Jeff Kinnaird
Executive Vice President of merchandising at Home Depot
Thank you Ted and good morning, everyone. I want to start by also thanking all of our associates and supplier partners for their ongoing commitment to serving our customers and communities. As you heard from Ted during the third quarter, we continue to see solid demand for home improvement projects and strong execution from our teams and supplier partners. Turning to our comp performance during the third quarter, 11 of our 14 merchandising departments posted positive comps. Build materials, plumbing, lumber, millwork, paint and hardware had comps above the company average. All other departments, with the exception of appliances, flooring, and indoor garden were positive, but below the company average.
During the third quarter, our comp average ticket increased 8.8% and comp transactions decreased 4.4%. The growth in our comp average ticket was driven primarily by inflation across our product categories, as well as demand for new and innovative products. Inflation from core commodity categories positively impacted our average ticket growth by approximately 200 basis points during the third quarter, driven by inflation in build materials, lumber, and copper.
Big ticket comp transactions or those over $1,000 were up 10.1% compared to the third quarter of last year. We saw a big ticket strength across many Pro heavy categories like fasteners, pipe and fittings, and gypsum. During the third quarter, both Pro and DIY sales growth were positive, with Pro outpacing DIY. We're encouraged by the continued momentum we are seeing with both our Pro and DIY customers. In addition, our Pros tell us their backlogs remain strong.
During the quarter, our project business remained healthy. This can be seen in the double digit comp performance of our build materials, plumbing, lumber and millwork departments, as well as in other categories like fencing, siding, conduit boxes, and fittings, tubs and showers and cabinets. We're also encouraged by the momentum we continue to see with our larger Pro customers. These medium to large repair-remodel Pros continue to post strong double digit comps. We believe we are building a unique interconnected Pro ecosystem that will increase our ability to grow share in a $450 billion addressable Pro space. To serve the Pro, it's about removing friction through a multitude of enhanced product offerings and capabilities.
We feel confident that the investments across our Pro ecosystem are resonating and that we continue to gain share with this important customer. As you know, we've been on a journey to remove friction from our interconnected shopping experience. A great example of this was our announcement in December of 2017 to own more of the appliance delivery end-to-end. And in the third quarter, we achieved an important milestone. We now have 100% of our appliance delivery volume managed through our market delivery operations. This has significantly improved the customer experience, on-time and quick deliveries have increased meaningfully and customer satisfaction metrics have increased by approximately six percentage points compared to the third quarter of last year.
Turning to total company online sales. We are very pleased with the performance of our digital assets. Sales leveraging our digital platforms increased nearly 10% compared to the third quarter of last year. This was driven by our continued investments, which are resonating with our customers. For example, during the quarter, lead times improved across different fulfillment capabilities, which drove greater conversion. For those customers that chose to transact with us online during the third quarter, approximately 50% of our online orders were fulfilled through our stores, a testament to the power of our interconnected retail strategy.
We're excited about the holiday season. During the third quarter, we hosted our Halloween event and could not be happier with the results. 2022 was a record sales year for Halloween program, both in-store and online as our customers continue to add to their collection with our unique and exclusive assortment. As we turn our attention to the fourth-quarter, we intend to continue this momentum with our annual holiday, Black Friday and gift center events.
Our teams have sourced the most compelling artificial tree assortment we have ever had, which makes it easier for our customers to find the perfect tree for their holiday. In terms of our decorative holiday program, we couldn't be happier with our industry-leading assortment with extraordinary features and functionality that looks great and also reflects exceptional value. In our gift center, we have continued to lean into brands that matter most for our customers, with our assortment of Milwaukee, Ryobi, Makita, Dewalt, Rigid, Husky and more. Earlier this fall, we launched the next-generation of Milwaukee drive M18 fuel lineup offering more power, run time and increased safety for our customers. In our gift center, we are featuring this innovation in combo skits with 4-Toos and 2-Tools. And, we have our exclusive Rigid 4-Tool 18V Brushless combination kit with 2-Free Tool, all backed by our lifetime service agreement. And in appliances, we have exciting offers on LG, Samsung, Bosch, Whirlpool, GE and Frigidaire. We have multiple exclusive offers including the LG side-by-side refrigerator, with craft ice, a great innovation in ice making. As with prior years, we've extended these events over several weeks and we believe we are well-positioned with the right brands, the right inventory, and a great customer experience. With that, I'd like to turn the call over to Richard. Thank you Jeff and good morning, everyone. In the third quarter, total sales were $38.9 billion, an increase of $2.1 billion or 5.6% from last year. During the third quarter, our total company comps were positive 4.3%, with positive comps of 7.1% in August. 4.4% in September, and 2.1% in October. Comps in the U.S. were positive 4.5% for the quarter, with positive comps of 7.2% in August, 4.2% in September, and 2.5% in October. On a three-year basis, monthly comps were consistent across the quarter. In the third quarter, our gross margin was approximately 34%, a decrease of approximately 10 basis points from last year, primarily driven by supply chain investments. We continue to successfully offset significant transportation and product cost pressures, while maintaining our position as the customer's advocate for value. During the third quarter, operating expense as a percent of sales decreased 18 basis points to 18.2%. Our operating expense performance was in line with our expectations, which reflected continued wage investments, as well as planned investments designed to drive efficiency in our store environment. Our operating margin for the third quarter was 15.8% compared to 15.7% in the third quarter of 2021. Interest and other expense for the third quarter increased by $80 million to $406 million due primarily to higher long-term debt levels than one year ago. In the third quarter, our effective tax-rate was 24.4%, down from 24.5% in the third quarter of fiscal 2021. Our diluted earnings per share for the third quarter was $4.24, an increase of 8.2% compared to the third quarter of 2021. During the third quarter, we opened three new stores; one in the U.S. and two in Mexico, bringing our total store count to 2319. Retail selling store footage was approximately $241 million square feet. At the end of the third quarter, inventories were $25.7 billion, up $5.1 billion compared to the third quarter of 2021. Inventory turns were 4.3 times, down from 5.4 times last year. And our inventory growth primarily reflects product cost inflation and strategic decisions in response to continued global supply chain disruption. Turning to capital allocation, after investing in our business and paying our dividend, it is our intent to return excess cash to shareholders in the form of share repurchases. During the third quarter, we invested $770 million back into our business in the form of capital expenditures. And during the quarter, we paid approximately $1.9 billion in dividends to our shareholders and we returned approximately $1.2 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 43.3%, down from 43.9% in the third quarter of fiscal 2021. Now. I will comment on our guidance for fiscal 2022. As you heard from Ted, we are very pleased with the solid performance we saw during the third quarter. Today, we are reaffirming our guidance for 2022. We expect comp sales growth of approximately 3% for fiscal 2022. We expect comp sales to be positive for the fourth quarter. We expect our fiscal 2022 operating margin to be approximately 15.4% for the year. And we expect mid-single-digit percentage growth in diluted earnings per share compared to fiscal 2021. As we've said throughout the year, we find ourselves in a unique environment with many cross currents. We are operating in a broad-based inflationary environment, not seen in four decades, while managing through constrained global supply chain conditions, all against the backdrop of monetary policy shifts intended to moderate demand. To date, our customer has proven resilient. We feel confident that we will continue to manage with flexibility through dynamic environment while growing faster than our market and delivering exceptional shareholder value. Before opening the call for questions, we are pleased to announce that we will be holding an Investor Conference on June 13, 2023 in New York City. We will share more details in the near future, but for now, please hold today. Thank you for your participation in today's call. And Christine, we are now ready for questions.
