Home Depot reported 1Q18 EPS of $2.08, ahead of the $2.05 consensus estimate. Total revenues were $24.95 billion, up 4.4% year over year but below the $25.17 billion consensus estimate.
Big-ticket sales—or transactions over $900, which represent about a quarter of Home Depot’s US sales—were up 10%, driven by strength in flooring, appliances, lumber and building materials. Online sales grew by approximately 20% from the year-ago quarter, driven by buy-online, pick-up-in-store and buy-online, ship-to-store services; 46% of the company’s online orders in the US are picked up in-store.
Comps rose by 4.2% during the quarter, missing the 5.5% consensus estimate. Comps for US stores were up 3.9%. Comp growth was driven by a 5.8% increase in average ticket spend, which was partially offset by a 1.5% decline in customer transactions. The company said that aside from outdoor goods, which were negatively impacted by an unusually long winter, its business was solid across categories over the quarter. Excluding the weak garden division, first-quarter same-store sales were up 6.5%, the company said.
Commodity price inflation in lumber, building materials and copper positively impacted average ticket growth by 111 basis points. Foreign exchange rates positively impacted average ticket growth by 41 basis points.
Management noted that a 2.2% gain in comp sales during April reflected the negative effect of unusual snow during the month and that some sales for the spring selling season were pushed into the second quarter.
The colder-than-normal winter weather had a negative impact on garden categories, which historically represent around 15%–20% of Home Depot’s first-quarter sales. Appliances, electrical and lumber categories posted double-digit comps during the quarter, while all merchandising departments were at or above the company average.
Sales for the Pro business continued to grow strongly in the quarter, outpacing DIY sales, which were negatively impacted by the garden business.
During the quarter, Home Depot adopted Accounting Standards Update (ASU) number 2014-09, which pertains to revenue recognition for certain items. Home Depot estimates that the adoption resulted in an increase of $33 million to revenues, a decrease of $98 million to cost of sales and an increase of $131 million to operating expenses for 1Q18.
Management noted several improvements to its interconnected shopping experience initiative, including better product content, a refreshed mobile experience, improved inventory visibility and faster checkout.
Management provided the following guidance: