What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-11-22 compared with 2022-08-23 · 88 added, 84 removed, 177 unchanged (49% of the section changed)

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

dollars in millions, except per share data Three Months Ended Six Months Ended

2022 August 1,

2021 July 31,

2022 August 1,

dollars in millions, except per share data Three Months Ended Nine Months Ended

2022 October 31,

2021 October 30,

2022 October 31,

Net sales $ 38,872 $ 36,820 $ 121,572 $ 115,438

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Repurchases of common stock 5,136 10,374

We reported net sales of $43.8 billion in the second quarter of fiscal 2022.

We reported net sales of $38.9 billion in the third quarter of fiscal 2022.

Net earnings were $4.3 billion, or $4.24 per diluted share.

For the first six months of fiscal 2022, net sales were $82.7 billion and net earnings were $9.4 billion, or $9.13 per diluted share.

We did not open or close any stores during the second quarter of fiscal 2022, resulting in a store count of 2,316 at the end of the second quarter of fiscal 2022.

As of July 31, 2022, a total of 311 stores, or 13.4%, were located in Canada and Mexico.

For the second quarter of fiscal 2022, sales per retail square foot were $700.62, and for the first six months of fiscal 2022, sales per retail square foot were $661.27.

Our inventory turnover ratio was 4.5 times at the end of the second quarter of fiscal 2022, compared to 5.7 times at the end of the second quarter of fiscal 2021.

The decrease in our inventory turnover ratio was driven by an increase in average inventory levels during the first half of fiscal 2022 resulting from strategic investments to promote higher in-stock levels and to pull forward merchandise for events in the second half of fiscal 2022 in response to ongoing global supply chain disruption, as well as continued investment in our new supply chain facilities and carry over of some spring seasonal inventory.

We generated $7.2 billion of cash flow from operations and issued $4.0 billion of long-term debt, net of discounts, during the first six months of fiscal 2022.

This cash flow, together with cash on hand, was used to fund cash payments of $4.0 billion for share repurchases and $3.9 billion for dividends.

In addition, we repaid $2.4 billion of long-term debt and $496 million of net short-term debt and funded $1.4 billion in capital expenditures.

For the first nine months of fiscal 2022, net sales were $121.6 billion and net earnings were $13.7 billion, or $13.37 per diluted share.

During the third quarter of fiscal 2022 , we opened one new store in the U.S.

and two new stores in Mexico, and we had no store closures, resulting in a store co unt of 2,319 at the end of the quarter.

As of October 30, 2022, a total of 313 stores, or 13.5% of our total store count, w ere located in Canada and Mexico.

For the third quarter of fiscal 2022, sales per retail square foot were $618.50, and for the first nine months of fiscal 2022, sales per retail square foot were $646.81.

Our inventory turnover ratio was 4.3 times at the end of the third quarter of fiscal 2022, compared to 5.4 times at the end of the third quarter of fiscal 2021.

The decrease in our inventory turnover ratio was driven by an increase in average inventory levels during the first nine months of fiscal 2022 resulting from strategic investments to promote higher in-stock levels and pull forward merchandise in response to ongoing global supply chain disruption, as well as continued investment in our new supply chain facilities and carry over of some spring seasonal inventory.

We generated $10.0 billion of cash flow from operations and issued $6.9 billion of long-term debt, net of discounts, during the first nine months of fiscal 2022.

This cash flow, together with cash on hand, was used to fund cash payments of $5.9 billion for dividends and $5.1 billion for share repurchases.

In addition, we repaid $2.4 billion of long-term debt and $1.0 billion of net short-term debt and funded $2.2 billion in capital expenditures.

In February 2022, we announced a 15% increase in our quarterly cash dividend to $1.90 per share.

Our ROIC for the trailing twelve-month period was 45.6% at the end of the second quarter of fiscal 2022 and 44.7% at the end of the second quarter of fiscal 2021.

Our ROIC for the trailing twelve-month period was 43.3% at the end of the third quarter of fiscal 2022 and 43.9% at the end of the third quarter of fiscal 2021.

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).

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Three Months Ended

July 31, 2022 August 1, 2021

October 30, 2022 October 31, 2021

dollars in millions $ % of

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Selected financial and sales data:

2022 August 1,

2022 October 31,

2021 % Change

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

Net sales for the second quarter of fiscal 2022 increased $2.7 billion, or 6.5%, to $43.8 billion from $41.1 billion for the second quarter of fiscal 2021.

