Strong Home Depot Results Show Pandemic's Consumer Spending Shift -- 2nd Update
August 18 2020 - 11:31AM
Dow Jones News
By Matt Grossman
Home Depot Inc. on Tuesday posted strong sales growth and a
higher-than-expected profit in the latest fiscal quarter,
emphasizing the company's success drawing home-improvement shoppers
during the Covid-19 pandemic.
Revenue for the Atlanta-based retailer rose by 23% to $38.05
billion in the May-to-July period, up from $30.84 billion during
the same three months of 2019. Analysts surveyed by FactSet had
anticipated revenue of $34.53 billion.
The coronavirus pandemic and government stimulus checks have
helped drive traffic to home-improvement retailers like Home Depot.
As Americans spent more time at home during the public-health
crisis, many turned their attention to domestic projects, shifting
money they would have otherwise spent on vacations, gym memberships
and other activities that have been postponed to prevent the
virus's spread.
"The home has never been more important to the customer," Home
Depot Chairman and Chief Executive Craig Menear said on a phone
call with analysts on Tuesday. "We're all spending lots of time
there. We're seeing things that need to be done or things that you
want to be done. We're clearly seeing the customer engaged in a
really strong way right now."
Home Depot's comparable-store sales in the U.S. -- which compare
sales at stores opened more than a year -- grew by 25% year over
year. The company notched double-digit percentage increases in the
number of customer transactions, the average ticket size and sales
a square foot of retail space.
Sales to do-it-yourself consumers grew faster in the quarter
than those to professional contractors, although both categories
increased, Ted Decker, the company's executive vice president for
merchandise, told analysts. Expensive purchases such as riding lawn
mowers and patio furniture drove growth in big-ticket transactions,
but that was partially offset by weaker sales of items requiring
intensive indoor installation work, such as countertops and
kitchens.
Comparable sales growth remained strong in the first two weeks
of August, after the quarter ended, Home Depot executives said. Mr.
Menear added that the pandemic made it difficult to forecast how
long heightened demand would persist.
"It's really so uncertain," he said. "We don't know the answer
to that, which is why we can't really extrapolate current
performance to future performance."
Home Depot's earnings in the quarter were $4.33 billion, or
$4.02 a share, up from $3.48 billion, or $3.17 a share, in 2019's
second quarter. Analysts anticipated earnings of $3.64 a share.
Shares of Home Depot, up 32% in 2020, fell 0.7% in initial
trading Tuesday morning to $286.25.
In the quarter, Home Depot spent $480 million on additional
employee benefits during the coronavirus pandemic, including
bonuses for hourly workers in stores and distribution centers.
Since the pandemic began, the company has spent $1.3 billion on
enhanced pay and benefits, Home Depot said.
While the coronavirus pandemic has battered parts of the U.S.
retail landscape and forced long-struggling chains like J.C. Penney
Co. into bankruptcy, it has given a boost to others. Restrictions
meant to slow the virus's spread squeezed many small businesses and
accelerated the yearslong shift to online shopping, allowing
Amazon.com Inc. and Walmart Inc. to flourish. It also strengthened
giants like Home Depot and Lowe's Cos., which largely remained open
earning sales as customers came to stores.
Separately on Tuesday, Walmart's quarterly sales surged as the
retail behemoth continued to use its scale, e-commerce supply chain
and grocery business to attract shoppers buying food and household
goods during the pandemic.
Overall, Walmart's global revenue rose 5.6% to $137.7 billion,
and its comparable U.S. sales at stores or digital channels
increased 9.3% in the quarter ended July 31.
Retailers like Walmart and Home Depot have benefited from
federal stimulus checks to consumers and federally enhanced
unemployment benefits. July marked the third straight month that
U.S. households' retail spending increased, according to Commerce
Department data. A more recent analysis by research firm GlobalData
suggests consumer spending may have moderated after the enhanced
$600 weekly unemployment benefit expired at the end of July.
Daily foot traffic to Home Depot stores since April has been
running at least 35% above last year's, according to Unacast Inc.,
which tracks location data from 25 million cellphones on any given
day. In 26 states, traffic doubled following a surge in late
May.
Write to Matt Grossman at matt.grossman@wsj.com
(END) Dow Jones Newswires
August 18, 2020 11:16 ET (15:16 GMT)
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