Trefis: Collaborate on Forecasts
View | Modify | Create | Collaborate

Home Depot (HD)

New Scenario
Request Scenario
Sankey Grid
Subscribe to Updates
Select a component to explore
Top Drivers for Period
Key Drivers



  1. Latest Earnings
    • In Q2 2019, the company's revenue was recorded at $30.8 billion, up by 1.2% y-o-y. The increase was driven largely by growth in comparable sales by 3% (3.1% in the US). The earnings was recorded at $3.18, higher than the $3.06 per share in the same period of 2018. Further, the difference between the Company’s sales growth and comparable sales performance reflects a shift in the calendar base due to 53 weeks of sales in fiscal 2018. The Company updated its guidance for 2019 wherein it expects sales to grow by approximately 2.3% and comp sales for the comparable 52-week period to be up approximately 4%. The Company reaffirmed its diluted earnings-per-share growth guidance for the year and expects diluted earnings-per-share growth of approximately 3.1% from fiscal 2018 to $10.03.
  2. Changes in the last year - U.S. economy and housing markets

    • Unemployment is at its lowest since 2000, and wages are improving. Although interest rate hikes make mortgages more expensive, on the whole, it is indicative of a strong economy. These factors signal a solid U.S. economy, and have given rise to supportive housing fundamentals. This bodes well for a company like Home Depot that is heavily reliant on the improvement of the housing industry.
    • The housing market has seen a resurgence of late. While things have not returned to the boom times, the number of new houses built last year was the most since 2007. People who buy new homes spend money on improving their homes, installing appliances, buying furnishings, etc. It is not just the new homes, but remodeling of existing houses is also on an upswing.
    • The NAHB (National Association of Home Builders) report forecasts remodel spending to increase 4.9 percent above 2017 levels in 2018, with additional growth of 0.6 percent forecast for 2019. First time buyers, who are mostly millennials and baby boomers, are set to drive this growth in the coming years.
    • Home Depot's share price and performance, in general, has continued to benefit from the phenomenal growth in housing markets in the previous years, and steady growth in recent times.
  3. Home Depot's online sales continue to propel overall growth
    • Home Depot has made a concerted effort to focus on its integrated retail strategy, which seamlessly connects online and offline channels, making its stores more efficient. This has resulted in improved revenues and profitability, with the online space being a key driver of the impressive growth Home Depot has witnessed in recent times. In the fourth quarter, online traffic improved at a healthy rate, sales increased 23% versus Q4 2017, and approximately 50% of online orders were picked up in-store. Moreover, in the digital space, the typical transaction ticket size is three times of that in a store. By focusing on an integrated channel strategy, Home Depot has been able to increase revenues per square foot, rather than generating revenues from new square footage. This has ensured that its existing store network is being effectively used to drive revenues.


Home Depot EBITDA Margin: From 2013-2018, Home Depot improved margins to about 18.5% by streamlining its operations, supply chain, and cutting down heavily on its SG&A expenses. Margins were also aided due to the substantial growth in same-store sales. Going forward, we expect the margins to continue to slightly increase to reach the 19.6% mark over the Trefis forecast period, with further operating leverage as comps improve. However, if the comps grow only modestly, and there is limited or no operating leverage, the margins would remain steady, causing a 5% downside to our current price estimate. On the other hand, if the housing market and home improvement industry continues to strengthen, and outpace previously forecast growth estimates, and comps improve better than expected, resulting in the margins reaching 20.6%, there could be an over 5% upside to our current price estimate.


Home Depot is the world’s largest retailer of home improvement products. Home Depot has grown to 2,287 stores spanning across the U.S., Canada, and Mexico. It offers a wide range of home improvement products and installation services to individual home owners as well as professional builders. In addition to the physical stores, consumers can buy these products through the company’s dedicated website. Home Depot has deep penetration in the U.S., Canada, and Mexico.

Home Depot's business is vulnerable to the housing market, and the housing slowdown has widely affected its sales. In fact, Home Depot had to close down its EXPO and HD supply businesses as their sales were badly impacted during the housing market downturn, making these businesses highly unprofitable.


Consistently outpacing Lowe's in terms of comps

Home Depot and Lowe's are the number one and two home improvement retailers in the U.S. In 2013, Home Depot outpaced Lowe's in terms of same store sales growth with better pricing. In 2014, sales growth was recorded at 4.3% for Lowe's and 5.3% for Home Depot. In 2015, while Home Depot's comps grew 5.6%, that of Lowe's grew only 4.8%. Home Depot bucked the trend of declining sales for retailers in early 2016 on higher consumer spending on home improvement. The company comfortably beat Lowe's comps in FY 2017 and FY 2018, given the guidance provided by the two companies for 2019, we expect the trend to continue.