The increase in net sales for the second quarter of fiscal 2022 primarily reflected the impact of positive comparable sales driven by an increase in comparable average ticket, partially offset by a decrease in comparable customer transactions.

A stronger U.S.

dollar negatively impacted net sales by $129 million in the second quarter of fiscal 2022.

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 13.9% of net sales during the second quarter of fiscal 2022 and grew by 12.0% compared to the second quarter of fiscal 2021.

The increase in online sales for the second quarter of fiscal 2022 was a result of customers continuing to leverage our digital platforms and reflects our ongoing investments to enhance these platforms and related fulfillment capabilities, which support our interconnected retail strategy.

Net sales for the third quarter of fiscal 2022 were $38.9 billion, an increase of 5.6% from $36.8 billion for the third quarter of fiscal 2021.

The increase in net sales for the third quarter of fiscal 2022 primarily reflected the impact of positive comparable sales driven by an increase in comparable average ticket, partially offset by a decrease in comparable customer transactions.

A strong er U.S.

dollar negatively impacted net sales by $132 million in the third quarter of fiscal 2022.

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 13.3% of net sales during the third quarter of fiscal 2022 and grew by 9.6% compared to the third quarter of fiscal 2021.

The increase in online sales for the third quarter of fiscal 2022 was a result of customers continuing to leverage our digital platforms and reflects our ongoing investments to enhance these platforms and related fulfillment capabilities, which support our interconnected retail strategy.

Comparable Sales.

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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 2022 increased 5.8%, reflecting a 9.0% increase in comparable average ticket, partially offset by a 3.1% decrease in comparable customer transactions compared to the second quarter of fiscal 2021.

The increase in comparable average ticket was primarily driven by inflation, as well as demand for new and innovative products.

While comparable customer transactions were negative during the second quarter of fiscal 2022, transactions improved compared to the first quarter of fiscal 2022 as spring broke across the country.

During the second quarter of fiscal 2022, all of our merchandising departments posted positive comparable sales compared to the second quarter of fiscal 2021.

Our Building Materials, Plumbing, Millwork, Paint, and Hardware departments posted comparable sales above the Company average.

Gross profit for the second quarter of fiscal 2022 increased 6.0% to $14.5 billion from $13.7 billion for the second quarter of fiscal 2021.

Gross profit as a percentage of net sales, or gross profit margin, was 33.1% for the second quarter of fiscal 2022 compared to 33.2% for the second quarter of fiscal 2021.

The decrease in gross profit margin during the second quarter of fiscal 2022 was primarily driven by investments in our supply chain network and higher product and transportation costs offset by the benefit from higher retail prices.

Total comparable sales for the third quarter of fiscal 2022 increased 4.3%, reflecting an 8.8% increase in comparable average ticket, partially offset by a 4.4% decrease in comparable customer transactions compared to the third quarter of fiscal 2021.

The increase in comparable avera ge ticket was primarily driven by inflation, as well as demand for new and innovative pro ducts.

The decrease in comparable customer transactions reflects the impact of macroeconomic factors including the broader inflationary environment.

During the third quarter of fiscal 2022, 11 of our 14 merchandising departments posted positive comparable sales compared to the third quarter of fiscal 2021, led by Building Materials, Plumbing, Lumber, Millwork, Paint, and Hardware, which posted comparable sales above the Company average.

Our Appliances, Flooring, and Indoor Garden departments posted negative comparable sales.

Gross profit for the third quarter of fiscal 2022 increased 5.3% to $13.2 billion from $12.6 billion for the third quarter of fiscal 2021.

Gross profit as a percentage of net sales, or gross profit margin, was 34.0% for the third quarter of fiscal 2022 compared to 34.1% for the third quarter of fiscal 2021.

The decrease in gross pr ofit margin during the third quarter of fiscal 2022 was primarily driven by investments in our supply chain network and higher product and transportation costs, offset by the benefit from higher retail prices.

Operating Expenses

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Selling, General & Administrative.

SG&A for the second quarter of fiscal 2022 increased $224 million, or 3.5%, to $6.7 billion from $6.4 billion for the second quarter of fiscal 2021.

