Skip to Content

The Big Reason Why Home Depot’s Sales Continue to Build

Home Depot’s foundation is looking rock solid thanks to a sturdy U.S. housing market.

The retailer remains one of the few that continues to post steady sales growth at a time when many brick and mortar retailers, including department stores, restaurants, and big box chains, lament softening sales and declining in-store traffic. Home Depot (HD) on Monday reported fiscal fourth-quarter sales that were across-the-board better than Wall Street projected, including a same-store sales increase of 5.8% that helped total sales jump to $22.2 billion. Over the past two years, Home Depot says it added $11 billion to the top line.

“Turning to 2017, overall GDP growth and strength in the U.S. housing market should continue to support growth in our business,” said Chairman and CEO Craig Menear. He said the retailer is targeting 4.6% in comparable sales growth for the current year.

Home-improvement retail has been a bright spot in recent years because the strength of the housing market has given consumers a greater incentive to spend money on their homes as they view that asset as increasing in value. Home Depot’s sales growth has recently been boosted by greater spending from professional customers (the other group is do-it-yourself). Those pros spent more on fencing, commercial and industrial lighting, electrical wiring, and interior doors in the latest quarter.

E-commerce has also been an opportunity. While online spending has been a trend for many years in retail, home improvement goods weren’t initially the target of that disruption, unlike smaller items like books, electronics and apparel. But in recent years, consumers are getting more comfortable going online to buy a bigger and bulkier home improvement item. Home Depot’s online business grew over 19% last year and represents 5.9% of total sales. And the company says about 45% of online orders booked in the U.S. are picked up in the physical stores.

“We are investing into that business because we must,” Chief Financial Officer Carol Tome told Fortune in an interview. Those investments have included a redesigned .com experience with a faster checkout time and an upgraded mobile app. Tome said that Home Depot is spending some $2 billion of capital on the business this year and a “big chunk” of that will be to enhance and improve the online experience.

Looking ahead, Tome says Home Depot mostly sees tailwinds that should continue to bolster the company’s sales. The team is projecting U.S. gross domestic product of 2.3% this year, up from less than 2% last year. Home prices are also expected to continue to appreciate.