Nine takeaways from Home Depot's earnings
There was a lot for Home Depot executives to like about the company’s third-quarter performance. The company reported sales growth of 6.1% and net earnings growth of 14.1%.
Beyond the numbers, here are some of the key takeaways form the company’s presentation to investors.
• Digital growth
Online sales grew more than 17% in the quarter, and now represent 5.6% of total sales. Of these sales, more than 40% are picked up in the store – “view as a positive sign of our physical store’s continued relevance with our customers,” said CEO Craig Menear.
The company also invested in its digital engine. Home Depot rolled out a an updated HomeDepot.com web site. It also redesigned its app. Both moves came without interruption said Ted Decker, executive VP of merchandising. “The update includes an expanded buy box, which now makes it easier for our customers to select their preferred fulfillment option at checkout, whether that be delivered to home or picked up in store,” Decker said. “These changes have already yielded positive results, as we have seen improvements in overall site performance.”
• Big tickets, double digits
Transactions over $900, the company’s big ticket sales, jumped 11.3% in the quarter. These sales were driven by appliances, flooring and roofing. Big ticket sales represent about 20% of U.S. sales.
• Strength with the pro
Sales to pros grew faster than sales to DIY customers. The categories leading the way were commercial and industrial lighting, fencing, plywood, pressure treated decking, and interior doors.
• Strong DIY sales, too
Special order carpet, tool storage, laminate flooring and vanities – a diverse mix of home-related projects – all generated strong comp-store sales, Decker said.
• Weather helped
The company said it took advantage of forecast analytics and favorable weather to extend the selling season for lawn mowers, seed, planters, fertilizers and soils and mulch. Executives also credited the retailer’s flexible supply chain for its ability to maximize sales in this regard.
• Inflation and the peso didn’t help
The total impact to ticket growth from commodity price inflation was approximately 35 basis points. Plus, average ticket growth was negatively impacted by approximately 33 basis points, primarily due to a weaker Mexican peso.
• A power play in the aisles
In a move described as a serious step forward in cordless technology, Home Depot in the fourth quarter will be launching a 9 amp-hour lithium battery from Milwaukee. This battery pack is said to deliver up to 5 times the run time and 35% more power than previous iterations. And it runs 60% cooler than standard lithium battery packs.
• Anniversary for Interline
The quarter brought with it the anniversary of the $1.6 billion acquisition of Interline Brands, a major player in the maintenance, repair and operations market. The Interline integration continues to progress as we work to execute against the business use cases to leverage Interline’s capabilities,” Menear said. “We are excited about the opportunity Interline provides us to expand our share of wallet with customers.”
• Expectations steady
For fiscal 2016, the expectation is for sales to grow by about 6.3%, with comps of about 4.9%.