As a percentage of net sales, SG&A was 15.2% for the second quarter of fiscal 2022 compared to 15.6% for the second quarter of fiscal 2021, primarily reflecting leverage from a positive comparable sales environment and strong expense management, partially offset by wage investments for hourly associates and increased operational costs, including investments designed to drive efficiencies in our stores.

SG&A for the third quarter of fiscal 2022 increased $300 million, or 4.9%, to $6.5 billion from $6.2 billion for the third quarter of fiscal 2021.

As a percentage of net sales, SG&A was 16.6% for the third quarter of fiscal 2022 compared to 16.8% for the third quarter of fiscal 2021, primarily reflectin g leverage from a positive comparable sales environment and lower incentive compensation, partially offset by wage investments for hourly associates and increased operational costs, including investments designed to drive efficiencies in our stores.

Depreciation and Amortization.

Depreciation and amortization for the second quarter of fiscal 2022 increased $23 million, or 3.9%, to $616 million from $593 million for the second quarter of fiscal 2021.

As a percentage of net sales, depreciation and amortization was 1.4% for the second quarter of both fiscal 2022 and fiscal 2021, primarily reflecting leverage from a positive comparable sales environment, offset by increased depreciation expense from strategic investments in the business.

Depreciation and amortization for the third quarter of fiscal 2022 increased $8 million, or 1.3%, to $608 million from $600 million for the third quarter of fiscal 2021.

As a percentage of net sales, depreciation and amortization was 1.6% for the third quarter of both fiscal 2022 and fiscal 2021 , primarily reflecting leverage from a positive comparable sales environment, offset by increased depreciation expense from strategic investments in the business.

Interest and Other, net

Interest and other, net, was $379 million for the second quarter of fiscal 2022 compared to $321 million for the second quarter of fiscal 2021.

Interest and other, net, as a percentage of net sales was 0.9% for the second quarter of fiscal 2022 compared to 0.8% for the second quarter of fiscal 2021, primarily reflecting higher interest expense due to higher debt balances during the second quarter of fiscal 2022, partially offset by leverage from a positive comparable sales environment.

Interest and other, net, was $406 million for the third quarter of fiscal 2022 compared to $326 million for the third quarter of fiscal 2021.

Interest and other, net, as a percentage of net sales was 1.0% for the third quarter of fiscal 2022 compared to 0.9% for the third quarter of fiscal 2021, primarily reflecting higher interest expense due to higher debt balances and increased variable rate interest from our interest rate swaps during the third quarter of fiscal 2022, partially offset by leverage from a positive comparable sales environment.

Provision for Income Taxes

Our combined effective income tax rate was 24.3% for the second quarter of fiscal 2022 compared to 23.9% for the second quarter of fiscal 2021.

Our combined effective income tax rate was 24.4% for the third quarter of fiscal 2022 compared to 24.5% for the third quarter of fiscal 2021.

Diluted Earnings per Share

Diluted earnings per share were $5.05 for the second quarter of fiscal 2022 compared to $4.53 for the second quarter of fiscal 2021.

The increase in diluted earnings per share was driven by higher net earnings during the second quarter of fiscal 2022, as well as lower diluted shares due to share repurchases.

FISCAL 2022 AND FISCAL 2021 SIX MONTH COMPARISONS

Six Months Ended

July 31, 2022 August 1, 2021

Diluted earnings per share were $4.24 for the third quarter of fiscal 2022 compared to $3.92 for the third quarter of fiscal 2021 .

The increase in diluted earnings per share was driven by higher net earnings during the third quarter of fiscal 2022, as well as lower diluted shares due to share repurchases.

FISCAL 2022 AND FISCAL 2021 NINE MONTH COMPARISONS

Nine Months Ended

October 30, 2022 October 31, 2021

dollars in millions $ % of

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Certain percentages may not sum to totals due to rounding.

Six Months Ended

Nine Months Ended

Selected financial and sales data:

2022 August 1,

2022 October 31,

2021 % Change

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

Net sales for the first six months of fiscal 2022 increased 5.2% to $82.7 billion from $78.6 billion for the first six months of fiscal 2021.

The increase in net sales for the first six months of fiscal 2022 primarily reflected the impact of positive comparable sales driven by an increase in comparable average ticket, partially offset by a decrease in comparable customer transactions.

Net sales for the first nine months of fiscal 2022 were $121.6 billion, an increase of 5.3% from $115.4 billion for the first nine months of fiscal 2021.

