The Home Depot, Inc (HD) Q2 2021 Earnings Call Transcript

The Home Depot, Inc (NYSE: HD) Q2 2021 earnings call dated Aug. 17, 2021.

Corporate Participants:

Isabel Janci — Vice President, Investor Relations

Craig Menear — Chairman and Chief Executive Officer

Ted Decker — President & Chief Operating Officer

Richard McPhail — Chief Financial Officer & Executive Vice President

Analysts:

Simeon Gutman — Morgan Stanley — Analyst

Michael Lasser — UBS — Analyst

Chuck Grom — Gordon Haskett — Analyst

Karen Short — Barclays — Analyst

Brian Nagel — Oppenheimer — Analyst

Zach Fadem — Wells Fargo — Analyst

Liz Suzuki — Bank of America — Analyst

Christopher Horvers — J.P. Morgan — Analyst

Kate McShane — Goldman Sachs — Analyst

Greg Melich — Evercore — Analyst

David Belanger — Wolfe Research — Analyst

Laura Champine — Loop Capital — Analyst

Eric Bosshard — Cleveland Research — Analyst

Presentation:

Operator

Greetings, and welcome to the Home Depot’s Second Quarter 2021 Earnings Call. [Operator Instructions]

It is now my pleasure to introduce your host, Isabel Janci. Please go ahead.

Isabel Janci — Vice President, Investor Relations

[Technical Issues] quarter 2021 earnings call.

Joining us on our call today are Craig Menear, Chairman and CEO; Ted Decker, President and Chief Operating Officer; and Richard McPhail, Executive Vice President and Chief Financial Officer. Following our prepared remarks, the call will be opened for questions. Questions will be limited to analysts and investors, and as a reminder, please limit yourself to one question with one follow-up. If we are unable to get to your question during the call, please call Investor Relations at 770-384-2387.

Before I turn the call over to Craig, let me remind you that today’s press release and the presentations made by our executives include forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. These statements are subject to risks and uncertainties that could cause actual results to differ materially from our expectations and projections. These risks and uncertainties include, but are not limited to, the factors identified in the release and in our filings with the Securities and Exchange Commission. Today’s presentations will also include certain non-GAAP measures. Reconciliation of these measures is provided on our website.

Now let me turn the call over to Craig.

Craig Menear — Chairman and Chief Executive Officer

Thank you, Isabel, and good morning, everyone.

We appreciate you joining us on our call this morning. We were pleased with our performance in the second quarter as we achieved over $40 billion in quarterly sales for the first time in our history. Sales for the second quarter were $41.1 billion, up 8.1% from last year. Comp sales were up 4.5% from last year, with US comps of a positive 3.4%. Diluted earnings per share were $4.53 in the second quarter, up from $4.02 in the second quarter of last year.

The strong underlying demand across the business continues. During the second quarter, we did observe some changing consumer patterns in the US as the US economy opened up. This has manifested itself in several ways. We have seen a shift in pattern of sales within the week as our weekday sales performance has actually strengthened relative to the weekend. We attributed this to consumers returning to travel and other recreational activities. And while the consumer is returning to pre-pandemic activities, we continue to see them engage in home improvement projects. We also see customers more comfortable taking on larger projects as evidenced by the continued strength with our Pro customer, which outpaced the DIY customer for the second quarter in a row. We remained agile and flexible and were pleased with our ability to respond to strong home improvement demand and comp the comp in the second quarter. We had positive comps every week despite unprecedented compares last year and grew sales by $3.1 billion in the second quarter and more than $12 billion year to date. Over the last six quarters, we have grown the business by more than $34 billion, a level unmatched in our market.

From a geographic perspective, 15 of our 19 US regions posted positive comps versus last year. On a two-year stack basis, all 19 regions saw strong double-digit comp growth. However, unlike the past four quarters, the second quarter, we did experience some variability in performance from a geographic perspective. The variability in our regional performance is driven by our Northern Division, where we saw a more pronounced shift in sales with stronger sales and outdoor seasonal categories during the first quarter. Mexico posted double digit positive comps, and despite significant customer restrictions during the quarter due to COVID-19, Canada posted comps that were essentially flat in local currency.

We continue to effectively manage the strong demand for home improvement products despite significant industry disruptions in supply chains. We are leveraging the scale of our supply chain and partnership with our vendors to prioritize key SKUs in high-demand categories, and while our in-stocks are not where we want them to be, they have improved from where they were a year ago, and our network continues to flow goods remarkably well thanks to the investments we have made in our supply chain over a number of years.

