Strategy

Home Depot Surges to Record Earnings in Q2

The retailer has benefited from the strength of the U.S. housing market but same-store sales grew at the slowest rate in nine quarters.
Matthew HellerAugust 16, 2016

Home Depot posted record quarterly sales and profits on Tuesday, riding the tailwind of continuing strength in the U.S. housing market.

For the second quarter, the retailer’s profits rose nearly 14% to $2.44 billion, or $1.97 a share, while revenue climbed 6.6% to $26.47 billion. Analysts polled by Thomson Reuters had projected earnings of $1.97 a share on $26.49 billion in sales.

Same-store sales were up 5.4% in the U.S. Home Depot. It was the slowest rate of growth in nine quarter but the company raised its full-year earnings outlook to $6.31 per share from $6.27.

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“We had a solid quarter, achieving the highest quarterly sales and net earnings results in company history as housing continues to be a tailwind for our business,” CEO Craig Menear said in a news release.

As The Wall Street Journal reports, Home Depot has benefited as “the housing market grows and Americans become increasingly willing to spend on home-improvement projects. As home prices rise, renovations and improvements make more financial sense.”

Spending growth for home improvements and repairs is predicted to reach 8% by 2017, well above the 4.9% historic average, according to the Harvard Joint Center for Housing Studies.

According to Home Depot, both consumers and professional contractors contributed to broad demand during the second quarter. The number of customers who spent over $900 at checkout increased 8.1% and now account for 20% of U.S. sales.

Comparable sales for Home Depot’s Pros business grew faster than its overall same-store results while the do-it-yourself business saw an increase in units per basket.

The company’s shares rose 0.61% to $136.23 in trading Tuesday, bringing the stock’s gain so far this year to 14%. “The ongoing fact that the company is able to keep costs from rising at a large rate even though sales are increasing at a strong clip remains a testimony to this company’s strength,” Seeking Alpha commented.

But Forbes cautioned that “the pent-up demand for home improvements is being exhausted, albeit gradually, and millennials just aren’t buying as many homes as previous generations did.”