The increase in net sales for the first nine months of fiscal 2022 primarily reflected the impact of positive comparable sales driven by an increase in comparable average ticket, partially offset by a decrease in comparable customer transactions .

A stronger U.S.

dollar negatively impacted net sales by $152 million for the first six months of fiscal 2022.

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 14.1% of net sales during the first six months of fiscal 2022 and grew by 7.9% compared to the first six months of fiscal 2021.

The increase in online sales for the first six months of fiscal 2022 was a result of customers continuing to leverage our digital platforms and reflects our ongoing investments to enhance these platforms and related fulfillment capabilities, which support our interconnected retail strategy.

dollar negatively impacted net sales by $284 million for the first nine months of fiscal 2022.

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 13.8% of net sales during the first nine months of fiscal 2022 and grew by 8.4% compared to the first nine months of fiscal 2021.

The increase in online sales for the first nine months of fiscal 2022 was a result of customers continuing to leverage our digital platforms and reflects our ongoing investments to enhance these platforms and related fulfillment capabilities, which support our interconnected retail strategy.

Comparable Sales.

Total comparable sales for the first six months of fiscal 2022 increased 4.1%, reflecting a 10.0% increase in comparable average ticket, partially offset by a 5.7% decrease in comparable customer transactions compared to the first six months of fiscal 2021.

Total comparable sales for the first nine months of fiscal 2022 increased 4.2%, reflecting a 9.7% increase in comparable average ticket, partially offset by a 5.3% decrease in comparable customer transactions compared to the first nine months of fiscal 2021.

The increase in comparable average ticket was primarily driven by inflation, as well as demand for new and innovative products.

The decrease in comparable customer transactions reflects the impact of cycling favorable weather and government stimulus during the first six months of fiscal 2021.

During the first six months of fiscal 2022, 12 of our 14 merchandising departments posted positive comparable sales, led by Plumbing, Building Materials, Millwork, and Paint when compared to the first six months of fiscal 2021.

Our Indoor and Outdoor Garden departments posted single-digit negative comparable sales.

Gross profit for the first six months of fiscal 2022 increased 4.6% to $27.6 billion from $26.4 billion for the first six months of fiscal 2021.

Gross profit as a percentage of net sales, or gross profit margin, was 33.4% for the first six months of fiscal 2022 compared to 33.6% for the first six months of fiscal 2021.

The decrease in gross profit margin during the first six months of fiscal 2022 was primarily driven by investments in our supply chain network and higher product and transportation costs offset by the benefit from higher retail prices.

The decrease in comparable customer transactions reflects the impact of macroeconomic factors including the broader inflationary environment, as well as cycling favorable weather and government stimulus during the first nine months of fiscal 2021.

During the first nine months of fiscal 2022, 11 of our 14 merchandising departments posted positive comparable sales when compared to the first nine months of fiscal 2021, led by Building Materials, Plumbing, Millwork, Paint, Hardware, and Kitchen and Bath, which posted comparable sales above the Company average.

Our Indoor Garden, Outdoor Garden and Appliances departments posted negative comparable sales.

Gross profit for the first nine months of fiscal 2022 increased 4.8% to $40.9 billion from $39.0 billion for the first nine months of fiscal 2021.

Gross profit as a percentage of net sales, or gross profit margin, was 33.6% for the first nine months of fiscal 2022 compared to 33.8% for the first nine months of fiscal 2021.

The decrease in gross profit margin during the first nine months of fiscal 2022 was primarily driven by investments in our supply chain network and higher product and transportation costs, offset by the benefit from higher retail prices.

Operating Expenses

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Selling, General & Administrative.

SG&A for the first six months of fiscal 2022 increased $460 million, or 3.6% to $13.3 billion from $12.8 billion for the first six months of fiscal 2021.

As a percentage of net sales, SG&A was 16.0% for the first six months of fiscal 2022 compared to 16.3% for the first six months of fiscal 2021, primarily reflecting leverage from a positive comparable sales environment and strong expense management, partially offset by wage investments for hourly associates and increased operational costs, including investments designed to drive efficiencies in our stores.

SG&A for the first nine months of fiscal 2022 increased $760 million, or 4.0% to $19.7 billion from $19.0 billion for the first nine months of fiscal 2021.

