Home Depot Crushes Estimates, Its Sales Jump 32.7% as Customers Rang Up Bigger Purchases

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  • Home Depot handily beat Wall Street's estimates for its fiscal first-quarter earnings and revenue.
  • The retailer has gotten a boost to sales over the last year during the coronavirus pandemic.
  • Home Depot didn't release an outlook for fiscal 2021.

Home Depot on Tuesday crushed Wall Street's earnings estimates as consumers' splurging on their homes lingers more than a year into the coronavirus pandemic.

Shares of Home Depot rose more than 2% in premarket trading but closed down 1%. The stock has risen 19% this year, giving it a market value of $341 billion.

Here's what the company reported for the three months ended May 2 compared with what Wall Street was expecting, based on a survey of analysts by Refinitiv:

  • Earnings per share: $3.86 vs. $3.08 expected
  • Revenue: $37.5 billion vs. $34.96 billion expected

The retailer reported fiscal first-quarter net income of $4.15 billion, or $3.86 per share, up from $2.25 billion, or $2.08 per share, a year earlier. Analysts surveyed by Refinitiv were expecting earnings per share of $3.08.

Net sales rose 32.7% to $37.5 billion, beating expectations of $34.96 billion. Global same-store sales surged 31% for the quarter, and paint was the only category to see same-store sales growth of less than 20%. Online sales grew by 27%. More than half of digital orders were fulfilled through stores.

In the first two weeks of May, U.S. same-store sales have climbed more than 30% compared with the same period two years ago, but the company declined to provide a year-ago comparison.

This is the first quarter that the retailer is facing year-over-year comparisons to its business during lockdowns. A year ago, its first-quarter same-store sales grew 6.4%. Home Depot was classified as an essential retailer, accelerating sales for the company's do-it-yourself supplies as consumers tackled new projects while stuck at home.

A booming housing market has also helped fuel growth, although soaring lumber prices and higher interest rates have dampened sales of newly built homes in recent months.

"The current shortage of new housing clearly is helping to drive improvements in the home values, which is a good thing for spending in the home," CEO Craig Menear said on the conference call.

For the company's first quarter this year, it reported 447.2 million customer transactions, up 19.3% from a year earlier. Consumers were also spending more during their visits. Average ticket rose 10.3% to $82.37.

Some of that increase in consumer spending could be tied to higher prices. For example, the price for a sheet of oriented strand board lumber has quadrupled over the last year, according to executives, but demand has kept pace. Menear said that the supply chain bottleneck is in saw mills, where cutting capacity hasn't caught up with demand.

"We don't see a lot of capacity coming online, so we're probably not going to see a lot of finished lumber product in distribution, so as soon as that product hits our stores, it sells," he said.

Consumers also had more cash in their pockets, thanks to stimulus checks from the federal government. However, executives said that it was too difficult to quantify the checks, most of which were sent to consumers in March.

Home Depot hasn't released an outlook for fiscal 2021. Last quarter, it cited the uncertainty caused by the pandemic.

"Fiscal 2021 is off to a strong start as we continue to build on the momentum from our strategic investments and effectively manage the unprecedented demand for home improvement projects," Menear said in a statement.

The company has also updated its mask policy after the Centers for Disease Control and Prevention changed its guidance for fully vaccinated people. Home Depot customers and employees who are fully vaccinated will no longer have to wear masks inside stores, unless state or local laws require facial coverings.

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