Home Depot (HD, Financial) reported solid first-quarter earnings that blew past Wall Street expectations, lifting overall sentiment in the retail market. Most importantly, the home improvement retailer posted comparable-store sales of 5.5%, much higher than the 4% the market was expecting.
Firing on all cylinders, the company posted revenues of $23.89 billion and earnings per share of $1.67, higher than Wall Street forecasts of $23.74 billion in revenues and $1.62 in earnings per share.
Comparable-store sales grew 5.5% globally while U.S. comparable-store sales grew by 6%. The best part about the comparable-store sales expansion was that transactions grew 1.5% while average ticket increased by 3.9%. Clearly, the store sales increase didn’t come just because Home Depot increased its prices but also because either more customers walked in or customers ordered more during this quarter compared to the year-ago period.
Retailers around the country are seeing mixed numbers this year with some companies posting better-than-expected results, and others struggling to keep customers flowing in or spending more. The stellar performance of Home Depot and Lowe’s (LOW, Financial) were the two bright spots in the retail industry in 2016; with Home Depot’s solid first-quarter numbers, there’s enough hope that the retail industry will keep chugging along on its growth path through 2017.
Despite the solid performance numbers during the first quarter, though, Home Depot surprised everyone by not raising its sales growth expectations for the year. The company reiterated its sales growth forecast of 4.6% and comparable-store sales forecast of 4.6% for full fiscal 2017.
When you consider its solid first-quarter numbers, Home Depot has effectively lowered market expectations by keeping its forecasts intact. It’s definitely possible for it to shoot past its 4.6% forecast figures at the current rate, but it’s also likely that the company is expecting some headwinds over the next few quarters.
The other very important takeaway during the first quarter was Home Depot’s online sales. As retail companies around the country struggle against the e-commerce juggernaut called Amazon (AMZN, Financial), Home Depot kept posting solid double-digit growth. In fiscal 2016, Home Depot’s online sales grew 19% compared to 2015, and it surged forward by 23% during the first quarter of 2017 compared to the prior period. That is a significant validation of its resilience against the e-commerce onslaught, and an important point for investors.
Disclosure: I have no positions in the stock mentioned above and no intention to initiate a position in the next 72 hours.
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