Home Depot (HD, Financial) crushed third quarter 2017 earnings expectations as the world’s largest home improvement retailer reported sales of $25.1 billion during the quarter for a growth rate of 8.1% compared to last year. The blowout result was made possible due to the recent natural disasters increasing demand for rebuilding materials, generators and flashlights.
Comparable store sales climbed 7.7% in the U.S., beating their own estimates as well as Wall Street’s. The market was expecting earnings per share of $1.82 and revenue of $24.55 billion during the quarter, while the company reported earnings per share of $1.84 and revenue of $25.03 billion.
As a result of third quarter sales numbers, Home Depot revised its 2017 outlook for the third time this year. The company now expects 2017 sales to increase by 6.3% and comparable sales growth of 6.5%, with both metrics being a full percentage point higher than the previous expectation.
The biggest take of all during the third quarter results was that Home Depot continues to go from strength to strength in e-commerce.
This is what Home Depot’s CEO Craig A. Menear had to say about online sales during the third quarter earnings call:
“Our interconnected strategy continues to drive sales both in stores and online, as online sales grew approximately 19% in the quarter, now representing approximately 6.2% of our total sales, with approximately 45% of our online U.S. orders being picked up in our stores.
"And should a customer need to return an item purchased online for another item, our conveniently located stores are there for them, with 85% of our online order returns being completed in-store.”
Online sales grew 19% during the quarter and now represent 6.2% of the company’s overall sales. During the second quarter of 2015, online sales represented 5% of the company’s overall sales, and it's clear that for the last eight quarters online sales have been growing at a much faster rate than their net sales.
Though the market loves to keep talking about the Amazon threat, Home Depot’s surging online sales have already made it a monster in its own right. At 6.2% of overall revenues, online sales were approximately $1.55 billion during the quarter. If Home Depot continues its current near-20% growth in online sales, the company should easily hit $10 billion in annual sales from online channels by 2020.
With a massive physical presence of 2,283 stores, Home Depot will remain the company to beat as it will be very hard for any new company to compete with its logistics chain, especially on the online front. Investors should wait for negative news related to Amazon hitting the company’s valuation and use those opportunities to buy into Home Depot.
Disclosure: I have no positions in the stock mentioned above and no intention to initiate a position in the next 72 hours.
