Home Depot’s Sales Surge from Housing Tailwinds

Comparable store sales were up 4.7% during Q2 FY16 due to higher housing starts

h1Home improvement retailer Home Depot Inc. (NYSE: HD) announced its Q2 FY16 financial results on August 16th, 2016. The Atlanta, Georgia-based company sells building materials, home improvement products, and lawn and garden products, and provides various services. The Home Depot stores have an average enclosed space of approximately 104,000 square feet and over 24,000 additional square feet of garden area. The Home Depot stores serve three primary customer groups: do-it-yourself (DIY) customers, do-it-for-me (DIFM) customers and professional customers. The Company has roughly 2,270 stores in the U.S. Read more about Home Depot’s financial results below.

Q2 FY16 financial highlights

Home Depot reported strong Q2 FY16 sales, supported by a number of economic tailwinds such as low unemployment and steady job growth, higher wages, and cheaper gas, which in turn has enabled consumers to channel funds to new house constructions as well as home improvement projects. The Company was also benefited by higher housing starts for July 2016 at 1.21 million, a harbinger of better sales for building materials, home improvement products, and services.

Home Depot continues to be one of the sole retail winners in Q2 FY16 after it reported a 6.6% rise in revenue at $26.47 billion. Comparable store sales were up 4.7% and comp sales for U.S. stores were a healthy 5.4%.

Source: Home Depot
Source: Home Depot

All product categories reported sales increases during the reporting quarter. Online sales surged 19% from the prior year period during Q2 FY16.

Source: Home Depot
Source: Home Depot

Home Depot’s net earnings for Q2 FY16 were $2.4 billion, or $1.97 per diluted share, compared to net earnings of $2.2 billion, or $1.73 per diluted share, in the year-ago period. For the second quarter of FY16, diluted EPS increased 13.9% from the same period in the prior year. Home Depot earned $1.71 per share on sales of $24.83 billion in Q2 FY15.

Source: Home Depot
Source: Home Depot

Store update

At the end of the second quarter, the Company operated a total of 2,275 retail stores in 50 states, the District of Columbia, Puerto Rico, U.S. Virgin Islands, Guam, 10 Canadian provinces and Mexico.

Guidance for full year FY16

Based on current industry trends, Home Depot reaffirmed its FY16 sales guidance and expects sales to grow approximately 6.3% and Comp sales to grow by approximately 4.9%. The Company raised its diluted EPS guidance for FY16; it now expects diluted EPS to grow approximately 15.6% from FY15 to $6.31. Home Depot’s long-term sales and operating income targets are shown below.

Long term sales and operating income target; Source: Home Depot
Long term sales and operating income target; Source: Home Depot

 

Stock Performance

h6Home Depot’s stock ended the day at $136.15, slipping 0.06%, at the close on Wednesday, August 17th, 2016, having vacillated between an intraday high of $136.47 and a low of $134.75 during the session. The stock’s trading volume was at 5,221,993 for the day. The Company’s market cap was at $169.95 billion as of Wednesday’s close.

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