Home improvement retailer Home Depot (HD 157.33) reported its fiscal first quarter results this morning and there were no surprises. Home Depot achieved another period of stellar results, as expected.
The connection that can be made easily from Home Depot's report is that it is most certainly not feeling the pinch of weak traffic, weak spending activity, and increased online competition like so many other retailers are. On the contrary, Home Depot finds itself in a consumer spending sweet spot and it is making the most of its appeal as the home improvement industry leader.
For its fiscal first quarter, Home Depot reported sales of $23.9 billion, a 4.9% increase versus the year-ago period and above analysts' average expectation. The thrust of its consumer connection, however, was in its comparable store sales.
In an environment where retailers are struggling to deliver comparable store sales growth, Home Depot achieved a 5.5% increase in first quarter comparable store sales, driven by a 6.0% increase for its U.S. stores. The number of customer transactions rose 1.6% year-over-year and the average ticket jumped 3.9% to $62.39.
In brief, then, more people frequented Home Depot stores in the first quarter and they spent more on average than they did a year ago. The encouraging element behind that operating revelation is that the first quarter is typically a seasonally weak period for Home Depot.
The company managed that growth well, too, as its operating margin expanded 50 basis points to 14.0% of net sales. Diluted earnings per share, meanwhile, increased 16.0% year-over-year to $1.67, which was comfortably ahead of analysts' average expectation.
Home Depot will hold a conference call at 9:00 a.m. ET to discuss its results. In the interim, it provided some updated fiscal 2017 guidance in its earnings press release.
The company is maintaining its view that fiscal 2017 sales growth will be approximately 4.6% with comparable sales also up approximately 4.6%. Home Depot bumped up its guidance for diluted EPS growth from approximately 10.5% to approximately 11.0%, which translates to $7.15 after anticipated share repurchases.
There could be a sliver of disappointment that Home Depot didn't raise its sales and comparable sales guidance, yet the affirmation is most likely being construed as a conservative forecasting approach that raises the potential for the company to deliver a positive surprise given the favorable trends for the housing sector and the home improvement retail industry.
Market participants will hear from competitor Lowe's (LOW 85.19) on May 24, but what they heard today from Home Depot has been more of the same good news that has driven Home Depot's stock to a record high this year.
Shares of HD are trading 1.6% higher in pre-market action, yet it is worth pointing out that they had risen 8% over the last month leading up to the report. Investors, therefore, knew they had reason to believe Home Depot would report good news and offer reassuring guidance and they were not disappointed in either respect.