The team continues to make progress on building out our One Home Depot supply chain vision. We remain largely on track with our plans, with the critical mass of buildings scheduled to come online this year and next. We believe that the network we are building is unique to the market. It will not only enhance the customer experience from a delivery standpoint but also expand the breadth and depth of our current opportunity set, drive efficiency end-to-end and leverage our scale to further extend our low-cost position in home improvement. In the near term, we remain focused on being flexible and agile as we navigate this dynamic environment, but we also continue to leverage the momentum of our strategic investments to further enhance interconnected shopping experience in support of our goals to drive growth faster than the market in any environment, further strengthen our position as a low-cost provider in home improvement with a relentless focus on productivity and efficiency and deliver exceptional shareholder value.

Throughout all the events of the past 18 months, our culture has remained our North Star. In fact, I recently spent time with a number of new associates that we have hired in the past year and was struck by how engaged and connected these associates were to The Home Depot culture. They were onboarded during a time when our stores and teams were busier than ever, but our associates took the time to get to know these new folks and share what it means to be part of the Orange-Blended family. Our ability to invest for the future while also managing the most fluid environment in our Company history is a direct result of our associates and their extraordinary efforts. I want to close by thanking them for the many ways they continue to live our values by serving our customers, communities and each other.

And with that, let me turn the call over to Ted.

Ted Decker — President & Chief Operating Officer

Thanks, Craig, and good morning, everyone.

I want to start by also thanking all of our associates and supplier partners for their commitment to serving our customers and communities. As you heard from Craig, during the second quarter, we continued to see strong performance in our business, particularly as we lapped the significant growth in the same period last year. We were able to meet strong customer demand despite ongoing pressures throughout the supply chain. Raw material shortages, production constraints and pressures across modes of transportation are creating a difficult supply chain environment. That being said, our performance would not be possible without the cross-functional efforts by our supply chain, merchandising, store and MET teams as we continued to flow record volumes of goods week after week.

Over the course of the pandemic, you’ve heard us talk about a number of initiatives we’ve implemented, many in concert with our suppliers to improve our in-stock positions and get product to our customers, and our teams continue to use our culture and values to guide our decisions. One of our values is entrepreneurial spirit, which is alive and well at The Home Depot. Our supply chain teams recently leveraged our scale and flexibility to arrange for several container vessels for our exclusive use, yet another way our team has found a creative solution to better serve our customers in this dynamic environment. While our in-stock levels are still not where we want them to be, we are maintaining the improvements we made over the last few quarters and building depth in key categories, as evidenced by inventory growing faster than sales compared to the same period last year.

Turning to our comp performance. During the second quarter, 10 of our 14 merchandising departments posted positive comps, led by kitchen and bath and lumber. During the second quarter of this year, we saw single-digit negative comps in paint, hardware and indoor and outdoor garden. It is important to note that these were some of our strongest performing departments during the second quarter of last year. On a two-year stack basis, each of our departments posted healthy double-digit comps. Our comp average ticket increased 11.3% and comp transactions decreased 6%. The growth in our comp average ticket was driven in part by inflation in certain categories, notably lumber. On a two-year stack basis, both comp average ticket and comp transactions were healthy and positive.

This was another historic quarter for lumber price volatility. During the first few weeks of the second quarter, prices for both framing and panel lumber reached all-time highs before quickly falling from their peaks. As an example, during the second quarter framing lumber peaked at approximately $1,500 per 1000 board feet before falling over $1,000 to approximately $500 while pricing for both framing and panel has come down from the peaks. The average price during the second quarter was still significantly higher than the same period last year. Inflation from core commodity categories positively impacted our average ticket growth by approximately 420 basis points during the second quarter. Big ticket comp transactions or those over $1,000 were up approximately 24% compared to the second quarter of last year. We saw big ticket strength across many Pro-heavy categories like lumber, vinyl plank flooring, gypsum and pipe and fittings.

