Home Depot Profit Tops Estimates After Housing Gains Spur Sales

Macy's and Home Depot Paint Mixed Retail Picture
  • Comparable-store sales hit 7.1%, fastest growth in a year
  • Climbing real estate prices are keeping homeowners spending

Home Depot Inc. posted fourth-quarter profit that topped analysts’ estimates and projected that its robust sales growth would continue this year, with consumers showing no signs of pulling back on renovations and projects.

Profit in the quarter through Jan. 31 rose to $1.17 a share, the Atlanta-based company said Tuesday in a statement. Analysts estimated $1.10, on average. Sales climbed 9.5 percent to $21 billion, beating analysts’ $20.4 billion projection. Revenue this year will gain as much as 6 percent, which is slightly higher than its average growth rate of the past four years.

The results signal that Home Depot’s business remains largely immune to a broader retail slump. While consumers have restrained purchases of items like clothing, they’ve kept shelling out cash to fix up their dwellings, encouraged by rising housing prices. Sales at Home Depot’s stores open for more than a year rose 7.1 percent, topping analysts’ 4.3 percent prediction.

“Expectations were elevated, but we believe the company surpassed every hurdle for the quarter," Matthew Fassler, an analyst at Goldman Sachs Group Inc., said in a note to clients.

Profit this year will rise to $6.12 to $6.18 a share, Home Depot said. The range straddles analysts’ average estimate of $6.16.

Shares Gain

Home Depot rose 1.4 percent to $124.53 at the close in New York. The shares have slid 5.8 percent this year amid a broader market decline. Rival Lowe’s Cos., which reports results on Wednesday, has fallen 11 percent.

Home prices in the 20 cities measured by the S&P/Case-Shiller index of property values increased 5.7 percent from a year earlier in the 12 months through December. The median projection of 27 economists surveyed by Bloomberg called for a 5.8 percent advance. Nationally, prices rose 5.4 percent year-over-year.

Home Depot had about 349.1 million customer transactions in the quarter, up 5.1 percent from a year earlier. The average purchase grew 2 percent to $58.96.

The warm winter -- which allowed homeowners to complete more outdoor projects -- boosted revenue by $100 million during the quarter, with December same-store sales growing more than 10 percent, executives said today on a conference call.

The retailer also raised its quarterly dividend by 17 percent to 69 cents a share.

“Home Depot delivered very strong fourth-quarter results and provided a healthy outlook for 2016 that was consistent with its long-term outlook,” Seth Sigman, an analyst at Credit Suisse Group AG, said in a note. “As investors debate Home Depot’s premium valuation, it’s important to consider the composition of growth -- driven mostly by strong comps, specifically transaction growth -- and what that deserves in the current retail world.”

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