Strength in the core

Storm-related sales boost Q3 performance

Stormy weather around the country had something to do with Home Depot’s third-quarter sales gain of 2.9%. So did strength in core categories.

The world’s largest home improvement retailer posted a 4.2% comp-store sales gain for the quarter ended Oct. 30. Total sales increased 2.9% to $17.326 billion. And even bigger growth came in the net earnings column, where Home Depot reported a 13.0% increase and net earnings of $934 million.

“Our third quarter was driven by strength in our core categories and storm-related sales, as well as strong operating performance,” said Frank Blake, chairman and CEO. “We will continue to invest in our core initiatives to provide customers with exceptional customer service and great product values.”

At the end of the third quarter, the company operated a total of 2,246 retail stores in the United States and abroad.

The report followed closely the third-quarter report of rival Lowe’s, which posted comp-store sales of positive 0.7% and an earnings decline.

Home Depot also announced that its board of directors declared a 16% increase in its quarterly dividend to 29 cents per share.

Atlanta-based Home Depot’s wind-and-storm-aided sales effort in the third quarter presented several category highlights, according to executive VP merchandising Craig Menear.

The company’s strong third-quarter performance included strength “in the core of the store” and growth in average ticket and transactions.

“The maintenance and repair categories that make up the core of our store continue to perform well,” Menear said during the company’s third-quarter earnings call. “Project basics such as pipes and fittings, fasteners, air circulation, hand tools, chemicals, caulks and appliance parts were positive. And, as customers prepared for winter, small maintenance projects like insulation and waterproofing also sold well.”

In addition to storm-related sales strength, the company saw higher-than-company-average comps in tools, electrical, indoor garden, building materials, plumbing and hardware.

Ten departments in all posted positive comps, with paint, flooring, lighting and kitchens rounding out the list.

Negative comps for the third quarter occurred in the following categories: lumber, outdoor garden, bath and millwork.

Brands and product innovation played a role in sales growth, he said. “We offered outstanding values in power tools from brands like Ryobi, Milwaukee, Makita, Ridgid and DeWalt, and we are seeing consistent response to these brands from our customers,” he said. Pro customers are responding well to exclusive-to-Home Depot hand tools from Milwaukee and DeWalt, he added

LED lighting continues to advance on the shelves, with the first commercially available 75-watt equivalent LED A-Line replacement, he said.

The Home Depot’s chief merchant also shared the following third-quarter trends with investors:

• Total transactions grew by 1.2%;

• Average ticket increased 3.0%;

• Transactions for tickets under $50 — about 20% of the company’s U.S. sales — were flat in the quarter; and

• Transactions for tickets more than $900 — also representing some 20% of U.S. sales — were up 3.6% in the quarter.

As far as the possible return of the housing market to lift home improvement sales, Blake wasn’t optimistic for a quick turnaround. “In the U.S., we still don’t see and we don’t expect to see in the near term any meaningful tailwind from the housing market,” he said. “Inventories remain high, pricing is under pressure and credit is still difficult.” 

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