During the second quarter, Pro sales growth outpaced DIY growth for the second quarter in a row. On a two-year stack basis, growth with our Pro and DIY customers was consistent and strong. We’re encouraged by the momentum we are seeing with our Pros. Growth with our larger Pros continues to outpace that of our smaller Pros and they tell us that their backlogs are long and growing. In fact, the National Association of Homebuilders Remodeling Index hit all-time highs during the second quarter, and during the quarter we saw many of our customers turn to Pros to help them with larger renovation projects. This can be seen in the strength of several of our kitchen and bath categories like in-stock kitchens, tubs and showers and vanities, all of which posted one year and two-year comps above the Company average.

Sales leveraging our digital platforms were essentially flat during the second quarter as we lapped digital sales growth of approximately 100% in the second quarter of last year. On a two-year stack basis, sales from our digital platforms increased approximately 100%. We’re thrilled with the customer engagement across our interconnected platforms. We know the vast majority of our customers engage with us in an interconnected manner, whether it be through project inspiration and research, transacting, fulfillment or support, our customers blend the physical and digital worlds. And while customers have gotten more comfortable buying online, we’ve never been more confident in the importance of our physical stores as they remain the center of our customer experience due to the project nature of our business. For those customers that chose to transact with us online during the second quarter, more than 55% of our online orders were fulfilled through our stores, a testament to the power of our interconnected retail strategy.

As we look forward to the back half of the year, we know our Pros are busy and we are working hard to secure the best products to help our Pros get their jobs done. Last quarter, we highlighted several exclusive products for our Pro customers. This quarter, we’re excited to announce a new big box home improvement exclusive relationship with LP Building Solutions, a top provider of OSP panel boards. In addition, we are pleased with the momentum we are seeing with our Pro Xtra loyalty program. Several quarters ago, we launched Pro Xtra, and we’ve been thrilled with the membership take-up and engagement we are seeing. Pro Xtra offers more frequent touch points with our Pros and convenient services like purchase tracking and volume pricing along with other benefits. In addition, all Pro Xtra members are now able to access our B2B Pro online experience, offering Pros more personalization on homedepot.com. During the third quarter, we are also thrilled to announce the rollout of what we believe is the most innovative paint offering in years through our exclusive relationship with BEHR. BEHR DYNASTY is a brand new, four-in-one interior paint that offers DIYers, pro painters and design professionals a unique product exclusively from The Home Depot. It is our most stain repellent, scuff-resistant, fast-drying, one coat coverage paint, all in one can.

With that, I’d like to turn the call over to Richard.

Richard McPhail — Chief Financial Officer & Executive Vice President

Thank you, Ted, and good morning, everyone.

In the second quarter, total sales were $41.1 billion, an increase of $3.1 billion or 8.1% from last year. Foreign exchange rates positively impacted total sales growth by approximately $385 million. During the second quarter, our total Company comps were positive 4.5%, with positive comps in all three months. During the quarter, we saw total Company comps of 4.7% in May, 3.9% in June and 4.9% in July. Comps in the US were positive 3.4% for the quarter, with comps of 3.1% in May, 2.7% in June and 4.3% in July. In the second quarter, our gross margin was 33.2%, a decrease of approximately 80 basis points from the same period last year. While there are many factors that impact gross margin, the year-over-year change during the second quarter was primarily driven by lumber, which accounted for approximately 60 basis points of pressure. In addition, several other factors negatively impacted our gross margin, including rising transportation costs, One Supply Chain investments and lapping a benefit from canceled events in the second quarter of last year.

During the second quarter, operating expense as a percent of sales decreased approximately 100 basis points to 17.1%. Our operating leverage during the second quarter reflects significant COVID-related expenses that we incurred in the second quarter of 2020 to support our associates. These expenses were partially offset by underspend in other expense items in the second quarter of last year, most notably payroll, as we staffed up to meet the strong demand. Our operating expenses during the second quarter of this year also include wage investments that we made at the end of 2020. Our operating margin for the second quarter was 16.1%, an increase of approximately 20 basis points from the second quarter of 2020. Interest and other expense for the second quarter decreased by $16 million to $321 million.

In the second quarter, our effective tax rate was 23.9%, down from 24.4% in the second quarter of fiscal 2020. Our diluted earnings per share for the second quarter were $4.53, an increase of 12.7% compared to the second quarter of 2020.

At the end of the quarter, inventories were $18.9 billion, up $5.4 billion from last year, and inventory turns were 5.7 times compared with 6.1 times this time last year.

