Revenue drivers for Home Depot
Home Depot (HD) is the number one home improvement (XHB) retailer. Its revenues have grown at a CAGR (compound annual growth rate) of 4.7% over the past five years. They came in at $83.2 billion in fiscal 2015, which ended February 1, 2015.
Most of HD’s revenues, ~89%, are earned in the US. The company derives its largest proportion of revenues from these three segments:
- Kitchen Products – ~10%
- Indoor Garden – ~9%
- Paint – ~9%
Fiscal 2015 was a record year for Home Depot (HD). The company earned revenues of $83.2 billion, an increase of $4.4 billion, or 5.5%, year-over-year. It also earned record net income of $6.3 billion, an increase of almost $1 billion over fiscal 2014. The company also grossed its highest-ever daily revenues on Black Friday last quarter.
Sales growth was driven by higher store comps, or same-store sales, as well as higher customer store transactions, and an increase in ticket size. Store comps rose 5.3% and 7.9% in fiscal 2015 and 4Q15, respectively. In the US market, the company’s store comps were even higher at 6.1% in fiscal 2015.
In comparison, same-store sales at Lowe’s (LOW), Home Depot’s (HD) closest competitor, rose 7.1% in 4Q15. At Williams-Sonoma (WSM), another key competitor, same-store sales rose 5.1% in the quarter ending February 1, 2015.
Home Depot (HD) reported a 3.7% increase in transactions to over 1.4 billion. Consumers (XLY) also spent 1.9% more per transaction on average. The expansion in e-commerce sales contributed 1.1% to comps. The company’s also beginning to see small increases in the number of units per basket.
Home Depot (HD) has been able to grow these key metrics despite the stop-start nature of the housing recovery. It concentrates on growing sales through its existing store base and e-commerce sales, rather than with aggressive store expansion. The company’s emphasis on customer service initiatives also appears to be paying off. We’ll cover e-commerce drivers in the next article.