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Why HD’s Same-Store Sales Growth Fell Short of Expectations

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First-quarter performance

In the first quarter of fiscal 2019, Home Depot’s (HD) overall SSSG (same-store sales growth) came in at 2.5%, lower than analysts’ expectation of 4.2%. The company blamed wet weather conditions in February and a fall in lumber prices for its lower-than-expected SSSG. The company’s SSSG was also negatively affected by a tough YoY (year-over-year) comparison, as its previous year’s sales included ~$500 million in hurricane-related sales.

Home Depot posted SSSG of -2.0% in February, 5.6% in March, and 3.2% in April. In the United States, its SSSG was -1.9% in February, 6.1% in March, and 4% in April.

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SSSG drivers

During the quarter, Home Depot’s average ticket size increased 2.0%, while its total transactions increased 3.8%. Big-ticket sales, which are classified as sales of over $1,000 and represent ~20% of the company’s US sales, were up 3.9%. However, excluding hurricane-related sales, its big-ticket sales increased 5.1%.

During the quarter, the appliances, indoor and outdoor garden, decor, tools, building materials, plumbing, and hardware departments posted above-average SSSGs. The paint and kitchen and bath departments posted positive SSSGs but still came in below the company average. The SSSGs of millwork and flooring were negative.

Home Depot’s investment in an interconnected shopping experience has reduced the friction of the shopping process and has improved customer satisfaction and conversion. It’s also increased sales. During the quarter, the company improved its front-end checkout experience, continued with the rollout of automated lockers, and simplified tools for its associates. All these initiatives contributed to the company’s online sales, which grew ~23% YoY. Of these online orders, ~54% were picked up from stores.

Sales to professional customers continued to outperform those to DIY customers. The company’s new business-to-business website added 35,000 new customers in the quarter, increasing its total number to 135,000.

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