Turning to capital allocation. After investing in our business, it is our intent to return excess cash to shareholders in the form of dividends and share repurchases. During the second quarter, we invested approximately $520 million back into our business in the form of capital expenditures. And during the quarter, we paid approximately $1.75 billion in dividends to our shareholders, and we returned approximately $3 billion to shareholders in the form of share repurchases. Computed on the average of beginning and ending long-term debt and equity for the trailing 12 months, return on invested capital was approximately 44.7%, up from 41.1% in the second quarter of fiscal 2020.

As you heard from Craig, we are very pleased with the strong performance we saw during the second quarter, particularly as we lapped the unprecedented growth we saw this time last year. And while these challenging compares continue through the back half of the year, we are encouraged by what we’re seeing. During the first two weeks of August, we’ve seen comps in the US consistent with the second quarter. Customer engagement and demand for home improvement is healthy. Housing remains strong and we see a supportive environment for home improvement spending as we look out over the next several years. That said, there is still a significant amount of uncertainty in the broader environment as it relates to the evolution of the COVID-19 pandemic and the new and spreading variants. As we’ve previously shared, we do not believe we can accurately predict how the external environment will evolve and how it will ultimately impact consumer spending. We will continue to execute with flexibility and focus on what has driven our successful performance.

Longer-term, we remain committed to what we believe is the winning formula for our customers, our associates and our shareholders. We intend to provide the best customer experience in home improvement, we intend to extend our position as the low-cost provider and we intend to be the most efficient investor of capital in home improvement. If we do these things, we believe we will continue to grow faster than our market and we will deliver exceptional value to our shareholders.

Thank you for your participation in today’s call. And, Christine, we will now open the call for questions.

Questions and Answers:

Operator

[Operator Instructions] Our first question comes from the line of Simeon Gutman with Morgan Stanley. Please proceed with your question.

Simeon Gutman — Morgan Stanley — Analyst

Thanks, everyone. Good morning. Hi, Craig. Hey, Richard. I wanted to ask — maybe I’ll ask this every quarter for now. I wanted to ask about home improvement demand, whether it has to digest the next couple of years or we can keep compounding? And I think Richard just mentioned in his comments, like expecting several years of healthy demand ahead. So curious if your thoughts have evolved on the next couple of years, given the massive growth we’ve had over the past two.

Craig Menear — Chairman and Chief Executive Officer

Simeon, when we look at the overall backdrop for support in home improvement, from a housing perspective, from the remodeling index, we feel pretty good about the long-term outlook for home improvement. Hard to predict the short term, but the longer-term outlook looks solid. Richard, I don’t know if you want you add.

Richard McPhail — Chief Financial Officer & Executive Vice President

You just — you look at the — we believe that home price appreciation is a fundamental support of home improvement activity and demand. As your home becomes more valuable, you are more likely to spend more on it. We are at a point now where the housing stock of the United States is over 20% more valuable than it was two years ago. And so, as we — as we look forward, not only have we seen that home price appreciation, but the homeowner balance sheet is incredibly healthy, the state of mortgage finance is incredibly healthy and so that’s why — some of the reasons why we’re optimistic.

Simeon Gutman — Morgan Stanley — Analyst

That’s helpful. And then one near-term question. The second half outlook for gross margin. Does this dynamic that occurred in the second quarter, does it ease, allowing the gross margin to improve in the back — if not improve, but at least the rate of change improve from what happened in the second quarter?

Richard McPhail — Chief Financial Officer & Executive Vice President

I’d say we’re focused on executing week to week here. There are certainly cost pressures in the environment. And I think we’re all dealing with that. But we’ve dealt with that throughout our history, and we are comfortable with our ability to manage through the cost environment effectively.

Craig Menear — Chairman and Chief Executive Officer

Simeon, I think there are some very unique scenarios obviously in the quarter, lumber being the one as Richard called out. Unprecedented level of drop and unprecedented speed with which it drops. Normally, the only impact you have is from mix. But with the rapid decline and the extent of the decline — we always have a philosophy that we want to lead the market down and lag going up, to remain as competitive as possible for our customers, and that actually created an impact which in this quarter was unique that we normally don’t see.

Richard McPhail — Chief Financial Officer & Executive Vice President

And I’d make another comment, which is the shape of the business given the volume that is coming through our system is not predictable. But we know we’re confident that we are taking share, and we’re there to meet the demand that we see from our customer. That mix may have an impact, but when we look at the operating profit dollar growth we’re generating as a company, we feel great about it. So we’re looking more at driving market share capture and driving that operating profit dollar growth.

