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Strong Home Depot Results Show Impact From Pandemic Measures — WSJ

By Matt Grossman 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (August 19, 2020).

Home Depot Inc. on Tuesday posted its strongest quarterly sales growth in nearly 20 years as the country's biggest home-improvement retailer benefited from surging interest in household projects during the Covid-19 pandemic.

Revenue for the Atlanta-based retailer rose by 23% to $38.05 billion in the May-to-July period, up from $30.84 billion during the same three months of 2019. Analysts surveyed by FactSet had anticipated revenue of $34.53 billion.

The coronavirus pandemic and government stimulus checks have helped drive traffic to home-improvement retailers like Home Depot. As Americans spent more time at home during the public-health crisis, many turned their attention to domestic projects, shifting money they would have otherwise spent on vacations, gym memberships and other activities that have been postponed to prevent the virus's spread.

"The home has never been more important to the customer," Home Depot Chairman and Chief Executive Craig Menear said on a phone call with analysts on Tuesday. "We're all spending lots of time there. We're seeing things that need to be done or things that you want to be done. We're clearly seeing the customer engaged in a really strong way right now."

Home Depot's comparable-store sales in the U.S. -- which compare sales at stores opened more than a year -- grew by 25% year over year. The company notched double-digit percentage increases in the number of customer transactions, the average ticket size and sales per a square foot of retail space.

Sales to do-it-yourself consumers grew faster in the quarter than those to professional contractors, although both categories increased, Ted Decker, the company's executive vice president for merchandise, told analysts. Expensive purchases such as riding lawn mowers and patio furniture drove growth in big-ticket transactions, but that was partially offset by weaker sales of items requiring intensive indoor installation work, such as countertops and kitchens.

Comparable sales growth remained strong in the first two weeks of August, after the quarter ended, Home Depot executives said. Mr. Menear added that the pandemic made it difficult to forecast how long heightened demand would persist.

"It's really so uncertain," he said. "We don't know the answer to that, which is why we can't really extrapolate current performance to future performance."

Home Depot's earnings in the quarter were $4.33 billion, or $4.02 a share, up from $3.48 billion, or $3.17 a share, in 2019's second quarter. Analysts anticipated earnings of $3.64 a share.

Shares of Home Depot, up 32% for this year through Monday, fell 0.8% in midday trading Tuesday to $285.92.

In the quarter, Home Depot spent $480 million on additional employee benefits during the coronavirus pandemic, including bonuses for hourly workers in stores and distribution centers. Since the pandemic began, the company has spent $1.3 billion on enhanced pay and benefits, Home Depot said.

While the coronavirus pandemic has battered parts of the U.S. retail landscape and forced long-struggling chains like J.C. Penney Co. into bankruptcy, it has given a boost to others. Restrictions meant to slow the virus's spread squeezed many small businesses and accelerated the yearslong shift to online shopping, allowing Amazon.com Inc. and Walmart Inc. to flourish. It also strengthened giants like Home Depot and Lowe's Cos., which largely remained open, earning sales as customers came to stores.

Separately on Tuesday, Walmart's quarterly sales surged as the retail behemoth continued to use its scale, e-commerce supply chain and grocery business to attract shoppers buying food and household goods during the pandemic.

Overall, Walmart's global revenue rose 5.6% to $137.7 billion, and its comparable U.S. sales at stores or digital channels increased 9.3% in the quarter ended July 31.

Retailers like Walmart and Home Depot have benefited from federal stimulus checks to consumers and federally enhanced unemployment benefits. July marked the third straight month that U.S. households' retail spending increased, according to Commerce Department data. A more recent analysis by research firm GlobalData suggests consumer spending may have moderated after the enhanced $600 weekly unemployment benefit expired at the end of July.

"When customers have more money in their pocket, there's some benefit to that. So we don't kid ourselves to think that that didn't have some kind of impact," Mr. Menear said when asked about the effect of stimulus spending.

Daily foot traffic to Home Depot stores since April has been running at least 35% above last year's, according to Unacast Inc., which tracks location data from 25 million cellphones on any given day. In 26 states, traffic doubled following a surge in late May.

Corrections & Amplifications GlobalData is a research firm that produced a recent analysis of consumer spending. An earlier version of this article misspelled the company's name as GobalData. (Corrected on Aug. 18)

Write to Matt Grossman at matt.grossman@wsj.com

 

(END) Dow Jones Newswires

August 19, 2020 02:47 ET (06:47 GMT)

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