Home Depot has been stealing valuable market share from arch-rival Lowe's due to better pricing models. In late 2011, Lowe's had decided to move away from promotions to everyday low prices to establish itself as the retailer offering the most competitive prices. However, Lowe's sales continue to struggle more than they already would have in a depressed housing market as customers continued to seek discounts, particularly for discretionary and big-ticket purchases. Home Depot has been grabbing market share from Lowe's due to better pricing models.

Following the recession, Home Depot focused on cost-cutting and improving customer service, whereas Lowe's opted for promotional sales and kept opening new stores, which produced diminishing returns. Since mid-2010, Home Depot's quarterly comparable-sales-growth rates have consistently outpaced Lowe's.

Emerging competition from online retailers

Online retail has been an emerging threat to the market share of brick and mortar home improvement retailers like Home Depot and Lowe's. For this reason both companies have made significant investments in online strategies, including small acquisitions and improvements in the web experience for their customers.

Improving same store sales could provide operating leverage

As a result of the gradual market recovery, Home Depot's same store sales growth (comps) has gradually improved from 2.9% in 2010 to 6.8% in 2017. This figure declined slightly in 2018 to 5.4% due to tougher y-o-y comparison and unfavorable weather conditions. Further, this expected to increase by 5% in 2019. This helped Home Depot improve its margins through operating expense leverage during 2010-2018. Going forward, we expect comps to continue to improve, as sales rise. This should bring in further operating expense leverage, thereby pushing up margins.

Home Depot's supply chain improvements

Home Depot has been focusing on supply-chain improvements through its central distribution system. We expect overall margins to further improve as the company continues its supply-chain improvements. Rapid Deployment Centers (RDC) aim to aggregate product needs for multiple stores to a single purchase order, and then rapidly allocate and deploy inventory to individual stores upon arrival at the RDC. This move aims to simplify the ordering process and improve inventory management. Home Depot has 18 fully mechanized RDCs in the U.S.

Pro customer activity will drive home improvement industry growth in the near future

The pro segment is estimated at $120 billion a year, nearly as large as the do-it-yourself segment. A breakdown of Home Depot's comparable sales growth in the last few quarters shows a broader increase in the average ticket size as compared to a customer traffic increase. Transactions of $1000 or more have grown by high single-digit or double-digit percentages in the last few quarters. Pro sales continue to grow disproportionately faster than Home Depot's average, boosting its top line and leading to a market-beating growth in categories such as plywood, fencing, and industrial lighting.

Shift in consumer preferences will impact the traditional range of home improvement products

A survey from NRHA suggests a change in the buying patterns among U.S. home improvement consumers. People are no longer only loyal to products made in the U.S. Consumer demand is driven more by price and quality. Consumers may find foreign products, which may be better suited to their needs, and more appealing than products made in the U.S. Another observable trend is the shift in consumers toward buying green or eco-friendly products, such as water-saving flushes and electricity-saving appliances.

Recent Trefis Articles

Home Depot Beats Consensus, Will Growth Continue For FY 2019?

Home Depot (NYSE: HD) announced its Q1 2019 (ended April 2019) results on May 21, 2019, followed by a conference call with analysts. The company just beat consensus for revenue which was recorded at $26.4 billion, up by 5.7% y-o-y. The increase was driven largely by growth in comparable sales by 2. ...More

What Will Drive Home Depot’s Growth In Q1 2019?

Home Depot (NYSE: HD) is set to announce its Q1 2019 (ended April 2019) results on May 21, 2019, followed by a conference call with analysts. The market expects the company to report revenue close to $26.4 billion for Q1 2019 (ended April 2019), which would be an increase of 5.8% on a y-o-y basis. ...More

How Has Home Depot’s Revenue Performed And What Is Its Outlook For 2021?

Trefis estimates that a continuous increase in the revenue per square foot covered metric will take Home Depot's (NYSE: HD) revenue to more than $122.1 billion by 2021. The company posted revenue of $108.2 billion and earnings of $9.78 for 2018. ...More

What To Expect From Home Depot In 2019

Despite ending fiscal 2018 on a fairly positive note, Home Depot's (NYSE: HD) shares fell by nearly 3% mainly due to a weaker-than-expected Q4 - as a result of unfavorable weather conditions, tougher year-on-year comparison, and a $247 million charge linked to Interline brands - in addition to soft fiscal 201... ...More

Can Digital Sales Drive Growth For Home Depot In Q4?

Home Depot (NYSE:HD) had a fairly strong first three quarters of 2018, as the home improvement retailer managed to grow its revenue by just over 6% in the first 9 months of the year. ...More

What Is Home Depot’s Fair Value?

