The Home Depot grew total sales 8.1% in its second fiscal quarter ended Aug. 1 to reach $41.12 billion, up from $38.05 billion a year earlier. Net earnings reached $4.81 billion, up 11.1% from $4.33 billion a year earlier.
The Home Depot, No. 4 in the Digital Commerce 360 Top 1000, says global same-store sales, a key metric in retail, increased 4.5%, and same-store sales in the U.S. increased 3.4%.
The Home Depot doesn’t breakout quarterly online sales but says sales through its digital platforms were “essentially flat” during the second quarter as the pandemic-fueled home improvement boom cooled.
“…We lapped digital sales growth of approximately 100% in the second quarter of last year,” said Ted Decker, president and chief operating officer, in an earnings call transcript obtained from Seeking Alpha. “On a two-year stack basis, sales from our digital platforms increased approximately 100%. We’re thrilled with the customer engagement across our interconnected platforms,” he said. More than 55% of online orders were fulfilled through stores, unchanged from Q1. Two-year stack adds the growth rates for the past two years together.
Americans fixing up their homes has powered the retailer’s historic revenue gains during the pandemic. Now, with the economy reopening, major renovations done by professionals are becoming a larger business. That led to an 11% increase in the average purchase price, but overall transactions fell 5.8%, not enough to sustain the momentum.
The retailer says that it sees signs customers are more comfortable taking on larger projects, CEO Craig Menear noted on the earnings call, as its professional sales from customers like contractors and other home improvement professionals outpaced those from traditional customers for the second quarter in a row.
Home Depot may face increased competition from local businesses as consumer behavior shifts and the initial DIY craze subsides, said Neil Saunders, managing director of GlobalData. “It is so important for Home Depot to emphasize the convenience and speed of its online services,” Saunders wrote in a note. “It is going to have to work increasingly hard to secure that share from others.”
The waning effects of the pandemic in the U.S. have reversed the fortunes of many companies that saw demand surge during lockdowns, from household cleaner Clorox Co. to streaming-video giant Netflix Inc. Walmart Inc. (No. 2) bucked the trend Tuesday, reporting same-store sales gains that topped analysts’ estimates.
While many competitors have released a forecast, Home Depot again declined to do so, citing continued uncertainty from the pandemic. One possible reason for the uncertainty at retailers like Home Depot and Walmart: Investors are struggling to figure out what will happen once government stimulus wanes, according to Edward Jones analyst Brian Yarbrough.
The company is also grappling with the impact of inflation, as commodity and shipping costs rise and some of the effects are being passed along to consumers.
On the earning call, Menear said the company is noticing changing consumer patterns in the U.S. as the economy opens. “We have seen a shift in the pattern of sales within the week, as our weekday sales performance is actually strengthened relative to the weekend,” Menear said. “We attributed this to consumers returning to travel and other recreational activities.”
Home Depot is working on improving its supply chain as it, along with many retailers, is still struggling to get inventory as fallout from the pandemic. “Raw material shortages, production constraints and pressures across modes of transportation are creating a difficult supply chain environment,” Decker said. “…It can be category by category. There’s a COVID outbreak in a factory, there’s a shipping constraint, there’s a domestic transportation capacity constraint. So, it’s been the story of two steps forward, one step back.”
Home Depot is more than three years into a long-term project to deliver all of its products, parcel and big and bulky, to 90% of the U.S. population the same day or next day they are ordered, he said. “Our in-stock levels are still not where we want them to be,” he added.
Home Depot recently chartered a dedicated cargo ship to take greater control of its supply chain. “We have a ship that’s solely going to be ours, and it’s just going to go back and forth with 100% dedicated to Home Depot,” Decker said in a June interview with CNBC. The vessel was expected to start service in July, according to CNBC.
For the second quarter ended August 1, 2021, Home Depot reported:
- Net sales increased 8.1% to reach $41.12 billion, up from $38.05 billion a year earlier.
- Net earnings reached $4.81 billion, up 11.1% from $4.33 billion.
- Customers placed 481.7 million transactions, down 5.8% from 511.5 million.
- Average ticket was $82.48, up 11.3% from $74.12 a year earlier.
For the first six months, Home Depot reported:
- Net revenue increased 18.6% to reach $78.62 billion, up from $66.31 billion in the first half of 2020.
- Net earnings increased 36.1% to reach $8.95 billion, up from $6.58 billion.
- Customers placed 928.9 million transactions, up 4.8% from 886.3 million.
- Average ticket was $82.43, up 10.8% from $74.37 a year earlier.
Percentage changes may not align exactly with dollar figures due to rounding.