Home Depot Is Getting a Big Boost From Hurricane Recovery and Rising Home Values
Home Depot Inc. sales got another shot in the arm from the U.S. housing boom last quarter, with an extra boost from hurricane-recovery efforts in Puerto Rico and Southern states.
A push by Americans to fix up their properties — using money generated by rising home values — helped lift the retailer’s same-store sales by 7.5 percent. That beat analysts’ prediction of 6.5 percent, according to Consensus Metrix.
After almost a decade of rising U.S. property values, homeowners are making renovations at a record pace. The world’s largest home-improvement chain also has benefited from investments in its technology and customer service — part of a strategy that has focused on generating more sales from current stores, rather than opening new ones.
The results helped send Home Depot shares up 4.3 percent to $195 in early trading. Through the end of last week, the stock had surged about 30 percent in the past 12 months.
Home Depot also is benefiting from a wave of millennials finally buying homes and starting families. That’s sending more consumers and contractors into its stores seeking supplies, appliances and fixtures.
Revenue rose 7.5 percent to $23.9 billion in the fourth quarter, exceeding the average estimate of $23.7 billion. Earnings amounted to $1.69 a share, excluding some items, compared with a projection of $1.63.
The Atlanta-based 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.
This push to provide an “interconnected retail experience” has helped fuel productivity and earnings, Chief Executive Officer Craig Menear said.