Home Depot (HD) wins on strong demand conditions and online sales
The players in home renovation products, such as Home Depot, Inc. HD, continue to benefit from the growing inclination of consumers for home improvement and maintenance projects. The extended stay indoors last year made people aware of the importance of houses. Consumer spending on homes has continued, although outward moves accelerate, as the interests of keeping homes well maintained are here to stay. The gains from these trends were visible in Home Depot’s performance in the second quarter of fiscal 2021. The company’s robust omnichannel offerings are also encouraging.
Shares of this company Zacks Rank # 3 (Buy) have gained 25.8% in the past six months compared to the industry’s 23.1% rise. Let’s take a closer look at the aspects that act like aces in the Home Depot stack.
Home improvement market looks strong
Strong demand for home improvement projects, robust trends in the housing market and continued investment have been added to The Home Depot’s bottom line. During the second quarter, the company’s net sales increased 8.1%. The company adapts effectively to the high demand environment, thanks to the investments in its business over the years and the dedication of its associates to serve customers. Management noted that consumers are focusing on larger projects, contributing to the growth in sales of the company’s Pro customers. Growth of Pro customers exceeded that of DIY customers for the second consecutive quarter. On a two-year stack basis, the growth of the company’s professional and DIY customers has been steady and strong.
Speaking of the Pro segment of the company, the company is on the right track with its strategic investments to create a Pro ecosystem that includes professional grade products, exclusive brands, improved delivery, field sales support, HD rental and more. The company expects its differentiated Pro ecosystem to foster deeper engagement with long-term Pro customers. During the second quarter, the company saw a sharp increase in tickets in heavy pro categories such as lumber, vinyl plank flooring, drywall, and pipe and fittings. The company is also impressed with the momentum of its pro extra loyalty program. The company expects continued growth in sales from Pro customers as demand for projects increases.
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Strong online sales and other benefits
In the second quarter, on a two-year stack basis, digital platform sales grew almost 100%. Improved delivery and fulfillment options have boosted the company’s online sales. Over the years, the company has created the fastest and most efficient home improvement delivery network through options such as Online Store Pickup Purchase (BOPIS) with convenient pickup bins. , the online purchase of in-store delivery with express delivery by car and van as well as the sidewalk Recover.
Home Depot sees significant benefits from executing the “One Home Depot” investment plan, which focuses on expanding supply chain facilities, technology investments and improving the digital experience. Amid the pandemic, customers are increasingly mixing the physical and digital elements of shopping. This makes the One Home Depot interconnected strategy most relevant. The interconnected retail strategy and the underlying technology infrastructure have helped to steadily increase web traffic over the past few quarters. In addition, it seeks to improve the interconnected tool rental facilities. This ability is likely to improve the experience for Pro and DIY customers.
Although the company is experiencing favorable demand conditions, the lapping of the strong growth environment over the past year has led to unfavorable year-over-year comparisons, particularly in same-store sales. The increased expenses resulting from increased penetration of lumber products and transportation costs were also of concern to the company.
Nonetheless, strong execution of growth strategies along with an attractive product offering helped the company respond effectively to demand conditions. These benefits, along with favorable conditions prevailing in the home improvement market in general, are expected to continue to support Home Depot’s growth in the periods ahead.
3 choices not to be missed
Tecnoglass Inc. TGLS, posting a Zacks Rank # 1 (Strong Buy), has a long-term earnings growth rate of 20%. You can see The full list of today’s Zacks # 1 Rank stocks here.
Best Buy Co., Inc. BBY, also ranked number one in Zacks, has a long-term profit growth rate of 8.3%.
Bed Bath & Beyond Inc. BBBY, holding a Zacks Rank # 2 (Buy), has achieved a surprise profit of 86.2% on average over the past four quarters.
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