Simeon Gutman — Morgan Stanley — Analyst

Thank you.

Operator

Our next question comes from the line of Michael Lasser with UBS. Please proceed with your question.

Michael Lasser — UBS — Analyst

Good morning. Thanks a lot for taking my question. How should the trend that you outlined with diverging performance on the weekdays versus the weekends inform how we think about the DIY business moving forward? Do you attribute that to more of a temporary condition where consumers had pent-up demand to go on vacation this summer and they returned to projects in the fall, or alternatively, as families returned to traditional activities like sports, watching college and pro sports and gradually returning to the office, it’s going to put accelerating pressure on the DIY business? And do you think there is enough strength and pent-up demand for the Pro segment that it can offset that?

Craig Menear — Chairman and Chief Executive Officer

Hey, Michael, it’s a great question. It’s something we’re watching carefully as the consumer gets back to more normal environments. What we did see is, the consumers — and our research would suggest this as well — consumers are taking on more projects. They are larger projects and have a tenancy to hire a pro to do them. And as a result, we’ve seen our Pro business strengthen for several quarters in a row, with the last two quarters where the Pro outperformed the DIY customers for the first time since the pandemic started. And so we’re very optimistic about where the Pro business goes and the strength of that Pro business. And we’re focused on making sure that we can take care of those Pros along with our — with our DIY customers. But feel like there is solid opportunity to continue to grow. Pros tell us their backlogs are bigger than ever. Consumers continue to tell us the home is more important than ever and that they have a laundry list of projects.

Michael Lasser — UBS — Analyst

That’s all helpful, Craig, and you’re going to have this funky dynamic where maybe the Pro business is good, maybe the DIY business decelerates from here, and how is that going to impact your labor model which is activity based. So if comps do turn negative in the back half, how quickly can you flex that and how well is it fine-tuned for this dynamic where you might have a decline in DIY transactions, you may actually not need as much labor, so you can actually save some SG&A dollars on that?

Craig Menear — Chairman and Chief Executive Officer

Yeah, Michael, you hit it on the head in terms of, our labor model is an activity based model, which has a component in there of transaction. So we can adjust relatively quickly. It’s a short cycle model, and we’ll make the appropriate adjustments as we go. We plan out a few weeks in advance.

Michael Lasser — UBS — Analyst

Okay. Thank you very much and good luck.

Craig Menear — Chairman and Chief Executive Officer

Thank you.

Operator

Our next question comes from the line of Chuck Grom with Gordon Haskett. Please proceed with your question.

Chuck Grom — Gordon Haskett — Analyst

Hey, good morning. I was wondering if you guys could elaborate a little bit more on some of the benefits you expect to see once the One HD Supply Chain that’s built out sometime in 2022.

Ted Decker — President & Chief Operating Officer

Sure. The whole purpose of the supply chain is really our ability to deliver all of our products, parcel and big and bulky to 90% of the US population same and next day. And we’re three plus years into this buildout. We have multiple facilities up of each type that we’re building. They’re all performing well and fulfilling that expectation of being able to deliver and satisfy the customer. Speed and reliability is what’s required, particularly with our Pro customers. In addition, it’s allowing us to expand our assortments from what we carry in our stores. So not only can we get the product in a quicker, more reliable fashion to our customers, we can get a broader assortment to our customers.

And lastly, we were up to $660 a square foot of sales this past quarter in our stores, and it’s just a tremendous amount of activity and cube in that building. So, to be able to get deliveries, particularly the big and bulky deliveries out of the store, that helps our customer flow and our associate activities in the store, and we’re just thrilled with that. In particular, as our FTCs have opened up, we’re relieving tremendous amount of delivery activity and cube flow out of our stores and delivering directly out of the new facilities exactly the way the supply chain team had planned it.

Chuck Grom — Gordon Haskett — Analyst

That’s great. And then just on lumber, curious what you’re seeing from a unit volume perspective as prices dropped throughout the quarter.

Ted Decker — President & Chief Operating Officer

We’ll, clearly when we — when we hit $1,500 plus a 1,000 board feet, people backed out of the market for sure and waited. And it wasn’t that we got a tremendous amount of new supply in the marketplace. I think once you hit that tipping point where people backed off on the margin and prices started to fall, and as Craig said, it was falling so quickly. $100, $150, even $200 a 1,000 board feet per week, people just stepped back even further. That’s now settled at about $430 for framing lumber. And, for sure, at those high levels, we saw an impact to units, our units had turned negative. And as prices have come down, units are still negative, but on a sequential basis, improving and responding to that lower price. So we’re very pleased supply and demand dynamics worked as expected.