Home Depot (NYSE:HD) has reported solid revenue and earnings growth through the first nine months of the year, driven by the robust growth of its digital segment, coupled with marked improvement in the housing market. ...More

Despite A Good Quarter, Home Depot’s Stock Declines After Weak Guidance

Home Depot (NYSE:HD) beat consensus expectations on both sales and earnings, with the metrics improving to $26.3 billion and $2.51 per share. The revenue increase has been driven by strength in the housing market and growth in its digital segment. ...More

Home Depot’s Digital Sales To Drive Revenue Growth In The Third Quarter

Home Depot (NYSE:HD) is scheduled to report its third quarter earnings on November 13, wherein a 5% growth in sales and an over 23% improvement in earnings is expected. ...More

Why Home Depot Is Worth $217

After a disappointing first quarter, due to colder than normal weather conditions, Home Depot (NYSE:HD) knocked one out of the park in Q2. Consequently, a better than expected first half performance prompted the company to up its full year guidance to 7% growth in sales and a diluted EPS of $9. ...More

The Onset Of Hurricane Season Drives Up The Stocks Of Home Improvement Retailers

Home improvement companies Home Depot (NYSE:HD) and Lowe's (NYSE:LOW) seem to be ready for the hurricane season even if the residents are not.  With Hurricane Florence looming on the horizon, consumers have been flocking to grocery and hardware stores to stock up on the necessary supplies. ...More

Home Depot Delivers An Impressive Beat In The Second Quarter Driven By Recovery In Seasonal Sales

Home Depot (NYSE:HD) knocked one out of the park in its second quarter, posting a beat of $450 million on revenues and $0.21 per share for earnings. The home improvement retailer delivered a comparable sales growth of an impressive 8%, versus a consensus expectation of 6. ...More

Strong Economy Bodes Well For Home Depot In The Second Quarter

Home Depot (NYSE:HD) is scheduled to report its second quarter results on August 14, wherein a substantial rise in both revenues and earnings is expected. A strong economy, as well as the benefit to be received from the tax reform, had prompted Home Depot to provide an upbeat guidance for FY 2018. ...More

Why Is Home Depot Making A Considerable Investment In Its Supply Chain?

Home Depot (NYSE: HD) has stated its intention of investing roughly $1.2 billion into its supply chain over the next five years. Given the changing retail landscape, the company believes "a great customer experience depends on great supply chain capability. ...More

Home Depot Deals With The Winter Blues In The First Quarter

A "slow start to the spring selling season" can be blamed for a rare revenue miss posted by Home Depot (NYSE:HD) in the first quarter. Despite that, the company still delivered a sales increase of 4.4%, and a comparable sales improvement of 4.2%, growth figures that aren't so common in the retail industry. ...More

Can Online Sales Drive Growth For Home Depot In The First Quarter?

Home Depot (NYSE:HD) is scheduled to report its first quarter results on May 15, wherein a substantial rise in both revenues and earnings is expected. A strong economy, as well as the benefit to be received from the tax reform, had prompted Home Depot to provide an upbeat guidance for FY 2018. ...More

Home Depot Beats Consensus Expectations On The Back Of A Strong Housing Market

Home Depot's (NYSE:HD) fourth quarter results came in higher than expected, spurred on by an improving housing market. Excluding the $127 million charge related to a one-time tax, the earnings per share came in at $1.69. A strong economy, as well as the benefit to be received from the tax reform, prompted Home Depot to provide an upbeat guidance for FY 2018. ...More

What To Expect From Home Depot’s Earnings

Home Depot (NYSE:HD) is scheduled to report earnings on February 20. Through the first nine months of 2017, the company's sales and comparable sales accelerated. ...More

What Does A Partnership With Tesla Mean For Home Depot?

Tesla has made a deal with Home Depot (NYSE:HD) to sell its rooftop solar panels and Powerwall, a battery it designed for homes that stores the energy generated by solar panels, in the latter's stores. ...More

How Can A Change In Home Depot’s EBITDA Margins Impact Its Valuation?

Home improvement giant Home Depot (NYSE:HD) has successfully managed to improve its EBITDA margin year after year, on the back of higher sales and increased productivity. Moreover, as the sales grow, the company is able to leverage the fixed costs, and thus expand its margins. ...More

Is Home Depot Considering Buying XPO Logistics?

The home improvement industry in the US is massive, with Home Depot (NYSE:HD), one of the biggest players in this space, garnering close to $100 billion in sales. Furthermore, the relatively decent operating margin for the company, 14. ...More

My Notes

Name (Required)
Email (Required, but never displayed)