The Home Depot, Inc. (HD - Free Report) is hitting all the right notes as apparent from its bullish run on the bourses. In fact, the stock hit a new 52-week high of $236.86 on Oct 15 before closing the session a tad lower at $235.62. The company is benefiting from the Integrated Retail Strategy and its focus on Pro customers.
Notably, shares of this Zacks Rank #3 (Hold) company have increased roughly 15.2% in the past six months. In the same time frame, the S&P 500 index, the Retail-Wholesale sector and the Zacks Building Products-Retail industry advanced 1.5%, 0.1% and 7.5%, respectively. With a long-term earnings growth rate of 10.1% and a VGM Score of A, Home Depot is positioned to attain new highs.
Factors Narrating Home Depot’s Growth Story
Home Depot is significantly benefiting from the execution of the “One Home Depot” investment plan, focused on delivering an interconnected shopping experience to customers. In-store investments under the plan mainly focus on easy customer navigation through the store aisles and increased speed to checkout. For this, the company introduced way-finding sign and store refresh package in more than 1,400 U.S. stores. These along with front-end store investments to optimize labor and merchandise space productivity led to improved customer satisfaction scores and conversion rates in stores.
Further, the introduction of digital price labels in the appliance department has enhanced store shopping experience as customers can now view the online ratings and reviews in the stores as well. Though physical stores are the keys to its business, the company identifies that many of in-store purchases are the result of online visits. Additionally, nearly 50% of the online orders in the United States are picked up from stores. This blended customer engagement across both channels forms the basis for the company’s integrated retail strategy that connects offline and online channels.
Home Depot is witnessing higher traffic, better conversion and continued sales growth in the digital business through improved search capabilities, site functionality, category presentation and product content. Moreover, it rolled out automated lockers in about 1,100 stores to make picking-up of online orders easier and convenient. Stores with these lockers witnessed an increase of 250 basis points (bps) in checkout scores compared with stores without lockers.
Also, the company is trying to leverage the digital business to boost sales for new categories like HD Home pool and workwear. These investments across the digital and physical assets are likely to drive its productivity growth, apart from boosting customer experience.
Moreover, the company’s Pro segment is a key growth driver, with Pro sales outpacing DIY (do-it-yourself) sales for the past several quarters. The Pro segment benefits from its efforts to enhance service capabilities for the Pros. Home Depot is focused on simplifying the Pro shopping experience and expanding engagement through services like tool rental, delivery and the new B2B website. The B2B platform brings a more personalized experience for Pro customers based on customer feedback. The company expects to roll out the new Pro online experience to more than a million Pros by 2019.
Home Depot equipped store personnel with several tools to better understand Pro customers. The latest among these tools is the My View system, which enables associates to access customer data, allowing them to work proactively to better serve Pro customers.
We believe that these efforts will continue driving the company’s performance helping it reach new highs.
Stocks to Consider
Builders FirstSource, Inc. (BLDR - Free Report) delivered positive earnings surprise of 26.6% in the last four quarters. The stock currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Lowe's Companies, Inc. (LOW - Free Report) has an impressive long-term earnings growth rate of 14% and a Zacks Rank #2 (Buy).
GMS Inc. (GMS - Free Report) has a long-term earnings growth rate of 7% and currently has a Zacks Rank #2.
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