Chuck Grom — Gordon Haskett — Analyst

Thank you.

Operator

Our next question comes from the line of Karen Short with Barclays. Please proceed with your question.

Karen Short — Barclays — Analyst

Hi, thanks very much. Just wondering, with respect to inventory, obviously you’re up against comparisons from last year. But looking at overall areas of inventory, is there any area where you think you’re still lacking product? And then, how to think about inventory growth in the second half of the year?

Craig Menear — Chairman and Chief Executive Officer

Yeah. First of all, Karen, let’s say we’re super pleased that we’ve been able to continue to build up, but yet at the same time have incredible inventory productivity at 5.7 turns. So we’re very, very pleased with that. There’s still — we’re in a situation still where we’re not exactly where we want to be from an in-stock perspective. Our suppliers are working hard, but our merchants have worked with our suppliers to kind of narrow the focus on key SKUs. And so there is opportunity still to continue to bring more product in across the breadth of assortment, but right now we’re trying to stay focused on the things that really, really matter.

Ted Decker — President & Chief Operating Officer

And I’d say it’s been a category-by-category story, and as Craig said, we’re trying to build depth in our highest velocity SKUs, we’re trying to build depth in [Indecipherable] quantities for our Pro customers, and that tends to be heavy on the building material side of the business, so lumber, building materials and electrical and plumbing fixtures. And we’ve recovered nicely in all of those departments. But again, it can be category by category. There is a COVID outbreak in a factory; there is a shipping constraint; there is a domestic transportation capacity constraint. So it’s been a story of two steps forward, one step back. But we are making progress, and that’s why we’re happy to lean into inventory. We’re blessed with the financial strength and liquidity. Our goods tend to be nonperishable, not a lot of obsolescence, particularly in our core product. So a lot of this is who has the product, who is going to sell the product, and I think our supply chain and merchants responding as well as they have is one of the reasons we’ve taken so much market share in this environment.

Karen Short — Barclays — Analyst

Okay. That’s helpful. And I just was wondering, on the Pro Xtra loyalty, I was wondering if you’d be willing to give a little update on the number of members in the program. And then any color if you can provide on average spend of members versus non-member Pro or just any metrics that you could provide?

Craig Menear — Chairman and Chief Executive Officer

Yeah. I won’t get into details, but our rough dynamic, about 4%, 5% of our customer base being the Pro, makes up 45% of our sales. So this is a number in the mid-millions of our core Pros. Very strong number of those — percentage of those are in the Pro Xtra program. And now, as I mentioned in my prepared remarks, we are building a B2B website and all of our Pro Xtra members now have been transferred over to that B2B experience. So, with the combination of the benefits that you’re getting with Pro Xtra, we’ve stood up a separate Pro Xtra app that those Pros are using, and the ability to engage on the B2B website which has all sorts of functionality built out specifically for the Pro, so think of bills of material for jobs, tracking jobs, quotes — building quotes, reorder capability, tracking all receipts, preferred pricing in certain instances, all of that is coming together, as well as personalization and building relevance on that Pro B2B website. So think of something like search results. If you are I, would put in flyers. We have 1,000 suppliers that could be returned in that search result. We’re getting to the point now that we know an electrician is performing that search. So we’re going to provide relevance and we’re going to provide our electrical suppliers [Phonetic] as the first results in that search query. So this is just another great add to our Pro ecosystem and just been tremendous engagement with the Pro loyalty app, the Pro Xtra program and now B2B website.

Karen Short — Barclays — Analyst

Great. Thanks very much for all the color.

Operator

Our next question comes from the line of Brian Nagel with Oppenheimer. Please proceed with your question.

Brian Nagel — Oppenheimer — Analyst

Good morning. Thank you for taking my question. So, a couple of questions with regard to sales, and pretty quick ones. But first off, just with respect to lumber, I know you talked about it in your prepared comments and in response from the questions. But could you say to what extent lumber was a benefit to comps this quarter?

Richard McPhail — Chief Financial Officer & Executive Vice President

About $1.3 billion.

Brian Nagel — Oppenheimer — Analyst

Okay. And that was weighed more towards the first — the way it weighs out, that was you know was weighed much more towards the first half of the quarter or early in the quarter I guess said better.

