Home Depot Explains Earnings Success

Home Depot Explains Earnings Success

Home Depot’s fiscal year sales success is built on a number of factors, and executives believe 2017 will be even more successful.

For the 2016 fiscal year, sales to $94.6 billion, up more than $6.1 billion from the prior year, for a 6.9% growth. Diluted earnings per share grew 18.1% to $6.45.

A piece of that success comes from the acquisition of Interline, a leading national distributor of MRO products, for $1.625 billion in cash in July of 2015. “We are pleased with the traction that we are seeing, as we have successfully completed work on the first business use case. The roll-out of Interline’s catalog of products is now taking place across all U.S. Home Depot stores,” Craig Menear, Chairman, CEO and President of Home Depot said in a conference call. Menear announced the next phase of the effort will be to allow all Interline customers to use their Interline accounts for purchases at Home Depot and homedepot.com.

Home Depot is expecting Interline sales to expand in the next fiscal year. In fact, expectations are high. “On the growth assumptions, we are assuming that Interline will grow faster than the company average in 2017, which was true in the fourth quarter as well,” Carol Tome, Home Depot Chief Financial Officer and Executive Vice President said on the conference call. “But remember, Interline is less than 2% of our total sales. So it just rounds out at the end of the day, and that’s why our comp sales guidance is the same as our total sales guidance for 2017.”

Menear added the combination of Interline products and attracting a pro customer appears to have a bright future. “It is a $50 billion market opportunity across multi-family, hospitality and institutional, which we own about 5%, give or take, of that market. So it’s a significant opportunity for us to continue our share of wallet with our Pro customer,” Menear announced.

Speaking of the pro customer, Home Depot is very excited by its success in luring the pro customer online or into its stores. Two areas mentioned as successful were lighting and wire. “”We saw strong comps in Pro heavy categories like Fencing, Pressure-Treated Decking, Commercial and Industrial Lighting, Electrical Wiring, and Interior Doors,” Edward (Ted) Decker, Executive Vice President of Merchandising said on the conference call.

Bill Lennie, Executive Vice-President of Sales, added that Home Depot is seeing a strong combination of large and small professional shoppers right now. “We’re seeing a great balance between our low-spend and our high-spend Pro. Good health in the business being driven both by transactions, more transactions, and ticket. So it just says that we’ve got great activity in the stores. And as Ted said, the drivers for the Pro are just in-stock and everyday value on the shelf.”

Home Depot expects pro sales to increase by 4.6% in 2017.

And when it comes to e-commerce, Home Depot is reporting online business grew by 19% from fiscal year 2015, and is not 5.9% of total sales. Menear announced of the pro purchases made online, about 45% are picked up by the pro customer, while the other 55% take advantage of a program called Buy Online Deliver From Store, or BODFS, where Home Depot will bring items ordered online directly to a jobsite.


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