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Home Depot Eyes Higher Growth in Fiscal 2017

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Company guidance

The Home Depot (HD) revised its full-year guidance upward at its fiscal 1Q17 earnings call on May 17, 2016. The company released point estimates for sales and EPS (earnings per share) growth. HD now expects comp (comparable) sales to increase 4.9% and overall sales to rise by 6.3%. This is higher than the estimates released by the company at the fourth quarter earnings call in February.

On that call, the company projected sales growth of 5.0%–6.1%. Comp sales were previously expected to increase at a 3.7%–4.5% pace for the year. The revision in estimates is due to the company’s strong performance in the first quarter and the weakening of the US dollar.[1. based on comments by Carol Tomé, CFO (chief financial officer) of Home Depot]

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Earnings guidance

Home Depot’s EPS growth for fiscal 2017 is expected to be 14.8%, which is higher than the 12%–13% expected earlier. HD expects to generate full-year EPS of $6.27.

Home Depot’s EPS increased 19% year-over-year to $1.44 in the first quarter of fiscal 2017. The higher projected growth in EPS relative to sales is partly due to the $1.3 billion in share buybacks (PKW) the company spent repurchasing 9.5 million shares. According to HD’s CFO (chief financial officer) Carol Tomé, the company expects to spend $5 billion on share buybacks during the year.

Lowe’s (LOW), the world’s second-largest home improvement chain, repurchased shares worth $1.2 billion in fiscal 1Q17. The company expects to grow diluted EPS by nearly 25% in fiscal 2017 to $4.11. Comps growth of 4% is expected for the year. Lowe’s top line and bottom line are expected to benefit from the impact of the 53rd week, the 45 new stores planned for the year, and its acquisition of RONA.

Restoration Hardware (RH) expects revenue to grow at a low mid-single-digit pace in fiscal 2017. RH’s adjusted diluted EPS is expected to be flat or decline slightly, partly as a result of execution delays in RH Modern, one of its newer concept brands.

Williams-Sonoma (WSM) expects growth of 3.9%–5.9% in its top line in fiscal 2017. It expects same-store sales growth of 3%–6%. WSM’s adjusted EPS is expected to increase 3.9%–8.3% this year.

In the next part, we’ll look at Home Depot’s stock performance and dividends.

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