As a percentage of net sales, SG&A was 16.2% for the first nine months of fiscal 2022 compared to 16.4% for the first nine months of fiscal 2021, primarily reflecting leverage from a positive comparable sales environment and lower incentive compensation, partially offset by wage investments for hourly associates and increased operational costs, including investments designed to drive efficiencies in our stores.

Depreciation and Amortization.

Depreciation and amortization for the first six months of fiscal 2022 increased $42 million, or 3.6% to $1.2 billion.

As a percentage of net sales, depreciation and amortization was 1.5% for the first six months of both fiscal 2022 and fiscal 2021, reflecting leverage from a positive comparable sales environment, offset by increased depreciation expense from strategic investments in the business.

Depreciation and amortization for the first nine months of fiscal 2022 increased $50 million, or 2.8% to $1.8 billion.

As a percentage of net sales, depreciation and amortization was 1.5% for the first nine months of both fiscal 2022 and fiscal 2021 , reflecting leverage from a positive comparable sales environment, offset by increased depreciation expense from strategic investments in the business.

Interest and Other, net

Interest and other, net for the first six months of fiscal 2022 was $748 million compared to $654 million for the first six months of fiscal 2021.

Interest and other, net, as a percentage of net sales was 0.9% for the first six months of fiscal 2022 and 0.8% for the first six months of fiscal 2021, primarily reflecting higher interest expense due to higher debt balances during the first six months of fiscal 2022, partially offset by leverage from a positive comparable sales environment.

Interest and other, net for the first nine months of fiscal 2022 was $1.2 billion compared to $980 million for the first nine months of fiscal 2021.

Interest and other, net, as a percentage of net sales was 0.9% for the first nine months of fiscal 2022 and 0.8% for the first nine months of fiscal 2021, primarily reflecting higher interest expense due to higher debt balances and increased variable rate interest from our interest rate swaps during the first nine months of fiscal 2022, partially offset by leverage from a positive comparable sales environment.

Provision for Income Taxes

Our combined effective income tax rate was 24.1% for the first six months of fiscal 2022 compared to 23.9% for the first six months of fiscal 2021.

Our combined effective income tax rate was 24.2% for the first nine months of fiscal 2022 compared to 24.1% for the first nine months of fiscal 2021.

Diluted Earnings per Share

Diluted earnings per share were $9.13 for the first six months of fiscal 2022, compared to $8.38 for the first six months of fiscal 2021.

The increase in diluted earnings per share was driven by higher net earnings during the first six months of fiscal 2022, as well as lower diluted shares due to share repurchases.

Diluted earnings per share were $13.37 for the first nine months of fiscal 2022, compared to $12.31 for the first nine months of fiscal 2021.

The increase in diluted earnings per share was driven by higher net earnings during the first nine months of fiscal 2022, as well as lower diluted shares due to share repurchases.

NON-GAAP FINANCIAL MEASURES

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Twelve Months Ended

dollars in millions July 31,

2022 August 1,

dollars in millions October 30,

2022 October 31,

Net earnings $ 17,095 $ 15,938

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LIQUIDITY AND CAPITAL RESOURCES

At July 31, 2022, we had $1.3 billion in cash and cash equivalents, of which $862 million 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 but also to enable us to invest in the business, fund dividend payments, fund any share repurchases, make any required debt payments, and satisfy other contractual obligations through the next several fiscal years.

At October 30, 2022, we had $2.5 billion in cash and cash equivalents, of which $719 million 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.

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In February 2022, we announced a 15% increase in our quarterly cash dividend from $1.65 to $1.90 per share.

During the first six months of fiscal 2022, we paid cash dividends of $3.9 billion to shareholders.

During the first nine months of fiscal 2022, we paid cash dividends of $5.9 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 May 2021, our Board of Directors approved a $20.0 billion share repurchase authorization, of which $5.8 billion remained available as of July 31, 2022.

In August 2022, our Board of Directors approved a $15.0 billion share repurchase authorization that replaced the May 2021 authorization and does not have a prescribed expiration date.

During the first six months of fiscal 2022, we had cash payments of $4.0 billion for repurchases of our common stock through open market purchases.

In August 2022, our Board of Directors approved a $15.0 billion share repurchase authorization that replaced the previous authorization of $20.0 billion, which was approved in May 2021.

This new authorization does not have a prescribed expiration date.

