Earnings Release
The Home Depot Announces Third Quarter Results; Updates Fiscal Year 2018 Guidance
ATLANTA, Nov. 13, 2018 /CNW/ -- The Home Depot®, the world's largest home improvement retailer, today reported sales of $26.3 billion for the third quarter of fiscal 2018, a 5.1 percent increase from the third quarter of fiscal 2017. Comparable sales for the third quarter of fiscal 2018 were positive 4.8 percent, and comp sales in the U.S. were positive 5.4 percent.
Net earnings for the third quarter of fiscal 2018 were $2.9 billion, or $2.51 per diluted share, compared with net earnings of $2.2 billion, or $1.84 per diluted share, in the same period of fiscal 2017. For the third quarter of fiscal 2018, diluted earnings per share increased 36.4 percent from the same period in the prior year.
"We are pleased with our third quarter results and the growth that we saw from both our professional and do-it-yourself customers. Our customers continue to respond to our expansive assortment and enhancements we are making to drive an interconnected shopping experience. We saw continued strength across the store, as well as healthy growth in our digital business," said Craig Menear, chairman, CEO and president. "We believe this is a testament to the overall strength of demand in the home improvement market."
Updated Fiscal 2018 Guidance
Based on its year-to-date performance, the Company updated its fiscal 2018 guidance. The Company will have 53 weeks of operating results in fiscal 2018 and now expects:
- Sales growth of approximately 7.2 percent;
- Comp sales growth of approximately 5.5 percent for the comparable 52-week period;
- Operating margin of approximately 14.5 percent;
- Tax rate of approximately 24 percent;
- Fiscal 2018 share repurchases of approximately $8 billion;
- Diluted earnings-per-share growth of approximately 33.8 percent from fiscal 2017 to $9.75.
The Home Depot will conduct a conference call today at 9 a.m. ET to discuss information included in this news release and related matters. The conference call will be available in its entirety through a webcast and replay at http://ir.homedepot.com/events-and-presentations.
Recent Accounting Pronouncement – Revenue Recognition
During the first quarter of fiscal 2018, the Company adopted ASU No. 2014-09, which pertains to revenue recognition. The adoption of this standard will not materially impact the Company's consolidated financial statements or related disclosures.
The Company has adopted this standard on a modified retrospective basis. In accordance therewith, financial information prior to fiscal 2018 will not be recast. The consolidated statements of earnings and balance sheet for periods and dates subsequent to fiscal 2017 reflect the effect of this accounting policy adoption.
Additional information about the impact of the adoption of ASU No. 2014-09 is available at http://ir.homedepot.com/financial-reports/quarterly-earnings/2018.
At the end of the third quarter, the Company operated a total of 2,286 retail stores in all 50 states, the District of Columbia, Puerto Rico, U.S. Virgin Islands, Guam, 10 Canadian provinces and Mexico. The Company employs more than 400,000 associates. The Home Depot's stock is traded on the New York Stock Exchange (NYSE: HD) and is included in the Dow Jones industrial average and Standard & Poor's 500 index.
Certain statements contained herein constitute "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements may relate to, among other things, the demand for our products and services; net sales growth; comparable sales; effects of competition; implementation of store, interconnected retail, supply chain and technology initiatives; issues related to the payment methods we accept; state of the economy; state of the residential construction, housing and home improvement markets; state of the credit markets, including mortgages, home equity loans and consumer credit; demand for credit offerings; inventory and in-stock positions; management of relationships with our suppliers and vendors; continuation of share repurchase programs; net earnings performance; earnings per share; dividend targets; capital allocation and expenditures; liquidity; return on invested capital; expense leverage; stock-based compensation expense; commodity price inflation and deflation; the ability to issue debt on terms and at rates acceptable to us; the impact and expected outcome of investigations, inquiries, claims and litigation; the effect of accounting charges; the effect of adopting certain accounting standards; the impact of the Tax Cuts and Jobs Act of 2017; store openings and closures; guidance for fiscal 2018 and beyond; financial outlook; and the integration of acquired companies into our organization and the ability to recognize the anticipated synergies and benefits of those acquisitions. Forward-looking statements are based on currently available information and our current assumptions, expectations and projections about future events. You should not rely on our forward-looking statements. These statements are not guarantees of future performance and are subject to future events, risks and uncertainties – many of which are beyond our control or are currently unknown to us – as well as potentially inaccurate assumptions that could cause actual results to differ materially from our expectations and projections. These risks and uncertainties include, but are not limited to, those described in Item 1A, "Risk Factors," and elsewhere in our Annual Report on Form 10-K for our fiscal year ended January 28, 2018 and in our subsequent Quarterly Reports on Form 10-Q.
