The Home Depot on Tuesday reported that third quarter sales rose 5.1% to $26.3 billion, as store comps rose 4.8% and U.S. comps rose 5.4%.
Net earnings in the quarter rose more than 30% year over year to $2.9 billion, according to a company press release.
With an added week in fiscal 2018, the retailer updated its guidance, now expecting sales growth of about 7.2% and comp sales growth of about 5.5% in the comparable 52-week period, the company also said. The company expects operating margin to land at about 14.5%.
The home improvement retailer managed to put even more daylight between itself and rivals in the sector, despite a slowdown in the U.S. housing market. Despite the housing pullback, a strong economy bodes well for The Home Depot.
"From our data, this has stimulated more households into undertaking home improvement projects — either completed by themselves or by professionals that they hire," Neil Saunders, managing director of GlobalData Retail, said in emailed comments. "Among these consumers, Home Depot is more often than not the destination of choice, with rival Lowe's coming in a distant second."
While diminishing sales of both new and existing homes threaten home improvement sales, disasters like hurricanes in the Carolinas and wildfires still raging in California will boost home improvement sales for a while, Saunders also said.
The retailer isn't only relying on consumers, and its focus on selling to professionals — who tend to buy big-ticket items and purchase in bulk — continues to pay off, according to Saunders. "This is one of the reasons average transaction values continue to rise," he said, adding that "we do not see much churn in the professional customer base." To Saunders' point, customer transactions in the third quarter rose 1.4% to $394.8 million from $389.5 million a year ago, with average ticket rising 3.6% to $65.11, the company said in its release.
The retailer has also positioned itself well to take advantage of the downfall of Sears, especially in appliances, something that J.C. Penney had been trying to do for a few years — with some success — under CEO Marvin Ellison, who departed for Lowe's this year.
As Sears shutters around 180 stores in Chapter 11, with more closures possible, Home Depot has more opportunities to grab appliance sales. "From our data, 62% of current Sears customers say they would consider Home Depot as an alternative for appliances which is far higher than the consideration for other home improvement retailers," Saunders said. "This, along with improvements to ranges — including the introduction of Bosch branded products — will provide a nice upside to growth over the next couple of quarters."