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What Led to Home Depot’s Record Results in Fiscal 2016?

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Home Depot’s sales rose 9.5%

Home Depot (HD) reported record results in fiscal 2016. Sales reached a new high of $88.5 billion in fiscal 2016, up 6.4% year-over-year (or YoY). Same-store sales growth came in at 5.6% in fiscal 2016, with US comps at 7.1%. The retailer reported over 1.5 billion transactions during the year, the highest ever in the company’s history.

Home Depot’s revenue growth was higher in fiscal 4Q16. Sales grew 9.5% to ~$21 billion in the quarter. Store comps came in at 7.1% for the company overall. Revenue growth was broad-based with all merchandising categories reporting positive comps.

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Performance comparisons

In contrast, Home Depot’s rivals Pier 1 Imports (PIR) and Bed Bath & Beyond (BBBY) posted same-store sales growth of 4.7% and 2.4%, respectively, in their last fiscal years. Walmart’s (WMT) US segment posted low-single-digit comps in the home goods category in fiscal 4Q16. HD makes up ~4.9% of the portfolio holdings in the iShares U.S. Home Construction ETF (ITB).

Home Depot’s US performance

Home Depot reported better-than-average performance in the US in the quarter and the fiscal year. Store comps came in at 7.1% and 8.9% in fiscal 2016 and 4Q16, respectively. The retailer’s (XLY) (FXD) (XRT) sales were boosted by the recovering US economy and housing (XHB) (ITB) market, aided slightly by unseasonably warm weather in November and December.

  • All 19 regions in the US reported mid-single-digit to low-double-digit comps growth, according to Craig Menear, CEO of Home Depot.
  • US sales got an estimated $100 million boost in 4Q16 from the unseasonably warm weather in November and December, according to Edward Decker, executive vice president of merchandising. This factor boosted sales of products for outdoor projects.

Interline Brands acquisition

Revenue also got an upwards push due to the integration of the results of Interline Brands. HD acquired MRO products distributor and marketer Interline Brands in fiscal 3Q16. The company was owned by Goldman Sachs Capital Partners (GS), P2 Capital Partners, and company management. While HD hasn’t disclosed comparative figures, Interline Brands made $1.7 billion in sales in the trailing-12-month period ended in 1Q15.

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