Online sales are growing for The Home Depot Inc., and now the home improvement retail giant is looking into new ways to deliver online orders to shoppers.
Home Depot CEO Craig Menear told analysts on the retailer’s Q3 2017 earnings call on Tuesday that online accounted for 6.2% of overall sales during the third quarter ended Oct. 29, or $1.552 billion, up 19.7% from $1.297 billion during the same time last year, when online accounted for 5.6% of overall revenue.
Menear said 45% of the company’s online U.S. orders are being picked up in stores and 85% of online order returns being completed in-store.
Home Depot is piloting other ways to fulfill online orders and will discuss those tests at its investor conference next month, Menear told analysts on the call.
“The flexibility of our supply chain is a competitive advantage for our business,” Menear told analysts on the call, according to a transcript from Seeking Alpha.
Sales at stores open for more than a year—a key benchmark for investors—rose 7.9%, more than two percentage points above estimates, according to Consensus Metrix.
Earlier this year, Home Depot Home Depot ramped up its service offerings to its commercial customers by acquiring Compact Power Equipment, a provider of equipment rental and maintenance services, for $265 million.
“I think the acquisition of Compact Power is another area where we can increase the engagement with our [commercial customers],” Edward Decker executive vice president for merchandising said during the conference call. The goal, he said, is to encourage more “multi-level engagement” with those commercial clients, including online, or via any of the company’s other services, such as delivery.
While commercial customers don’t actually buy a lot online, Decker said, commercial customers do engage online with Home Depot more than other shoppers—mainly to check inventory levels and prices. “They’re still then going to the store, but they want to make sure everything is there for their project before they go to the store,” Decker said.
Home Depot reported that the hurricanes that hit the United States earlier this year lifted same-store sales by about $282 million in the third quarter. But, because customers stocked up on less profitable items such as plywood and generators during the natural disasters, margins on hurricane-related sales were a lot lower than average, the company said. Sales gains are expected to surge in the final months of the year because that’s when homeowners will start receiving insurance checks for damage, the company said.
“Although natural disasters have had a positive impact on sales, their effect on margins has been less satisfactory,” said Neil Saunders, a GlobalData Retail analyst.
Home Depot also reported that it incurred about $104 million of hurricane-related expenses and, as a result, its operating profit was negatively impacted by about $51 million in the third quarter.
In September, Home Depot, No. 8 in the Internet 2017 Retailer Top 500, stopped its buy online, pickup in store service at stores located in the path of Hurricane Irma. The retailer did that in part because most consumers who went directly to stores to buy goods needed to brace their homes for the storm and it did not want to disappoint online shoppers as inventory dwindled, a spokesman said at the time.
Home Depot was named the Omnichannel Retailer of the Year at the 2017 Internet Retailer Excellence Awards earlier this year.
Bloomberg News contributed to this report.