Home Depot's Quarterly Profit Rises -- Update
February 25 2020 - 3:40PM
Dow Jones News
By Dave Sebastian
Home Depot Inc. posted higher profit for its latest quarter,
beating Wall Street estimates, though overall sales declined as it
booked one less week compared with the prior year.
The home-improvement retailer on Tuesday reported net income of
$2.48 billion, or $2.28 a share, for its fiscal fourth quarter,
which ended Feb. 2. Analysts polled by FactSet had expected $2.10 a
share. Profit in the year-earlier period was $2.34 billion, or
$2.09 a share.
Home Depot said sales for the latest period declined 2.7% to
$25.78 billion, roughly in line with analysts' expectations. The
Atlanta-based company said the extra week of operations in the
year-earlier period contributed about $1.7 billion in sales.
Sales at physical and online outlets that had been open for more
than a year rose 5.2% for the period, ahead of the 4.7% rise
analysts were expecting. The company had missed same-store-sales
expectations for the previous four quarters, according to
FactSet.
On one less week, the number of customer transactions fell 6.4%
from a year earlier, but the average amount each customer spent
rose 4.1% and sales per retail square foot rose 2.8%. Operating
expenses fell 5.6% to $5.33 billion for the quarter.
Finance chief Richard McPhail said the company sources 30% of
its products from other countries, mostly from China, and that it
is working with its suppliers amid the coronavirus epidemic. He
also said it is still too early to determine whether supply-chain
disruptions would materially affect the company's financial
performance.
"We feel good about where we stand with respect to product for
the first quarter," he said in an interview.
Home Depot shares, which have risen about 24% in the past year,
were off slightly Tuesday, while the Dow Jones Industrial Average
slumped for a second day in a row on mounting fears over the
epidemic's spread outside of China.
During its latest quarter, Home Depot saw some benefit from
refunds on tariffs imposed on certain Chinese goods that were
subsequently exempted, Ted Decker, the executive vice president of
merchandising, said on a call with analysts. He said luxury vinyl
plank flooring was a major Home Depot category that had been
subject to tariffs.
Home Depot affirmed its financial outlook for the current fiscal
year. It expects per-share earnings to grow about 2% to $10.45 on
same-store-sales growth of about 3.5% to 4%. It also raised its
quarterly dividend by 10% to $1.50 a share.
The company, which operates about 2,300 stores, expects to open
six new stores during the year.
Mr. McPhail said on the analyst call that the guidance assumes
the U.S. economy will grow slightly less than 2% this year and a
boost to demand from rising home prices and housing turnover.
"The economy is strong, and the U.S. consumer is healthy," Mr.
McPhail said.
Average home prices in major U.S. metropolitan areas rose 3.8%
in 2019, accelerating from an annualized increase of 3.5% the prior
month and 3.3% in October, according to the S&P CoreLogic
Case-Shiller National Home Price Index. The pace marks a full eight
years of price increases in homes for sale.
Home Depot's domestic business remains resilient to risks such
as coronavirus and the trade war, and customers in coming months
could shift their discretionary spending to home improvement from
travel plans, especially outside the U.S., CFRA Research analyst
Kenneth Leon said in a note to clients.
"Home-improvement sales will benefit from low rates on mortgages
and home-equity loans, rising home prices, and a growing market in
2020 home sales," Mr. Leon said.
Write to Dave Sebastian at dave.sebastian@wsj.com
(END) Dow Jones Newswires
February 25, 2020 15:25 ET (20:25 GMT)
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