April 9, 2024


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Home Depot Surpasses 4th-Quarter Earnings and Revenue Projections

Home Depot Inc. (NYSE:HD) released its fourth-quarter results before the opening bell on Feb. 25. The company recorded earnings and revenue that beat analysts’ expectations, attributing the strong results to a robust holiday season as well as strong sales of appliances.

By the numbers

The world’s largest home improvement retailer reported earnings per share of $2.28, which topped estimates of $2.10. Revenue of $25.28 billion beat expectations of $25.26 billion, but fell 2.7% on a year-over-year basis.

Same store sales surged 5.2% during the quarter versus the anticipated growth of 4.8%. The quarterly comps growth was aided by a 4% increase in the average shopper’s ticket price. U.S. comps were up 5.3%.

Reflecting on the company’s performance, Chairman and CEO Craig Menear said:

“Fiscal 2019 was a record year for our business and one marked by significant progress as we invest to transform ourselves into The Home Depot of the future. We had a strong finish to the year as our fourth quarter results reflect strength in our core business, solid execution around our holiday events and the overall health of the consumer.”

The housing market

Home Depot’s success relies on demand from the housing market. The company saw U.S. homebuilding falling less than anticipated in January. In addition, permits were up to a near 13-year high.

However, mild winter in most parts of U.S. led to fewer snowblowers and winter-related products being sold during the quarter. The positive aspect of the weather was that the professional homebuilders continued construction.

Other growth contributors

Home Depot is currently concentrating on its “One Depot Program,” which brings together its brick-and-mortar stores and its online business. In 2017, the company announced that it would make an investment of $11 billion in the program over a three-year period.

“Through the second year of our One Home Depot investment program, we have grown sales by over $9 billion dollars – a level of growth unmatched in our market,” Menear said.

The company has also put in efforts to improve its online shopping experience, including adding better search processes to its website and in-store labels, which would enable customers to read the digital ratings of an item. The company recorded its highest ever mobile app downloads in a single day in December, post the launch of its new marketing campaign.

Looking forward

The home appliance retailer projects sales growth of 3.5% to 4% for 2020. Comps are expected to grow 3.5% to 4% over the same period. Capital expenditure is anticipated to be $2.8 billion as the company plans to open six new stores this year.

Home Depot says it plans to grow its investments in 2020 to $3.9 billion, which is more than the $3.6 billion invested in the previous year. The company’s margins are expected to hurt as a result of this heavy projected investment.

Disclosure: I do not hold any positions in the stocks mentioned.

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This article first appeared on GuruFocus.