The Home Depot on Tuesday reported fourth quarter sales rose 10.9% to $26.5 billion. Same-store sales rose 3.2%, while U.S. same-store sales rose 3.7%. For the full year, the retailer reported a 7.2% increase in sales to $108.2 billion. Total comp sales in fiscal 2018 rose 5.2%, while U.S. comp sales rose 5.4%.
Net earnings in Q4 were $2.3 billion, compared to $1.8 billion in the year-ago period, according to a company press release.
The retailer had an extra week in fiscal 2018, with 14 weeks in the fourth quarter compared to last year's 13 weeks. This extra week added $1.7 billion in sales in the quarter and fiscal year. However, the extra week is not included in the company's comparable stores number.
While the extended 53-week trading period resulted in a substantial uplift in sales compared to the prior year, the same-store sales number provides a more accurate indication of the company's health. And with a material slowdown in the housing market, home improvement products are less likely to be in demand, according to GlobalData Retail Managing Director Neil Saunders.
"In light of this, Home Depot's comparable sales increases actually look even more respectable — in essence, they show the company is able to pull other levers to secure growth, even as economic fundamentals weaken," he said.
The number of people buying holiday gifts increased this year, according to Saunders, due in part to the retailer offering deals in the tools and DIY accessories categories. The snow and ice that affected a large part of the country at the beginning of the year also gave the home improvement retailer the opportunity to capitalize on its sales of ice melts and snow shovels, which Saunders believes it did "far quicker off the mark than many of its rivals."
Home Depot also likely capitalized on Sears' struggles, particularly in the appliance category, according to Saunders. "[Home Depot], along with Best Buy, remains one of the main beneficiaries of Sears' ceding of share and despite the resolution of Sears' woes, the shrinking of the business is likely to yield further gains over the remainder of this year." In 2016, J.C. Penney also aimed to grab share from a struggling Sears by adding appliances back to its stores after more than three decades without them, under the helm of then-CEO Marvin Ellison, who has since left for Lowe's. However, the faltering department store recently cut the sale of appliances from its U.S. stores, further leaving opportunity for Home Depot to grab market share.
Home Depot revealed that it expects comp sales to increase 5% in the 52-week fiscal year 2019, a decrease from comp sales in last year's 53-week period. Sales growth outlook is expected to be 3.3%, and the company plans five net new stores.
"Looking ahead, it would be logical to take a more negative stance on Home Depot's fortunes mainly because it is up against some tough prior year numbers and a somewhat slower economy," Saunders said. Although, due to Home Depot remaining the destination of choice for home improvement projects, its focus and investment on omnichannel and its "back-end improvements," he "expect[s] it to advance further in the coming fiscal year."