Home Depot Reports Solid 4th Quarter

ATLANTA — The Home Depot today reported sales of $23.9 billion for the fourth quarter of fiscal 2017, a 7.5 percent increase from the fourth quarter of fiscal 2016. Comparable store sales for the fourth quarter of fiscal 2017 were positive 7.5 percent, and comp sales for U.S. stores were positive 7.2 percent.

Net earnings for the fourth quarter of fiscal 2017 were $1.8 billion, or $1.52 per diluted share, compared with net earnings of $1.7 billion, or $1.44 per diluted share, in the same period of fiscal 2016. For the fourth quarter of fiscal 2017, diluted earnings per share increased 5.6 percent from the same period in the prior year.

On January 25, 2018, the Company announced that it expected the impact of the Tax Cuts and Jobs Act of 2017 to result in an additional net tax expense of approximately $150 million. The provisional amount recorded in the fourth quarter was $127 million. This charge, coupled with the one-time bonus payment to hourly associates that was also announced on January 25, 2018, negatively impacted fourth quarter and fiscal 2017 diluted earnings per share by approximately $0.17.

Fiscal 2017

Sales for fiscal 2017 were $100.9 billion, an increase of 6.7 percent from fiscal 2016. Total company comparable store sales for fiscal 2017 increased 6.8 percent, and comp sales for U.S. stores were positive 6.9 percent for the year.

Earnings per diluted share in fiscal 2017 were $7.29, compared to $6.45 per diluted share in fiscal 2016, an increase of 13.0 percent.

“Our ongoing commitment to enhance the interconnected retail experience for our customers, provide localized and innovative product, and deliver best in class productivity resulted in record sales and net earnings for 2017,” said Craig Menear, chairman, CEO and president. “I would like to thank our associates for their solid execution and exceptional work in service to our customers.”

Dividend Declaration

The Company today announced that its board of directors declared a 15.7 percent increase in its quarterly dividend to $1.03per share. “As a testament to our commitment to create value for our shareholders and our positive outlook for the business, the board has increased the dividend for the ninth consecutive year,” said Menear. The dividend is payable on March 22, 2018, to shareholders of record on the close of business on March 8, 2018. This is the 124^th consecutive quarter the Company has paid a cash dividend.

Fiscal 2018 Guidance

The Company will have 53 weeks of operating results in fiscal 2018 and provides the following guidance for fiscal 2018:

• Sales growth of approximately 6.5 percent including the 53^rd week
• Comparable store sales growth of approximately 5.0 percent for the 52-week period
• 53^rd week projected to add approximately $1.6 billion to total sales
• Three new stores
• Gross margin of approximately 34.0 percent
• Operating margin of approximately 14.5 percent
• Tax rate of approximately 26.0 percent
• Share repurchases of approximately $4.0 billion
• 53-week diluted earnings-per-share growth, after anticipated share repurchases, of approximately 28.0 percent to $9.31
  • 53^rd week expected to contribute approximately $0.19 of diluted earnings per share
• Capital spending of approximately $2.5 billion
• Depreciation and amortization expense of approximately $2.1 billion
• Cash flow from the business of approximately $14.1 billion

The Company plans to adopt ASU No. 2014-09, which pertains to revenue recognition, in the first quarter of fiscal 2018. The Company will update its fiscal 2018 guidance to reflect the impact of this accounting change during its first quarter earnings call in May. The Company does not expect the accounting change to have a material impact on its fiscal 2018 sales or operating margin guidance.

Long-Term Financial Targets

Today the Company reaffirms and updates its fiscal 2020 financial targets as follows:

Reaffirms:

• Total sales ranging from approximately $115 billion to approximately $120 billion
• Compounded annual sales growth rate ranging from approximately 4.5 percent to approximately 6.0 percent
• Operating margin ranging from approximately 14.4 percent to approximately 15.0 percent
• Annual average capital spending of approximately 2.5 percent of sales

Updates:

• Return on invested capital target of more than 40 percent. Note that the return on invested capital target has been updated to reflect the impact of the Tax Cuts and Jobs Act of 2017.

Home Depot is planning a conference call with reporters on the 4th quarter and fiscal year earnings.  This story will be updated by tED magazine as new information on earnings and strategies in Home Depot’s “Pro Services” customers is announced.