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Home Depot First Quarter Earnings Call Highlights

Author: 123jump.com Staff
Last Update: 11:56 PM ET May 26 2012
Housing market is still in the doldrums but Home Depot, Inc has managed to increase comparable same store sales between 4% and 6% in the last four quarters tough helped by warmer weather in the last two quarters.

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The Home Depot, Inc. (HD), the home improvement retailer first quarter net sales grew 5.9% to $17.81 billion from $16.82 billion a year ago. Comparable same store sales for the quarter rose 5.8% and for the U.S. stores increased 6.1%.

Net earnings in the quarter increased 28% to $1.04 billion or 68 cents per diluted share compared to $812 million or 50 cents per share in the same period of fiscal 2011.

Quarterly Financial Performance

- Net sales grew 5.9% from a year ago to $17.81 billion.
- Comparable same store sales for the quarter rose 5.8% with positive comps of 6.2% in February, in March 6% and in April 5.4%.
- U.S. stores comparable sales increased 6.1% benefited by warmest winter with positive comps of 7.2% in February, in March 5.8% and in April 5.6%. May is performing as we expected.

- Earnings per share soared 36% to 68 cents.
- Income tax provision for the quarter was 36.5% and is expected to be the same rate for the year.

- Total company gross margin increased by 8 basis points to 34.7% for the quarter from last year.

- Total operating expenses for the quarter were $8 million. In the first quarter, operating expense decreased by 109 basis points to 25.1%.

- Inventory at the end of the quarter declined $100 million from a year ago to $11.6 billion.
- Inventory turns increased to 4.3 from 3.9 in the quarter a year ago.
- At the end of the quarter, cash and equivalent were $3.2 billion and total assets were $42.2 billion.

- In the quarter, the company repurchased 19.4 million shares worth $1.1 billion including 2.1 million shares in open market and 17.3 million through accelerated share repurchase program.

- Return on invested capital was 15.4%, 240 basis points higher than the first quarter a year ago.

- Investor conference is schedule don June 6.

Comparable Metrics

- U.S. comparable sales increased more than 6% for the second quarter in a row, not seen in the last eight years. Unusually warm weather played a role with the fourth warmest winter in history and relatively cold winter in the quarter a year ago.

- Comparable sales were the strongest in the northern division with double digits comps and mid-to-low single digits in southern and western divisions and 38 of 40 top markets had positive comps.

- Weather positively impacted 300 basis points in the U.S. comparable sales of which 80 and 100 basis points were related to pull forward activities that would have otherwise occurred in second quarter.

- Last time we saw this kind of comparable sale growths were in fourth quarter of 2003 and first quarter of 2004.

- There are some positive signs in housing market, it is still under pressure and home prices are stabilizing but not on a solid ground yet and shadow inventory and credit availability is constrained.

- Our large pro customers who spend more than $10,000 annually with us are growing at a faster pace (11%) than our general consumer segment (7%) but our overall pro business (5%) is moving slightly slower than the general consumer business. Recovery in our pro business appears to be sequential but by only a certain class of pro.

- Large pro customers who spend more than $10,000 a year with us represent about 12% of our total pro customer base.

- Large pro customers are getting more repair jobs and we are seeing that business coming from them.

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Sources: Data collected by 123jump.com and Ticker.com from company press releases, filings and corporate websites. Market data: BATS Exchange. Inc