Home Depot beat Wall Street’s expectations for the fourth quarter, and its CEO Craig Menear said the results indicate its significant investments in the company are paying off.
Here’s what the company reported compared with what analysts were expecting for Home Depot’s fiscal fourth quarter, based on Refinitiv data:
- Earnings per share: $2.28 vs. $2.10, adjusted
- Revenue: $25.78 billion vs. $25.76 billion
- Same-store sales: 5.2% vs. up 4.8%
The Atlanta-based home improvement retailer’s shares were up more than 2% in premarket trading on the earnings news. It also increased its dividend by 10%.
For the fourth quarter that ended Feb. 2, Home Depot reported that net income rose 5.8% to $2.48 billion, or $2.28 a share, from $2.34 billion, or $2.09, a year ago. Analysts surveyed by Refinitiv expected the company to earn $2.11 a share.
Revenue fell 2.7% to $25.78 billion from $26.49 billion a year ago, but it outpaced analyst estimates of $25.76 billion. It also reiterated its forecast for fiscal 2020.
Home Depot’s shares have been trading near an all-time high, buoyed by a strong U.S. economy and a housing market with appreciating home values. But it’s been under pressure as it spends billions of dollars to integrate its brick-and-mortar stores and its online business. It announced in 2017 that it would invest about $11 billion over three years as part of its “One Home Depot” program. It cut its forecast twice in 2019, saying it was taking longer to see the benefits of that spending.
Home Depot leaders have said its investments will peak in 2020. The company plans to spend $3.9 billion, up from $3.6 billion in 2019 and $3.3 billion in 2018.
Home Depot CEO Craig Menear said in a news release that fiscal 2019 was “marked by significant progress as we invest to transform ourselves into The Home Depot of the future.”
He said the company has “more conviction than ever that our strategic initiatives are creating a value proposition that is unique to the marketplace and will extend our leadership position for years to come.”
Home Depot executives said in December that its forecast for 2020 sales would be below Wall Street expectations and its margins would be pressured by its investments. That news caused the company’s shares to temporarily fall.
Home Depot’s investments have fueled changes, such as improving signage to make its big-box stores easier to navigate, revamping its supply chain to speed up deliveries and adding lockers in stores for pickup of online purchases.
Investors will listen on Tuesday’s earnings call to hear if Home Depot and its supply chain will be hurt by the coronavirus outbreak. About 70% of the company’s products are sourced from the U.S., but 30% come from other parts of the world — with much of that coming from China, according to company spokeswoman Sara Gorman.
Home Depot is gearing up for spring, its busiest sales season. Home Depot said that it plans to hire 80,000 additional employees, with many part-time hires staffing its garden center. That’s on par with seasonal hiring in recent years.
Home Depot is the largest home improvement chain in the country. It has about 2,290 retail stores and more than 400,000 employees across the U.S., Canada, Mexico.
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