Forward-looking statements speak only as of the date they are made, and we do not undertake to update these statements other than as required by law. You are advised, however, to review any further disclosures we make on related subjects in our periodic filings with the Securities and Exchange Commission.
THE HOME DEPOT, INC. |
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS |
(Unaudited) |
|
|
|
|
|
|
|
|
| Three Months Ended |
|
|
| Nine Months Ended |
|
|
in millions, except per share data | October 28,
2018 |
| October 29,
2017 |
| % Change |
| October 28,
2018 |
| October 29,
2017 |
| % Change |
Net sales | $ | 26,302 |
|
| $ | 25,026 |
|
| 5.1 | % |
| $ | 81,712 |
|
| $ | 77,021 |
|
| 6.1 | % |
Cost of sales | 17,151 |
|
| 16,378 |
|
| 4.7 |
|
| 53,579 |
|
| 50,758 |
|
| 5.6 |
|
Gross profit | 9,151 |
|
| 8,648 |
|
| 5.8 |
|
| 28,133 |
|
| 26,263 |
|
| 7.1 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative | 4,808 |
|
| 4,514 |
|
| 6.5 |
|
| 14,591 |
|
| 13,424 |
|
| 8.7 |
|
Depreciation and amortization | 473 |
|
| 454 |
|
| 4.2 |
|
| 1,390 |
|
| 1,347 |
|
| 3.2 |
|
Total operating expenses | 5,281 |
|
| 4,968 |
|
| 6.3 |
|
| 15,981 |
|
| 14,771 |
|
| 8.2 |
|
Operating income | 3,870 |
|
| 3,680 |
|
| 5.2 |
|
| 12,152 |
|
| 11,492 |
|
| 5.7 |
|
Interest and other (income) expense: |
|
|
|
|
|
|
|
|
|
|
|
Interest and investment income | (25) |
|
| (22) |
|
| 13.6 |
|
| (73) |
|
| (51) |
|
| 43.1 |
|
Interest expense | 249 |
|
| 269 |
|
| (7.4) |
|
| 782 |
|
| 788 |
|
| (0.8) |
|
Interest and other, net | 224 |
|
| 247 |
|
| (9.3) |
|
| 709 |
|
| 737 |
|
| (3.8) |
|
Earnings before provision for income taxes | 3,646 |
|
| 3,433 |
|
| 6.2 |
|
| 11,443 |
|
| 10,755 |
|
| 6.4 |
|
Provision for income taxes | 779 |
|
| 1,268 |
|
| (38.6) |
|
| 2,666 |
|
| 3,904 |
|
| (31.7) |
|
Net earnings | $ | 2,867 |
|
| $ | 2,165 |
|
| 32.4 | % |
| $ | 8,777 |
|
| $ | 6,851 |
|
| 28.1 | % |
|
|
|
|
|
|
|
|
|
|
|
|
Basic weighted average common shares | 1,135 |
|
| 1,168 |
|
| (2.8) | % |
| 1,144 |
|
| 1,184 |
|
| (3.4) | % |
Basic earnings per share | $ | 2.53 |
|
| $ | 1.85 |
|
| 36.8 |
|
| $ | 7.67 |
|
| $ | 5.79 |
|
| 32.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted weighted average common shares | 1,141 |
|
| 1,174 |
|
| (2.8) | % |
| 1,150 |
|
| 1,190 |
|
| (3.4) | % |
Diluted earnings per share | $ | 2.51 |
|
| $ | 1.84 |
|
| 36.4 |
|
| $ | 7.63 |
|
| $ | 5.76 |
|
| 32.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended |
|
|
| Nine Months Ended |
|
|
Selected Sales Data(1) | October 28,
2018 |
| October 29,
2017 |
| % Change |
| October 28,
2018 |
| October 29,
2017 |
| % Change |
Customer transactions (in millions) | 394.8 |
|
| 389.5 |
|
| 1.4 | % |
| 1,226.0 |
|
| 1,212.0 |
|
| 1.2 | % |
Average ticket | $ | 65.11 |
|
| $ | 62.84 |
|
| 3.6 |
|
| $ | 65.79 |
|
| $ | 62.78 |
|
| 4.8 |
|
Sales per square foot | 433.99 |
|
| 412.49 |
|
| 5.2 |
|
| 449.94 |
|
| 423.60 |
|
| 6.2 |
|
_____________ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) | Selected Sales Data does not include results for Interline Brands, Inc., which was acquired in fiscal 2015. |
THE HOME DEPOT, INC. |
CONDENSED CONSOLIDATED BALANCE SHEETS |
(Unaudited) |
|
|
|
|
|
|
in millions | October 28,
2018 |
| October 29,
2017 |
| January 28,
2018 |
Assets |
|
|
|
|
|
Cash and cash equivalents | $ | 1,764 |
|
| $ | 3,549 |
|
| $ | 3,595 |
|
Receivables, net | 2,171 |
|
| 2,166 |
|
| 1,952 |
|
