Home Depot busted through analysts’ expectations with its fourth quarter earnings report, posting an overall same-store sales rise of 5.8% (including U.S. same-store sales growth of 6.3%), well past the Consensus Metrix analyst expectation for 3.5%.
The home improvement retailer reported Q4 net earnings of $1.7 billion, or $1.44 per diluted share, compared to $1.5 billion or $1.17 per diluted share in the year-ago quarter — well past Thomson Reuters expectations for $1.34 per share on $21.81 billion in sales.
In tandem with its Q4 earnings beat, Home Depot's board of directors authorized a $15 billion share repurchase program, replacing its previous authorization, sending shares up 1.8% Tuesday morning.
As the economy continues to hum and property values stay steady, American consumers are plowing their money into their homes — spending many see as an investment, not simply an indulgence. The number of customer transactions at Home Depot in the quarter rose 2.9% year over year, while average ticket value rose 2.9% and sales per square foot rise 5.7%.
Home Depot CEO Craig Menear in his statement Tuesday credited the robust housing market for the company's strong quarter, but also praised the company's own growth initiatives. "Our focus on providing localized and innovative product selection, improving the interconnected customer experience, and driving productivity resulted in record sales and net earnings for 2016," he said.
GlobalData Retail analyst Håkon Helgesen was suitably impressed, pointing out in a note emailed to Retail Dive that more extreme weather this year contributed to the retailer’s good results (e.g., sending customers in to buy snow blowers). But Helgesen also said that “thanks to its flexibility, Home Depot performs well whatever the weather... In 2015, the company took advantage of warmer temperatures to push outdoor projects much later into the season; this year its focus switched to winter care and preparedness products. In essence, Home Depot manages events, including the vagaries of the weather, in a way that so many other retailers do not."
Improved consumer confidence is also fueling spending on bigger-ticket items like appliances, Helgesen noted, with Home Depot benefiting from Sears' struggles in the category.
Thanks to improvements in delivery and fulfillment and omnichannel services, stickiness rendered by increases in its credit card membership, as well as inventory improvements, Home Depot is poised to continue its success — bumping up against its own performance when it comes to growth, according to Helgesen.
“[S]ales growth rates will weaken, but not significantly so, and only because of stiffer comparatives,” he said. “Moreover, we believe that improved efficiencies, including delivery from store and better stock allocation, will help to drive up profit across 2017.”