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Investment Plans Foster Growth at Home Depot (HD), Stock Gains
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The Home Depot Inc. (HD - Free Report) has been reaping significant gains from the execution of its strategic initiatives and commitment to investing in the business to deliver the best interconnected shopping experience, capture wallet-share with the Pro and expand its store footprint. The company is on track with the execution of the “One Home Depot” investment plan, which focuses on expanding supply-chain facilities, technology investments and enhancing the digital experience.
HD’s interconnected retail strategy and underlying technology infrastructure have helped consistently boost web traffic for the past few quarters. Enhanced search capabilities, improved Pro site experience, and robust fulfillment capabilities have been driving improved online conversions. Sales leveraging HD’s digital platforms rose 5% year over year in third-quarter fiscal 2023. The company’s strategy of providing an interconnected experience is resonating well with customers, as around 50% of online orders were fulfilled through stores in the fiscal third quarter.
Gains from the company’s investments in One Home Depot plan and interconnected retail strategy have been well-reflected in its share price. Shares of this Zacks Rank #3 (Hold) company have rallied 15.8% in the past six months, outpacing the industry’s growth of 12%. The stock also fared better than the Retail-Wholesale sector and the S&P 500’s rise of 11.9% and 8.2%, respectively, in the same period.
Image Source: Zacks Investment Research
Other Factors Driving the Stock
Home Depot’s Pro segment has been a key growth driver, with the segment witnessing robust sales growth for the past several quarters. Pro sales outpaced DIY sales in the fiscal third quarter. Although lower than the year-ago quarter, HD noted that Pro backlogs continued to be healthy and elevated relative to the historic trends. Recent external data point suggests that the types of projects in these backlogs are changing from large-scale remodels to smaller projects.
The company remains on track with its strategic investments to build a Pro ecosystem that includes professional-grade products, exclusive brands, enhanced delivery, credit, digital capabilities, field sales support and HD rental. It continues to invest in Pro capabilities like enhanced fulfillment, more personalized online experience and other business management tools to drive Pro customers’ deeper engagement.
Home Depot remains focused on expanding its business and is positioned to capture market share. Management noted that it witnessed improved customer engagement in home improvement projects, particularly for small projects, in the fiscal third quarter. Going forward, the company remains focused on navigating the unique and uncertain environment by operating with agility amid evolving consumer trends. It also expects to drive productivity and efficiency throughout the business. As a result, it expects to deliver on its previously announced $500 million in annualized cost savings in 2024.
Hurdles to Pullback
Home Depot has been witnessing broad-based pressure across the business, driven by softened demand. The company continued to witness softness in certain big-ticket, discretionary categories, a trend which started in fourth-quarter fiscal 2022. This led to dismal third-quarter fiscal 2023 results, with the top and bottom lines declining year over year. However, results gained from strength in categories associated with smaller projects.
Driven by the continued soft trends in big-ticket, discretionary categories, Home Depot narrowed its view for fiscal 2023. The company anticipates sales and comparable sales to decline 3-4% year over year in fiscal 2023. The operating margin rate is estimated at 14.1-14.2%. HD estimates earnings per share to decline 9-11% year over year in fiscal 2023.
Additionally, Home Depot has been witnessing a decline in customer transactions, driven by soft sales of big-ticket discretionary categories and, in turn, hurt overall comparable sales (comps) in third-quarter fiscal 2023. Deflation from core commodity categories, primarily in lumber and copper, negatively impacted the company’s average ticket growth by 60 basis points in the fiscal third quarter. Lumber prices declined significantly from the year-ago quarter. Big-ticket comp transactions declined 5.2% year over year.
Beacon Roofing, the largest publicly traded distributor of residential and non-residential roofing materials and complementary building products in the United States and Canada, currently sports a Zacks Rank #1 (Strong Buy).
The Zacks Consensus Estimate for Beacon Roofing’s current financial-year sales and earnings indicates growth of 7.3% and 9.2%, respectively, from the year-ago reported numbers. BECN has a trailing four-quarter earnings surprise of 11.1%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
Deckers is a leading designer, producer and brand manager of innovative, niche footwear and accessories developed for outdoor sports and other lifestyle-related activities. It flaunts a Zacks Rank #1 at present.
The Zacks Consensus Estimate for Deckers’ current financial-year sales and earnings indicates growth of 11.7% and 21.3%, respectively, from the year-ago reported numbers. WMT has a trailing four-quarter earnings surprise of 26.3%, on average.
American Eagle Outfitters is a specialty retailer of casual apparel, accessories and footwear. It currently carries a Zacks Rank #2 (Buy).
The Zacks Consensus Estimate for American Eagle Outfitters’ current fiscal-year sales and earnings indicates growth of 4% and 39.2%, respectively, from the previous year’s reported figures. AEO has a trailing four-quarter average earnings surprise of 23%.
