Strong track record
Home Depot’s (HD) sales have beaten the consensus estimates for eight out of nine quarters. The retailer’s sales grew by 9% during 1Q16 to $22.8 billion. Analysts expected the company to generate sales of $22.4 billion.
Key drivers of sales
Home Depot’s 1Q16 sales were mainly driven by the 6.5% growth in same-store sales. The same-store sales growth in the first quarter was driven by a 4.1% rise in comparable store customer transactions and a 2.4% rise in the comparable average ticket. Transactions for tickets below $50 grew by 2.7% in 1Q16. Transactions for tickets above $900 jumped by 9.5% in 1Q16 driven by the purchases of appliances, roofing, sheds, and windows appliances.
Same-store sales for US stores grew 7.4% in 1Q16. Favorable weather contributed another $250 million to the US sales numbers. However, the 1Q16 net sales were adversely impacted by $196 million of currency headwinds caused by the continued strengthening of the US dollar.
Home Depot’s Mexico and Canada businesses recorded positive same-store sales in their native currencies for the 50th and 18th consecutive quarters, respectively, in 1Q16. Online sales grew by 21.5% in 1Q16 and contributed 5.7% of the first quarter sales.
The 9% growth in 1Q16 sales was higher than the 6.1% sales growth in 1Q15 but lower than the 9.5% growth rate in 4Q15.
During 1Q16, sales figures for Home Depot’s peers were as follows:
- Sales of Bed Bath & Beyond (BBBY) remained flat at $2.7 billion as an increase in net sales from new stores was offset by lower same-store sales.
- Williams-Sonoma’s (WSM) sales grew 6.5% to $1.1 billion driven by higher same-store sales.
- Lowe’s Companies (LOW) spiked by 7.8% to $15.2 billion driven by higher comparable sales across all product categories.
2Q16 sales expectations
Analysts expect Home Depot’s 2Q16 sales to increase by about 7.3% to $26.5 billion. Rising home improvement spending is likely to benefit the house improvement retailer’s (RTH) sales. The company’s focus on innovation is also expected to benefit its top line. Recent innovations include the Milwaukee Pneumatic Framing Nailer, the 20-volt Max Brushless Finish Nailer, and the Pergo Outlast Plus Laminate Flooring.
The next part of this series will discuss 2Q16 earnings expectations for Home Depot.