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The Home Depot Inc HD

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Economic Moat

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PREMIUM

Spending Momentum Persists Across the Home Improvement Landscape, Bolstering Home Depot's Results

Jaime M. Katz, CFA Senior Equity Analyst

Analyst Note

| Jaime M. Katz, CFA |

We plan to raise our $217 per share fair value estimate for wide-moat Home Depot by a mid-single-digit rate after incorporating robust first-quarter sales growth of 33% (to $37.5 billion), which outpaced our estimate by $4 billion. Strength came from same-store sales that rose a whopping 31% (on top of a 6.4% rise a year ago), while orange box (ex-MRO) performance was also stout, with average ticket rising 10%, customer transactions higher by 19%, and sales per square foot up 30% as consumers embarked on big ticket projects. More impressive was the profitability Home Depot captured on its rising scale, delivering a 15.4% operating margin (up 380 basis points), despite commodity headwinds. And the firm continues to capture market share, with its top line outpacing building material and garden equipment and supplies industry growth that averaged 25% (seasonally adjusted, U.S. Census) in February-April.

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Company Profile

Business Description

Home Depot is the world's largest home improvement specialty retailer, operating nearly 2,300 warehouse-format stores offering more than 30,000 products in store and 1 million products online in the United States, Canada, and Mexico. Its stores offer numerous building materials, home improvement products, lawn and garden products, and decor products and provide various services, including home improvement installation services and tool and equipment rentals. The acquisition of distributor Interline Brands in 2015 allowed Home Depot to enter the maintenance, repair, and operations business, which recently expanded through the acquisition of HD Supply. The tie-up with Company Store brought textile exposure to Home Depot's lineup.

Contact
2455 Paces Ferry Road
Atlanta, GA, 30339
T +1 770 433-8211
Sector Consumer Cyclical
Industry Home Improvement Retail
Most Recent Earnings Apr 30, 2021
Fiscal Year End Jan 30, 2022
Stock Type Cyclical
Employees 504,800

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