Home Depot posts 6% sales growth amid strong housing market
The Home Depot on Tuesday reported second quarter sales rose 6.2% to $28.1 billion. Overall same-store sales in the quarter rose 6.3%, handily beating the Consensus Metrix analyst expectation for 4.9% cited by Reuters, and at U.S. stores same-store sales rose 6.6%, the company said in a press release.
Net earnings for the quarter rose 14.2% to $2.7 billion, or $2.25 per diluted share, compared with net earnings of $2.4 billion, or $1.97 per diluted share, in the year-ago quarter, the company said. E-commerce sales grew 23%, executives said in a conference call.
The home improvement retailer raised its fiscal 2017 projections and now expects sales to grow approximately 5.3%, same-store sales to grow approximately 5.5% percent and diluted earnings to grow approximately 13% percent from fiscal 2016 to $7.29 per share.
Unlike retailers in other markets, the robust housing market is providing a healthy sales environment for home improvement retailers in general and Home Depot in particular.
CEO Craig Menear told analysts Tuesday that both sales to building professionals and consumers were up. He added that the company’s July acquisition of an equipment rental and maintenance company for $265 million would further its partnership with pros in stores and on sites. The return of the retailer’s home garden spaces in some markets boosted sales to do-it-yourselfers, according to Ted Decker, Home Depot’s EVP of Merchandising.
”We were pleased with our results this quarter as our customers rewarded us with the highest quarterly sales in company history," Menear said in a statement. "We also achieved the highest quarterly net earnings in company history. These results were made possible by our hard working associates and the outstanding values brought forth by our supplier partners.”
Not even an expected slowdown in the housing market will hurt the retailer much, according to GlobalData Retail analyst Håkon Helgesen. “[W]e remain confident about the future outlook for Home Depot,” he said in a note emailed to Retail Dive. “There are some small clouds on the housing front, but even if these do grow, they are not yet close enough to affect performance over the remainder of this year.”
Despite what Home Depot executives called a “protracted” economic recovery that is boosting housing turnover (rather than housing starts), transactions at Home Depot are already down, according to GlobalData Retail research. That is the result of a supply shortage that is restricting housing moves and spiking prices for first-time buyers. Still, while executives told analysts they’re keeping an eye on those trends, Helgesen doesn’t believe Home Depot will suffer much any time soon.
“When combined with the company's operational excellence and the sound strategic decisions it has made, these are driving exceptional performance. In a sense, everything is perfectly aligned for growth,” Helgesen said in a note emailed to Retail Dive. “[E]ven if housing transactions do soften, the impact on Home Depot will not be immediate. Our data show that home improvement spending remains elevated for up to three years after the initial move. As such, even if there is a bottoming out of housing demand, it will be a soft rather than a hard landing for the DIY sector.”
That’s been helped by Home Depot’s ability to capture market share, particularly among women, Helgesen said. The retailer is accomplishing that in part by keeping stores and products up-to-date and smoothing online transactions.
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