10% increase in our quarterly cash dividend from $1.90 to $2.09 per share. During the first six months of fiscal 2023, we paid cash dividends of $4.2 billion to shareholders. We intend to pay a dividend in the future; however, any future dividend is subject to declaration by our Board of Directors based on our earnings, capital requirements, financial condition, and other factors considered relevant by our Board of Directors.

In August 2022, our Board of Directors approved a $15.0 billion share repurchase authorization, of which approximately $7.5 billion remained available as of July 30, 2023. In August 2023, our Board of Directors approved a new $15.0 billion share repurchase authorization that replaced the August 2022 authorization and does not have a prescribed expiration date. During the first six months of fiscal 2023, we had cash payments of $5.0 billion for repurchases of our common stock through open market purchases.

### DEBT

We have a commercial paper program that allows for borrowings up to $5.0 billion. In connection with our program, we have back-up credit facilities with a consortium of banks for borrowings up to $5.0 billion, which consist of a five-year $3.5 billion credit facility scheduled to expire in July 2027 and a 364-day $1.5 billion credit facility scheduled to expire in July 2024. In July 2023, we completed the renewal of our 364-day $1.5 billion credit facility, extending the maturity from July 2023 to July 2024. All of our short-term borrowings in the first six months of fiscal 2023 were under our commercial paper program, and the maximum amount outstanding at any time was $1.5 billion. At July 30, 2023, we had no outstanding borrowings under our commercial paper program, and we were in compliance with all of the covenants contained in our credit facilities, none of which are expected to impact our liquidity or capital resources.

We also issue senior notes from time to time as part of our capital management strategy. We did not have any issuances of senior notes during the first six months of fiscal 2023. In April 2023, we repaid $1.0 billion of senior notes at maturity.

The indentures governing our senior notes do not generally limit our ability to incur additional indebtedness or require us to maintain financial ratios or specified levels of net worth or liquidity. The indentures governing our notes contain various customary covenants; however, none are expected to impact our liquidity or capital resources. See Note 4 to our consolidated financial statements for further discussion of our debt arrangements.

### CASH FLOWS SUMMARY

### Operating Activities

Cash flow generated from operations provides us with a significant source of liquidity. Our operating cash flows result primarily from cash received from our customers, offset by cash payments we make for products and services, associate compensation, operations, occupancy costs, and income taxes. Cash provided by or used in operating activities is also subject to changes in working capital. Working capital at any point in time is subject to many variables, including seasonality, inventory management and category expansion, the timing of cash receipts and payments, vendor payment terms, and fluctuations in foreign exchange rates.

Net cash provided by operating activities increased by $5.0 billion in the first six months of fiscal 2023 compared to the first six months of fiscal 2022, primarily driven by changes in working capital, slightly offset by a decrease in net earnings. Changes in working capital were primarily driven by lower inventory purchases in the first six months of fiscal 2023 relative to the first six months of fiscal 2022.

### Investing Activities

Cash used in investing activities increased by $441 million in the first six months of fiscal 2023 compared to the first six months of fiscal 2022, primarily resulting from increased capital expenditures and cash paid for an acquired business during fiscal 2023.

### Financing Activities

Cash used in financing activities in the first six months of fiscal 2023 primarily reflected $5.0 billion of share repurchases, $4.2 billion of cash dividends paid, and $1.1 billion of repayments of long-term debt. Cash used in financing activities in the first six months of fiscal 2022 primarily reflected $4.0 billion of share repurchases, $3.9 billion of cash dividends paid, $2.4 billion of repayments of long-term debt, and $496 million of net repayments of short-term debt, partially offset by $4.0 billion of net proceeds from long-term debt.

### CRITICAL ACCOUNTING ESTIMATES

During the first six months of fiscal 2023, there were no changes to our critical accounting estimates or our significant accounting policies as disclosed in the 2022 Form 10-K. Our significant accounting policies are disclosed in Note 1 to our consolidated financial statements.

### ADDITIONAL INFORMATION

For information on accounting pronouncements that have impacted or are expected to materially impact our consolidated financial condition, results of operations, or cash flows, see Note 1 to our consolidated financial statements.

## Market risk

As filed, 693 characters.

Our exposure to market risk results primarily from fluctuations in interest rates in connection with our long-term debt portfolio. We are also exposed to risks from foreign currency exchange rate fluctuations on the translation of our foreign operations into U.S. dollars and on the purchase of goods by these foreign operations that are not denominated in their local currencies. Additionally, we may experience inflation and deflation related to our purchase and sale of certain commodity products. There have been no material changes to our exposure to market risks, including the types of instruments we use to manage our exposure to such risks, from those disclosed in the 2022 Form 10-K.

## Controls and procedures

As filed, 980 characters.

Under the direction and with the participation of our Chief Executive Officer and Chief Financial Officer, we evaluated our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) and concluded that our disclosure controls and procedures were effective as of July 30, 2023.

We are in the process of an ongoing business transformation initiative, which includes upgrading and migrating certain accounting and finance systems. We plan to continue to migrate additional business processes over the course of the next few years and have modified and will continue to modify the design and implementation of certain internal control processes as the transformation continues.

Except as described above, there were no other changes in our internal control over financial reporting during the fiscal quarter ended July 30, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 601 characters.

In addition to the other information set forth in this report, you should carefully consider the factors discussed under Part I, Item 1A, “Risk Factors” and elsewhere in the 2022 Form 10-K. These risks and uncertainties could materially and adversely affect our business, consolidated financial condition, results of operations, or cash flows. Our operations could also be affected by additional factors that are not presently known to us or by factors that we currently do not consider material to our business. There have been no material changes in the risk factors discussed in the 2022 Form 10-K.

Filed Aug 22, 2023.
Source: SEC EDGAR, the filing index for accession 0000354950-23-000185. Last ingested by Listed: Oct 24, 2026, 14:56 ET. No prices; not investment advice.