Merchandise inventories | 14,754 |
|
| 13,419 |
|
| 12,748 |
|
Other current assets | 1,120 |
|
| 548 |
|
| 638 |
|
Total current assets | 19,809 |
|
| 19,682 |
|
| 18,933 |
|
Net property and equipment | 22,054 |
|
| 21,960 |
|
| 22,075 |
|
Goodwill | 2,258 |
|
| 2,217 |
|
| 2,275 |
|
Other assets | 1,079 |
|
| 1,164 |
|
| 1,246 |
|
Total assets | $ | 45,200 |
|
| $ | 45,023 |
|
| $ | 44,529 |
|
|
|
|
|
|
|
Liabilities and Stockholders' Equity |
|
|
|
|
|
Short-term debt | $ | 1,398 |
|
| $ | 125 |
|
| $ | 1,559 |
|
Accounts payable | 9,054 |
|
| 8,570 |
|
| 7,244 |
|
Accrued salaries and related expenses | 1,495 |
|
| 1,488 |
|
| 1,640 |
|
Current installments of long-term debt | 1,054 |
|
| 1,198 |
|
| 1,202 |
|
Other current liabilities | 5,195 |
|
| 4,621 |
|
| 4,549 |
|
Total current liabilities | 18,196 |
|
| 16,002 |
|
| 16,194 |
|
Long-term debt, excluding current installments | 23,332 |
|
| 24,266 |
|
| 24,267 |
|
Other liabilities | 2,352 |
|
| 2,212 |
|
| 2,614 |
|
Total liabilities | 43,880 |
|
| 42,480 |
|
| 43,075 |
|
Total stockholders' equity | 1,320 |
|
| 2,543 |
|
| 1,454 |
|
Total liabilities and stockholders' equity | $ | 45,200 |
|
| $ | 45,023 |
|
| $ | 44,529 |
|
THE HOME DEPOT, INC. |
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS |
(Unaudited) |
|
|
| Nine Months Ended |
in millions | October 28,
2018 |
| October 29,
2017 |
Cash Flows from Operating Activities: |
|
|
|
Net earnings | $ | 8,777 |
|
| $ | 6,851 |
|
Reconciliation of net earnings to net cash provided by operating activities: |
|
|
|
Depreciation and amortization | 1,603 |
|
| 1,533 |
|
Stock-based compensation expense | 204 |
|
| 214 |
|
Changes in working capital and other, net of acquisition effects | (548) |
|
| 1,143 |
|
Net cash provided by operating activities | 10,036 |
|
| 9,741 |
|
|
|
|
|
Cash Flows from Investing Activities: |
|
|
|
Capital expenditures, net of non-cash capital expenditures | (1,711) |
|
| (1,354) |
|
Payments for business acquired, net | — |
|
| (260) |
|
Proceeds from sales of property and equipment | 21 |
|
| 38 |
|
Other investing activities | (3) |
|
| — |
|
Net cash used in investing activities | (1,693) |
|
| (1,576) |
|
|
|
|
|
Cash Flows from Financing Activities: |
|
|
|
Repayments of short-term debt, net | (161) |
|
| (585) |
|
Proceeds from long-term debt, net of discounts | — |
|
| 2,991 |
|
Repayments of long-term debt | (1,192) |
|
| (534) |
|
Repurchases of common stock | (5,518) |
|
| (6,067) |
|
Proceeds from sales of common stock | 140 |
|
| 157 |
|
Cash dividends | (3,548) |
|
| (3,174) |
|
Other financing activities | 99 |
|
| (41) |
|
Net cash used in financing activities | (10,180) |
|
| (7,253) |
|
Change in cash and cash equivalents | (1,837) |
|
| 912 |
|
Effect of exchange rate changes on cash and cash equivalents | 6 |
|
| 99 |
|
Cash and cash equivalents at beginning of period | 3,595 |
|
| 2,538 |
|
Cash and cash equivalents at end of period | $ | 1,764 |
|
| $ | 3,549 |
|
THE HOME DEPOT, INC. |
ASU NO. 2014-09 IMPACT OF ADOPTION |
(Unaudited) |
|
The Company adopted ASU No. 2014-09, which pertains to revenue recognition, in the first quarter of fiscal 2018. The following table shows the impact of adopting ASU No. 2014-09 on the consolidated statement of earnings for the three and nine month periods ended October 28, 2018. The implementation of this accounting standard resulted in an increase in net sales, gross profit, selling, general and administrative, and total operating expenses and a decrease in cost of sales. There was no impact on operating income, net earnings, or earnings per share. |
