Home Depot shines amid gloomy earnings from other retailers
- On Tuesday, Home Depot reported first quarter sales of $23.9 billion, a nearly 5% jump compared to the same period last year. Comparable store sales grew 5.5% overall and 6% in the U.S., according to a company press release.
- Home Depot's net earnings reached $2 billion during the quarter, increasing 12% from $1.8 billion a year ago. The earnings and sales figures beat analyst expectations across the board, according to CNBC. The company raised its earning growth projections for the year, expecting 11% growth in diluted earnings-per-share over fiscal 2016.
- Home Depot’s stock enjoyed a 2% bump in pre-market trading as the company raised its guidance and beat analyst expectations. The company reaffirmed its 2017 sales and comparable sales growth projections of 4.6%.
Compared to the doom-and-gloom reports coming from many other retailers, Home Depot has a very different story to tell in the first quarter of 2017. Home Depot’s first quarter sales growth follows a strong fourth quarter that saw U.S. same-store sales grow more than 6%. That figure nearly doubled some analyst estimates.
"After last week's string of negative numbers, Home Depot has firmly put pay to the idea that the consumer economy is running out of steam," Neil Saunders, managing director of GlobalData Retail, said in a note emailed to Retail Dive. "As the chain's above forecast growth in both total and underlying sales shows, shoppers are still spending heavily on home improvement."
The home improvement retailer benefited from cold weather early in the quarter that extended the window for winter products and generated traffic during a usually quiet in-between season for Home Depot, according to Saunders.
As during previous earnings periods, the company is also riding a revived housing market that has been generating regular consumer investment in their homes. Spending on home improvement projects is expected to grow 2% over the coming decade to almost $270 billion in 2025, according to the Joint Center for Housing Studies of Harvard University.
The robust housing market also helps boost the professional and trade segment of the market, according to Saunders. This is an area that “Home Depot is successfully attracting and serving,” Saunders said. This includes Home Depot’s Interline business, which focuses on commercial repair and maintenance products and the company acquired in 2015.
However, there is a forward-looking concern that the strong housing market and broader economy will weaken, according to Saunders. But at the moment, he added, there are no signs of that happening in the near future.
High consumer confidence also contributed to the positive results, boosting spending on more expensive items like appliances, Home Depot executives noted in February. Home Depot has benefited from Sears' struggles in the category.
As other traditional retailers struggle, Home Depot is protected to some degree from competition from Amazon and other e-commerce retailers, the Wall Street Journal and other observers have pointed out. Unlike other retailers that are dependent on mall traffic or merchandise — such as apparel — that's sold easily through internet channels, consumers looking for home improvement products still do most of their shopping at brick-and-mortar. At least for the time being.
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