Home Depot Inc. signaled demand is still strong for home-improvement projects a year into COVID-19, but customer trends from the latter part of 2020 indicate that sales growth may be slowing down a bit.
- Same-store sales in the U.S., a key measure in retail performance, rose 25 per cent in the quarter ended Jan. 31, better than the estimate of 19.1 per cent from Consensus Metrix.
Key Insights
- Investors may be disappointed that the company didn’t give an official forecast for 2021. But Chief Financial Officer Richard McPhail offered some insight for the year ahead by saying if conditions remain similar to the last half of the past year, sales would be flat or slightly positive and the operating margin should be at least 14 per cent. Home Depot may face difficult comparisons in the coming quarters as home-improvement growth slows.
- Customer transactions fell in the three months through January, compared with the quarter through November. However, shoppers are spending more on average per transaction.
- As Home Depot continued to operate its stores during the pandemic, the cost of sales has been increasing faster than revenue growth as cleaning costs rise.
Market Reaction
- The shares declined 3.2 per cent in early trading Tuesday as U.S. stock futures dropped. Home Depot has gained 3.9 per cent this year.
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