|
|
| Three Months Ended October 28, 2018 |
in millions | As
Reported |
| % of
Net Sales |
| ASU No. 2014-
09
Impact |
| Excluding
ASU No. 2014-
09 Impact |
| % of
Net Sales |
Net sales | $ | 26,302 |
|
| 100.0 | % |
| $ | 64 |
|
| $ | 26,238 |
|
| 100.0 | % |
Cost of sales | 17,151 |
|
| 65.2 |
|
| (83) |
|
| 17,234 |
|
| 65.7 |
|
Gross profit | 9,151 |
|
| 34.8 |
|
| 147 |
|
| 9,004 |
|
| 34.3 |
|
Selling, general and administrative | 4,808 |
|
| 18.3 |
|
| 147 |
|
| 4,661 |
|
| 17.8 |
|
Total operating expenses | 5,281 |
|
| 20.1 |
|
| 147 |
|
| 5,134 |
|
| 19.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Nine Months Ended October 28, 2018 |
in millions | As
Reported |
| % of
Net Sales |
| ASU No. 2014-
09
Impact |
| Excluding
ASU No. 2014-
09 Impact |
| % of
Net Sales |
Net sales | $ | 81,712 |
|
| 100.0 | % |
| $ | 130 |
|
| $ | 81,582 |
|
| 100.0 | % |
Cost of sales | 53,579 |
|
| 65.6 |
|
| (300) |
|
| 53,879 |
|
| 66.0 |
|
Gross profit | 28,133 |
|
| 34.4 |
|
| 430 |
|
| 27,703 |
|
| 34.0 |
|
Selling, general and administrative | 14,591 |
|
| 17.9 |
|
| 430 |
|
| 14,161 |
|
| 17.4 |
|
Total operating expenses | 15,981 |
|
| 19.6 |
|
| 430 |
|
| 15,551 |
|
| 19.1 |
|
THE HOME DEPOT, INC. |
ASU NO. 2014-09 IMPACT OF ADOPTION |
(Unaudited) |
|
The Company adopted ASU No. 2014-09, which pertains to revenue recognition, in the first quarter of fiscal 2018. The following table shows the impact of adopting ASU No. 2014-09 on the consolidated balance sheet as of October 28, 2018. |
|
|
| October 28, 2018 |
in millions | As
Reported |
| ASU
No. 2014-09
Impact |
| Excluding
ASU No. 2014-09
Impact |
Assets |
|
|
|
|
|
Receivables, net | $ | 2,171 |
|
| $ | (44) |
|
| $ | 2,215 |
|
Other current assets | 1,120 |
|
| 268 |
|
| 852 |
|
Total current assets | 19,809 |
|
| 224 |
|
| 19,585 |
|
Total assets | 45,200 |
|
| 224 |
|
| 44,976 |
|
|
|
|
|
|
|
Liabilities and Stockholders' Equity |
|
|
|
|
|
Other current liabilities | $ | 5,195 |
|
| $ | 125 |
|
| $ | 5,070 |
|
Total current liabilities | 18,196 |
|
| 125 |
|
| 18,071 |
|
Other liabilities | 2,352 |
|
| 24 |
|
| 2,328 |
|
Total liabilities | 43,880 |
|
| 149 |
|
| 43,731 |
|
Total stockholders' equity | 1,320 |
|
| 75 |
|
| 1,245 |
|
Total liabilities and stockholders' equity | 45,200 |
|
| 224 |
|
| 44,976 |
|
THE HOME DEPOT, INC. |
PRO FORMA EFFECT OF ASU NO. 2014-09 |
(Unaudited) |
|
The Company adopted ASU No. 2014-09, which pertains to revenue recognition, in the first quarter of fiscal 2018 using the modified retrospective method. In accordance therewith, financial information prior to fiscal 2018 will not be recast as the modified retrospective method does not permit recasting pre-adoption financial information. The following tables present selected as-reported financial results and the pro forma effect of ASU No. 2014-09 as if the recognition and presentation guidance in the accounting standard had been applied in fiscal 2017. There was no impact on operating income, net earnings, or earnings per share. The fiscal 2017 pro forma financial information included in the tables below is presented for informational purposes only. |
|
|
| Three Months Ended April 30, 2017 |
in millions | As
Reported |
| % of
Net Sales |
| ASU No. 2014-
09
Effect |
| Including
ASU No.