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Investment Plans Foster Growth at Home Depot (HD), Stock Gains
The Home Depot Inc. (HD - Free Report) has been reaping significant gains from the execution of its strategic initiatives and commitment to investing in the business to deliver the best interconnected shopping experience, capture wallet-share with the Pro and expand its store footprint. The company is on track with the execution of the “One Home Depot” investment plan, which focuses on expanding supply-chain facilities, technology investments and enhancing the digital experience.
HD’s interconnected retail strategy and underlying technology infrastructure have helped consistently boost web traffic for the past few quarters. Enhanced search capabilities, improved Pro site experience, and robust fulfillment capabilities have been driving improved online conversions. Sales leveraging HD’s digital platforms rose 5% year over year in third-quarter fiscal 2023. The company’s strategy of providing an interconnected experience is resonating well with customers, as around 50% of online orders were fulfilled through stores in the fiscal third quarter.
Gains from the company’s investments in One Home Depot plan and interconnected retail strategy have been well-reflected in its share price. Shares of this Zacks Rank #3 (Hold) company have rallied 15.8% in the past six months, outpacing the industry’s growth of 12%. The stock also fared better than the Retail-Wholesale sector and the S&P 500’s rise of 11.9% and 8.2%, respectively, in the same period.
Image Source: Zacks Investment Research
Other Factors Driving the Stock
Home Depot’s Pro segment has been a key growth driver, with the segment witnessing robust sales growth for the past several quarters. Pro sales outpaced DIY sales in the fiscal third quarter. Although lower than the year-ago quarter, HD noted that Pro backlogs continued to be healthy and elevated relative to the historic trends. Recent external data point suggests that the types of projects in these backlogs are changing from large-scale remodels to smaller projects.
The company remains on track with its strategic investments to build a Pro ecosystem that includes professional-grade products, exclusive brands, enhanced delivery, credit, digital capabilities, field sales support and HD rental. It continues to invest in Pro capabilities like enhanced fulfillment, more personalized online experience and other business management tools to drive Pro customers’ deeper engagement.
Home Depot remains focused on expanding its business and is positioned to capture market share. Management noted that it witnessed improved customer engagement in home improvement projects, particularly for small projects, in the fiscal third quarter. Going forward, the company remains focused on navigating the unique and uncertain environment by operating with agility amid evolving consumer trends. It also expects to drive productivity and efficiency throughout the business. As a result, it expects to deliver on its previously announced $500 million in annualized cost savings in 2024.
Hurdles to Pullback
Home Depot has been witnessing broad-based pressure across the business, driven by softened demand. The company continued to witness softness in certain big-ticket, discretionary categories, a trend which started in fourth-quarter fiscal 2022. This led to dismal third-quarter fiscal 2023 results, with the top and bottom lines declining year over year. However, results gained from strength in categories associated with smaller projects.
Driven by the continued soft trends in big-ticket, discretionary categories, Home Depot narrowed its view for fiscal 2023. The company anticipates sales and comparable sales to decline 3-4% year over year in fiscal 2023. The operating margin rate is estimated at 14.1-14.2%. HD estimates earnings per share to decline 9-11% year over year in fiscal 2023.
Additionally, Home Depot has been witnessing a decline in customer transactions, driven by soft sales of big-ticket discretionary categories and, in turn, hurt overall comparable sales (comps) in third-quarter fiscal 2023. Deflation from core commodity categories, primarily in lumber and copper, negatively impacted the company’s average ticket growth by 60 basis points in the fiscal third quarter. Lumber prices declined significantly from the year-ago quarter. Big-ticket comp transactions declined 5.2% year over year.
Key Picks
Some better-ranked stocks are Beacon Roofing Supply (BECN - Free Report) , Deckers Outdoor (DECK - Free Report) and American Eagle Outfitters (AEO - Free Report) .
Beacon Roofing, the largest publicly traded distributor of residential and non-residential roofing materials and complementary building products in the United States and Canada, currently sports a Zacks Rank #1 (Strong Buy).
The Zacks Consensus Estimate for Beacon Roofing’s current financial-year sales and earnings indicates growth of 7.3% and 9.2%, respectively, from the year-ago reported numbers. BECN has a trailing four-quarter earnings surprise of 11.1%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
Deckers is a leading designer, producer and brand manager of innovative, niche footwear and accessories developed for outdoor sports and other lifestyle-related activities. It flaunts a Zacks Rank #1 at present.
The Zacks Consensus Estimate for Deckers’ current financial-year sales and earnings indicates growth of 11.7% and 21.3%, respectively, from the year-ago reported numbers. WMT has a trailing four-quarter earnings surprise of 26.3%, on average.
American Eagle Outfitters is a specialty retailer of casual apparel, accessories and footwear. It currently carries a Zacks Rank #2 (Buy).
The Zacks Consensus Estimate for American Eagle Outfitters’ current fiscal-year sales and earnings indicates growth of 4% and 39.2%, respectively, from the previous year’s reported figures. AEO has a trailing four-quarter average earnings surprise of 23%.