24 Mar

Home Depot Enjoys Record Financial Performance

WRITTEN BY Phalguni Soni

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%

Home Depot Enjoys Record Financial Performance

Record performance

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 drivers

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.

Higher spending

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.

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