As of October 30, 2022, approximately $14.0 billion of the $15.0 billion share repurchase authorization remained available.

During the first nine months of fiscal 2022, we had cash payments of $5.1 billion for repurchases of our common stock through open market purchases.

In July 2022, we expanded our commercial paper program from $3.0 billion to $5.0 billion to further enhance our financial flexibility.

All of our short-term borrowings in the first six months of fiscal 2022 were under our commercial paper program, and the maximum amount outstanding at any time was $2.7 billion.

All of our short-term borrowings in the first nine months of fiscal 2022 were under our commercial paper program, and the maximum amount outstanding at any time was $2.7 billion.

In connection with our program, we have back-up credit facilities with a consortium of banks.

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These facilities replaced our previously existing five-year $2.0 billion credit facility, which was scheduled to expire in December 2023, and our 364-day $1.0 billion credit facility, which was scheduled to expire in December 2022.

At July 31, 2022, we had outstanding borrowings under our commercial paper program of $539 million, 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.

At October 30, 2022, 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.

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The net proceeds from this issuance were used for general corporate purposes, including repayment of outstanding indebtedness and repurchases of shares of our common stock.

During the first six months of fiscal 2022, we repaid an aggregate of $2.25 billion of senior notes.

In September 2022, we issued $3.0 billion of senior notes.

The net proceeds from this issuance are being used for general corporate purposes, including repurchases of shares of our common stock.

During the first nine months of fiscal 2022, we repaid an aggregate of $2.25 billion of senior notes.

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.

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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 decreased by $2.8 billion in the first six months of fiscal 2022 compared to the first six months of fiscal 2021, primarily driven by changes in working capital, slightly offset by an increase in net earnings.

Working capital was primarily impacted by higher merchandise inventories, along with the timing of vendor payments.

The increase in inventory was primarily due to inflation, along with strategic investments to promote higher in-stock levels and to pull forward merchandise for events in the second half of fiscal 2022 in response to ongoing global supply chain disruption, as well as continued investment in our new supply chain facilities and carry over of some spring seasonal inventory.

Net cash provided by operating activities decreased by $3.4 billion in the first nine months of fiscal 2022 compared to the first nine months of fiscal 2021, primarily driven by changes in working capital, slightly offset by an increase in net earnings.

Working capital was impacted by higher merchandise inventories and reduced inventory turnover, timing of vendor payments, and decreases in deferred revenue in fiscal 2022.

Our inventory position reflects the impact of inflation, along with strategic investments to promote higher in-stock levels and pull forward merchandise in response to ongoing global supply chain disruption, as well as continued investment in our new supply chain facilities and carry over of some spring seasonal inventory.

Investing Activities

Cash used in investing activities increased by $3 million in the first six months of fiscal 2022 compared to the first six months of fiscal 2021, primarily resulting from increased capital expenditures, partially offset by cash paid for an acquired business during the first six months of fiscal 2021.

Cash used in investing activities increased by $113 million in the first nine months of fiscal 2022 compared to the first nine months of fiscal 2021, primarily resulting from increased capital expenditures, partially offset by cash paid for an acquired business during the first nine months of fiscal 2021.

Financing Activities

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.

Cash used in financing activities in the first six months of fiscal 2021 primarily reflected $6.9 billion of share repurchases, $3.5 billion of cash dividends paid, and $1.4 billion of repayments of long-term debt.

Cash used in financing activities in the first nine months of fiscal 2022 primarily reflected $5.9 billion of cash dividends paid, $5.1 billion of share repurchases, $2.4 billion of repayments of long-term debt, and $1.0 billion of net repayments of short-term debt, partially offset by $6.9 billion of net proceeds from long-term debt.

Cash used in financing activities in the first nine months of fiscal 2021 primarily reflected $10.4 billion of share repurchases, $5.3 billion of cash dividends paid, and $1.5 billion of repayments of long-term debt, partially offset by $3.0 billion of net proceeds from long-term debt.

CRITICAL ACCOUNTING POLICIES

During the first six months of fiscal 2022, there were no changes to our critical accounting policies as disclosed in the 2021 Form 10-K.

During the first nine months of fiscal 2022, there were no changes to our critical accounting policies as disclosed in the 2021 Form 10-K.

Refer to Note 1 to our consolidated financial statements for further discussion regarding our significant accounting policies.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis