US Insights

Home Depot Growth Shows No Signs of Slowing

Hannah Hayes

Analyst

Retail 11.14.2018 / 10:00

Home Depot

Home Depot delivered another impressive quarter.

Continuing its second-quarter momentum, Home Depot delivered another impressive quarter in Q3, with sales increasing 5.1% to USD26.3 billion and comps growing 4.8% compared with the year-ago quarter. In Q3, Home Depot continued to reap the benefits of a strong macro environment, including benefits from tax reform, low unemployment, and a strong housing market. Despite uncertainty over tariff policy and impact from 2017’s unprecedented storm activity, Home Depot beat Wall Street estimates and raised its fiscal year 2018 guidance, indicating a positive outlook for the remainder of 2018 and beyond.

Operational Discipline Helps Overcome Macro Variables

At the start of 2018, Home Depot expected more modest sales growth due to large capital investments and an uncertain macro environment. While external challenges played out in Q3, the retailer’s commitment to driving growth internally helped deliver strong results across shopper segments and positioned the retailer for further success in 2018.

Despite widespread storm impact in 2017, growth continues across the shopper base.

One concern for Home Depot heading into the second half of 2018 was whether it could continue growing sales and beating comps after an unprecedented level of natural disasters in 2017. While the retailer received a boost from some storm activity in Q3, growth was largely due to the retailer’s ability to connect with its existing shoppers. Home Depot again saw the biggest gains with pro shoppers, with categories like power tools and concrete posting major growth. However, the consumer segment was also strong, with categories like appliances, décor, and flooring registering above the company average. 

Home Depot’s brand as a home expert is a stabilizing force during macro uncertainties.

Even amid a slowing housing market, volatile commodity prices, and uncertain tariff policy, Home Depot remains largely positive about the future, raising its sales guidance to 7.2% and comps to 5.5% for FY 2018. The retailer stressed that it can align with shoppers’ needs through dedicated investments, convince shoppers to trade up through exclusives and trusted brands, and leverage its position as a complete home project provider to balance potential price increases across categories.

Supply-chain and personalization enhancements boost digital growth.

The retailer attributed much of its 28% online growth in Q3 to its increased efforts to move products to shoppers faster and to connect on a more personal level. Home Depot’s new pilot fulfillment centers enable it to ship to 95% of the U.S. within two days. On-demand pilots, such as car and van delivery, allow the retailer to reach 40% of the country the same day and are popular with both pro and DIY shoppers.

Looking Forward

Although Home Depot is confident in its performance for the remainder of 2018, suppliers will need to align with the retailer’s productivity push. To lock in strong performance in Q4 and FY 2018, work with Home Depot to connect your products with seasonal themes and continue to look for ways to elevate your products through relevant solutions, exclusives, and services. Check in with the retailer to ensure that your product is in stock and adjust shipping forecasts where necessary.

We will turn our attention to Lowe’s performance next week. After announcing significant banner and store closures, we expect CEO Marvin Ellison to provide more details about his strategy for improving the retailer’s performance. For additional implications, stay tuned to KRiQ.com for our in-depth analysis of the channel’s third-quarter results.

Source: Kantar Consulting

Editor's Notes

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