KEY POINTS

  • Home Depot reported 3Q18 EPS of $2.51, beating the $2.27 consensus estimate and up 36.3% year over year. Revenues were $26.30 billion, beating the $26.24 consensus and up 5.9% year over year.
  • Comps were 4.8%, beating consensus of 4.7%; US-only comps were up 5.4%.
  • The company raised guidance across the board, raising 2018 EPS guidance to $9.75 from $9.42, revenue growth from 7.0% to 7.2% and comps from 5.3% to 5.5%.

3Q18 Results

Home Depot reported 3Q18 revenues of $26.30 billion, beating the $26.24 consensus and up 5.9% year over year.

Comps were up 4.8%, beating the consensus estimate of 4.7%. US-only comps were 5.4%.

EPS was $2.51, beating the $2.27 consensus estimate and up 36.3% year over year. 

Details from the Quarter

Management commented that it was pleased with the results for the quarter and with growth in professional and do-it-yourself customers. Management commented that customers are responding to the company’s broad assortment and interconnected shopping experience. Management saw strong performance across all store categories, as well as healthy growth in digital sales.

  • There were 398.4 million customer transactions in the quarter, up 1.4% year over year.
  • The average ticket was $65.11, up 3.6% year over year.
  • The company reported sales of $433.99 per square foot, up 5.2% year over year.
  • From a geographic perspective, sales were strong across the US, and all but one of 19 regions posted positive comps. The exception was the Gulf region, which faced tough comparisons due to stronger than normal sales associated with Hurricane Harvey during the same period in 2017. The company generated $300 million of sales in the year-ago quarter due to the hurricane.
  • Canada and Mexico posted positive comps in local currency.
  • Average ticket size and transaction volume grew in the quarter. Professional sales again outpaced DIY sales. Management believes there is a healthy balance of growth from both professional and DIY customers, which management characterized as a testament to the overall strength of demand in the home improvement market.
  • Online sales grew approximately 28% year over year, as customers continue to respond to ongoing investment and enhancements to the digital experience designed to deliver a frictionless, interconnected customer experience. Buy online, ship-to-store and buy online, pick-up in store (BOPIS) sales both grew at a faster rate than overall online sales growth in the quarter. These are key components of the company’s plans to offer an interconnected shopping experience centering on enhanced delivery and fulfillment options. The company remains in the early stages of a five-year investment journey in its supply chain to enable the fastest, most efficient delivery network in home improvement.
  • Today, the company can reach approximately 95% of the US population in two days or fewer with parcel shipping and is enhancing its supply chain with a goal of reaching 90% of the US population with same-day or next-day delivery for more products, including big and bulky goods. To get there, management believes it must invest in facilities that offer greater depth and breadth of SKU availability.
  • 2018 was designated as a year of pilot testing new fulfillment centers. Management believes it is on track with its five-year plan. The first few pilot facilities are opened, with additional pilot facilities scheduled to open throughout the rest of this year and early next year as part of the testing and learning process.
  • Management also remains focused on meeting customers’ immediate delivery needs and claims to have made great progress with store delivery enhancements. Car and van express delivery offerings now enable same-day delivery. Since rolling out the car and van delivery that can reach over 40% of the US population, the company has seen increased utilization from professional and DIY customers.
  • The company’s 2020 goals include delivering exceptional customer service, driving productivity and simplifying operations. The company has implemented a program of enhanced signage and refreshing stores in approximately 700 outlets, ahead of the initial plan and continues to make progress in rolling out redesigned front-end areas and pickup lockers, among other investments. The company is also working to reduce customer friction, while helping associates to be more productive with their time, for example, with the deployment of a new management application.

Raises Guidance

The company provided the following guidance for 2018:

  • Revenue growth of 7.2%, up from 7.0% previously.
  • Comps of 5.5%, up from 5.3% previously.
  • EPS of $9.75, up from $9.42 previously.

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