The largest home retailer in the U.S., Home Depot (HD, Financial), posted its first quarter numbers on May 19 and left the Street in awe after it reported numbers that surpassed the Street expectations. Though the U.S. economy is facing sluggishness in the current year, and while the headwinds such as harsh winters and difficult trading conditions of the West Coast persisted, the home improvement chain posted top line figures that beat the analyst expectations. Let’s quickly take a look at the quarterly report of Home Depot.
The glittering numbers
In the past year the recovery noticed in the housing sector aided the retailer to report better top and bottom line numbers. But in the beginning of this year, the macroeconomic factors were not favourable enough to post good earnings. There was a gradual slowdown seen in the growth of the U.S. economy, along with a weaker global economy which exerted pressure on the earnings of Home Depot.
In fact, the sale of existing houses fell 4.9% in January to an adjusted average rate of 4.82 million, which was the lowest sales record since May 2014. But, even in the presence of such headwinds, Home Depot performed well and there was a 4.4% rise in transactions during the quarter, and a 1.7% improvement in the average ticket sizes.
The Pro category which presently represents 20% of the U.S. sales saw a 7% increase in transaction tickets of over $900 during the first quarter. Besides this, Home Depot also benefitted from its online presence that aided in generating positive results, with the retailers’ online sales growing almost 30% in the quarter. Home Depot also leveraged its well-knit distribution network to improve the sales generated through its Buy Online, Pick-up In Store, Buy Online, Ship to Stores and Buy Online, Return in Store programs.
Revenue for the quarter stood at $20.9 billion surpassing the analysts’ estimate of $20.82 billion, and growing 6.1% on a year-over-year basis. Comparable same store sales also improved 6.1% in the quarter, with 7.1% growth registered in the U.S. stores. Net income improved 14.5% on a year-over-year basis rising to $1.579 billion from $1.379 billion reported a year-ago. . The company earned an adjusted $1.16 a share which was slightly over the analysts’ estimate of $1.15 a share.
The better earnings suggest that consumers were spending on their homes much more than was expected during the quarter. CEO, Craig Menear stated during the earnings call – “We had a stronger-than-expected start to the year as we experienced a more normal spring across much of the country and continued recovery of the U.S. housing market…”
Parting word
The management remains upbeat on the future earnings for the fiscal year and has projected the full year earnings to be in the range of $5.24-$5.27 a share from the earlier estimate of $5.11-$5.17 a share. The full year sales growth is now forecasted to be around 4.2-4.8%. Let’s stay tuned and keep an eye on how Home Depot’s sales continue to grow in the upcoming quarters.