Craig Menear — Chairman and Chief Executive Officer

Yes, Brian, for sure. It was a unbelievable fast fall. But yes, it was — that was heavily geared towards first part of the quarter.

Brian Nagel — Oppenheimer — Analyst

Okay. And then the second question I have, I know this is off of nuance but as you talk about the strength in the Pro business in your conversations, your connections with your Pro customers, do you think that the jobs that are being taken on now, were those jobs that were started during the pandemic and are only now being able to be fulfilled because the Pros have — Pros are available to work or these projects are actually sort of starting right now?

Craig Menear — Chairman and Chief Executive Officer

I think you probably have a combination would be my best guess. Don’t know that for sure, but we know for example when we talk to Pros that they’ve had a backlog for some time. And so I think clearly there is probably some that have been in the works where they’ve been waiting to — customers have been waiting for Pro to start a job and then I think there is probably scenarios where it’s a quicker cycle, but we don’t really have a way of knowing that.

Richard McPhail — Chief Financial Officer & Executive Vice President

The National Association of Homebuilders Index has a lot of interesting survey data within it. One of the survey components is consumer optimism and intent around projects and we have actually seen intent tick up for small projects, medium-size projects and large projects really sort of sequentially through the year. So I think if you kind of take the question off of the backlog and you say what’s the intent, it does seem like that homeowners are leaning into projects and you know — whether it’s a Pro or consumer customer, it all essentially is the same customer demand. So it looks like the trend is strengthening in project demand.

Ted Decker — President & Chief Operating Officer

And I think if you look at our services business as a proxy, we’re certainly seeing that as well as our service business think of these are large projects, carpet installation, cabinet installation, refacing bath, HVAC, those all are strong and accelerating.

Brian Nagel — Oppenheimer — Analyst

Appreciate all the color. Thank you.

Operator

Our next question comes from the line of Zach Fadem with Wells Fargo. Please proceed with your question.

Zach Fadem — Wells Fargo — Analyst

Hey, good morning. So you’re lapping a period of very low promotional activity as you know and given the three major holiday events in Q2 with Memorial Day, Father’s Day, July 4th, could you talk about to what extent these events were a material topline driver in the quarter? And then with respect to gross margin, to what extent did this have an impact in Q2 and how should we think about the promotional impact as that mix is into the gross margin line in the second half?

Ted Decker — President & Chief Operating Officer

I would say our promotions were up from last year, but only because we canceled so many last year. We were on the margin less promotional say than going back to ’19. So while we’re very happy with our events in our sell-through, we had record sell-through in virtually all of our programs. The events were not a huge driver of our comp and it wasn’t — the things Richard called out on our margin impact, it wasn’t particularly meaningful.

Richard McPhail — Chief Financial Officer & Executive Vice President

Wasn’t meaningful.

Zach Fadem — Wells Fargo — Analyst

Got it, that’s helpful. And then Richard, could you talk about how your Pro versus DIY trends performed through the quarter? And if there is any variability in trend from one versus the other and then for Q3, does the commentary that trends are in line during the first two weeks of August, does that also hold for both Pro versus DIY?

Richard McPhail — Chief Financial Officer & Executive Vice President

Well, so we’re not going to break out intra-quarter, it was the second quarter where we saw our Pro customer grow faster than our DIY customer. I’d say in the first two weeks of the quarter not much has changed with respect to the direction of our business.

Zach Fadem — Wells Fargo — Analyst

Got it, appreciate the time.

Operator

Our next question comes from the line of Liz Suzuki with Bank of America. Please proceed with your question.

Liz Suzuki — Bank of America — Analyst

Great, thank you. Could you just give an update on the MRO market and the trends you’re seeing there? I mean you mentioned that your big Pros were outpacing small Pros. So was MRO growth even above that of those big Pros given relatively easier comparisons against last year?

Craig Menear — Chairman and Chief Executive Officer

Liz, we’re very pleased actually with our MRO business and the acquisition of HD Supply. Yeah, the business there is very, very solid. What we’re excited about candidly with that business is the opportunity to much better serve 50 million households in the multi-family space. Not only can we serve them with MRO products, but obviously as we have relationships and build that through our MRO business, the opportunity to then participate in capital refreshes for those property owners on those 50 million households that are in the multi-family is a huge opportunity for Ho