2014-09 Effect |
| % of
Net Sales |
Net sales | $ | 23,887 |
|
| 100.0 | % |
| $ | 48 |
|
| $ | 23,935 |
|
| 100.0 | % |
Cost of sales | 15,733 |
|
| 65.9 |
|
| (90) |
|
| 15,643 |
|
| 65.4 |
|
Gross profit | 8,154 |
|
| 34.1 |
|
| 138 |
|
| 8,292 |
|
| 34.6 |
|
Selling, general and administrative | 4,361 |
|
| 18.3 |
|
| 138 |
|
| 4,499 |
|
| 18.8 |
|
Total operating expenses | 4,805 |
|
| 20.1 |
|
| 138 |
|
| 4,943 |
|
| 20.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended July 30, 2017 |
in millions | As
Reported |
| % of
Net Sales |
| ASU No. 2014-
09
Effect |
| Including
ASU No.
2014-09 Effect |
| % of
Net Sales |
Net sales | $ | 28,108 |
|
| 100.0 | % |
| $ | 33 |
|
| $ | 28,141 |
|
| 100.0 | % |
Cost of sales | 18,647 |
|
| 66.3 |
|
| (114) |
|
| 18,533 |
|
| 65.9 |
|
Gross profit | 9,461 |
|
| 33.7 |
|
| 147 |
|
| 9,608 |
|
| 34.1 |
|
Selling, general and administrative | 4,549 |
|
| 16.2 |
|
| 147 |
|
| 4,696 |
|
| 16.7 |
|
Total operating expenses | 4,998 |
|
| 17.8 |
|
| 147 |
|
| 5,145 |
|
| 18.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended October 29, 2017 |
in millions | As
Reported |
| % of
Net Sales |
| ASU No. 2014-
09
Effect |
| Including
ASU No. 2014-
09 Effect |
| % of
Net Sales |
Net sales | $ | 25,026 |
|
| 100.0 | % |
| $ | 44 |
|
| $ | 25,070 |
|
| 100.0 | % |
Cost of sales | 16,378 |
|
| 65.4 |
|
| (85) |
|
| 16,293 |
|
| 65.0 |
|
Gross profit | 8,648 |
|
| 34.6 |
|
| 129 |
|
| 8,777 |
|
| 35.0 |
|
Selling, general and administrative | 4,514 |
|
| 18.0 |
|
| 129 |
|
| 4,643 |
|
| 18.5 |
|
Total operating expenses | 4,968 |
|
| 19.9 |
|
| 129 |
|
| 5,097 |
|
| 20.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended January 28, 2018 |
in millions | As
Reported |
| % of
Net Sales |
| ASU No. 2014-
09
Effect |
| Including
ASU No. 2014-
09 Effect |
| % of
Net Sales |
Net sales | $ | 23,883 |
|
| 100.0 | % |
| $ | 41 |
|
| $ | 23,924 |
|
| 100.0 | % |
Cost of sales | 15,790 |
|
| 66.1 |
|
| (85) |
|
| 15,705 |
|
| 65.6 |
|
Gross profit | 8,093 |
|
| 33.9 |
|
| 126 |
|
| 8,219 |
|
| 34.4 |
|
Selling, general and administrative | 4,440 |
|
| 18.6 |
|
| 126 |
|
| 4,566 |
|
| 19.1 |
|
Total operating expenses | 4,904 |
|
| 20.5 |
|
| 126 |
|
| 5,030 |
|
| 21.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Fiscal Year Ended January 28, 2018 |
in millions | As
Reported |
| % of
Net Sales |
| ASU No. 2014-
09
Effect |
| Including
ASU No. 2014-
09 Effect |
| % of
Net Sales |
Net sales | $ | 100,904 |
|
| 100.0 | % |
| $ | 166 |
|
| $ | 101,070 |
|
| 100.0 | % |
Cost of sales | 66,548 |
|
| 66.0 |
|
| (374) |
|
| 66,174 |
|
| 65.5 |
|
Gross profit | 34,356 |
|
| 34.0 |
|
| 540 |
|
| 34,896 |
|
| 34.5 |
|
Selling, general and administrative | 17,864 |
|
| 17.7 |
|
| 540 |
|
| 18,404 |
|
| 18.2 |
|
Total operating expenses | 19,675 |
|
| 19.5 |
|
| 540 |
|
| 20,215 |
|
| 20.0 |
|
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SOURCE The Home Depot
