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Home Depot’s Q4 SSSG Fell Short of Analysts’ Expectations

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Feb. 27 2019, Updated 12:05 p.m. ET

Fourth-quarter performance

Home Depot (HD) posted an SSSG (same-store sales growth) of 3.2% in the fourth quarter, which fell short of analysts’ expectation of 4.5%. The company’s management blamed unfavorable weather conditions for the lower-than-expected SSSG. Among the 3.2% SSSG, the increase in the average ticket size contributed 2.3%, while transaction growth contributed 0.9%.

Looking at the monthly performance, Home Depot posted an SSSG of 3.1% in November, 3.1% in December, and 3.3% in January. The company’s SSSG in the United States was at 3.7% during the quarter with 3.4% in November, 3.5% in December, and 4.1% in January. In international markets, Mexico posted a positive SSSG in its local currency, while the SSSG in Canada was flat.

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Home Depot’s investment in creating an interconnected shopping experience has improved customers’ satisfaction, conversion, and increased sales. During the fourth quarter, the tools, appliances, indoor garden, building materials, outdoor garden, hardware, and paint departments posted above-average SSSG. Although plumbing, flooring, millwork, and kitchen and bath posted positive SSSG, it was below the company’s average. Lighting and lumber posted a mid-single-digit decline in their SSSG.

Big-ticket transactions, which are above $1,000 and represent 20% of the company’s US sales, rose 4.8%. The company’s management blamed wet weather for lower sales growth in its big-ticket transactions.

During the fourth quarter, the sales from both professional and DIY (do-it-yourself) customers were positive. However, sales from professional customers outperformed sales from DIY customers. To improve the engagement with professional customers, Home Depot has been investing to improve its B2B website to deliver a more personalized offering to its professional customers and enhance the digital experience. The company has improved its search capabilities, site functionality, and the product content on its website and mobile applications, which led to 22.7% growth in its online sales during the quarter.

Next, we’ll discuss analysts’ revenue expectations for 2019.

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