Home Depot Fourth-Quarter Sales Growth Surpasses Estimates

• February 20 2018
• Matthew Townsend

Home Depot Inc. is cashing in as Americans continue to pour money into their properties. Hurricane recovery spending in Puerto Rico and southern states is helping, too.

Home Depot Inc. is cashing in as Americans continue to pour money into their properties. Hurricane recovery spending in Puerto Rico and southern states is helping, too.

Sales in the fourth quarter through January surpassed analysts’ expectations. Revenue rose 7.5 percent to $23.9 billion, the company said in a statement Tuesday, versus an average estimate of $23.7 billion. Sales at stores open for more than a year -- a key benchmark for investors -- rose 7.5 percent. That beat analysts’ 6.5 percent prediction, according to Consensus Metrix.

The results show that the company’s investments in technology and customer service are still driving growth after it almost completely stopped opening new locations. The largest home-improvement chain has also basked in almost a decade of rising U.S. property values. That’s pushed homeowners to take on renovations at a record pace.

Home Depot is also benefiting as young adults, who had put off settling down, are buying homes and starting families at increasing rates.

Shares of Home Depot rose 0.2 percent to $187.30 in early trading. The stock had surged 31 percent in the past 12 months.

The company also gave guidance for this fiscal year, which will have 53 weeks of operating results. Sales will rise increase about 6.5 percent, with the 53rd week adding about $1.6 billion to sales. Profit will hit $9.31 a share, trailing calls for $9.73.

The company had already disclosed that fourth-quarter earnings would be reduced by about $150 million, or 19 cents a share, from the impact of the U.S. tax overhaul. This was primarily from offshore earnings that haven’t been repatriated. The final amount was 17 cents.

Home Depot is preparing for the spring selling season, when revenue reaches its highest point in the year as people start fixing up their homes. To meet demand in a tight labor market, the company has automated much of the job-application process to make it faster and easier.

Rising home values continue to help Home Depot, with prices last quarter jumping to record highs in almost two-thirds of U.S. cities, according to the National Association of Realtors. But there are signs that the market might be cooling off. Mortgage rates are rising amid inflation fears, with the 30-year loans climbing to 4.38 percent, the highest since April 2014.

In December, Home Depot laid out long-term goals of boosting annual sales to as much as $120 billion by 2020, from $100.9 billion last year. That would equate to a revenue growth of 6 percent a year. It also plans to boost capital expenditures, including investing in its supply chain, cutting checkout times and employee training.

Several years ago, the company stopped its major store expansion, and instead shifted investment to improving its existing locations, including upgrading technology. The chain was one of the first in the industry to offer shoppers a view of in-store inventory. For example, on its mobile website and application, a shopper can pinpoint the exact location of a product and how many are available.