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The Home Depot Announces Fourth Quarter and Fiscal 2018 Results; Increases Quarterly Dividend by 32.0 Percent; Announces $15.0 Billion Share Repurchase Authorization; Provides Fiscal 2019 Guidance

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ATLANTA, Feb. 26, 2019 /PRNewswire/ -- The Home Depot®, the world's largest home improvement retailer, today reported sales of $26.5 billion for the fourth quarter of fiscal 2018, a 10.9 percent increase from the fourth quarter of fiscal 2017. Comparable sales for the fourth quarter of fiscal 2018 were positive 3.2 percent, and comp sales in the U.S. were positive 3.7 percent.

The Home Depot logo. (PRNewsFoto/The Home Depot) (PRNewsFoto/)

The fourth quarter of fiscal 2018 consisted of 14 weeks compared with 13 weeks for the prior year. The 14th week added approximately $1.7 billion in sales for the quarter and the year. The additional week is not included in comparable sales results for the quarter or the year.

Net earnings for the fourth quarter of fiscal 2018 were $2.3 billion, or $2.09 per diluted share, compared with net earnings of $1.8 billion, or $1.52 per diluted share, in the same period of fiscal 2017. The 14th week added approximately $0.21 per diluted share for the quarter and year.

Net earnings for the fourth quarter and the year were negatively impacted by a nonrecurring, pre-tax charge of approximately $247 million, or $184 million after tax equaling $0.16 per diluted share, due to an impairment loss related to certain trade names at Interline Brands.

Fiscal 2018

Sales for fiscal 2018 were $108.2 billion, an increase of 7.2 percent from fiscal 2017. Total company comparable sales for fiscal 2018 increased 5.2 percent, and comp sales in the U.S. were positive 5.4 percent for the year.

Earnings per diluted share in fiscal 2018 were $9.73, compared to $7.29 per diluted share in fiscal 2017, an increase of 33.5 percent.

"We achieved record sales and net earnings in fiscal 2018, while making great progress on the strategic investments we laid out in December of 2017. We focused on enhancing the interconnected retail experience for our customers, providing localized and innovative product, and delivering best in class productivity," said Craig Menear, chairman, CEO and president. "Our view on the health of the economy and the consumer, as well as the momentum of our strategic investments, supports our belief that we can deliver comparable sales growth of 5.0 percent in fiscal 2019. I would like to thank our associates for their solid execution and exceptional work in service to our customers."

Dividend Declaration and Share Repurchase Authorization

The Company today announced that its board of directors declared a 32.0 percent increase in its quarterly dividend to $1.36 per share.

"As a testament to our commitment to create value for our shareholders and a demonstration of confidence in the business going forward, the board has increased the dividend for the tenth consecutive year," said Menear. The dividend is payable on March 28, 2019, to shareholders of record on the close of business on March 14, 2019. This is the 128th consecutive quarter the Company has paid a cash dividend.

The board of directors also authorized a new $15 billion share repurchase program, replacing its previous authorization.

Fiscal 2019 Guidance

The Company provided the following guidance for fiscal 2019, a 52-week year compared to fiscal 2018, a 53-week year:

  • Comparable sales growth of approximately 5.0 percent for the comparable 52-week period
  • Sales growth of approximately 3.3 percent
  • Five net new stores
  • Gross margin of approximately 34.0 percent
  • Operating margin of approximately 14.4 percent
  • Net interest expense of approximately $1.2 billion
  • Tax rate of approximately 25.5 percent
  • Share repurchases of approximately $5.0 billion
  • Diluted earnings-per-share growth of approximately 3.1 percent to $10.03
  • Capital spending of approximately $2.7 billion
  • Depreciation and amortization expense of approximately $2.3 billion
  • Cash flow from the business of approximately $14.1 billion

Long-Term Financial Targets

Today the Company reaffirms its fiscal 2020 financial targets as follows:

  • Total sales ranging from approximately $115 billion to approximately $120 billion  
  • Operating margin ranging from approximately 14.4 percent to approximately 15.0 percent
  • Return on invested capital of more than 40 percent

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 ir.homedepot.com/events-and-presentations.

At the end of the fourth quarter, the Company operated a total of 2,287 retail stores in all 50 states, the District of Columbia, Puerto Rico, the 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; inventory and in-stock positions; 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; issues related to the payment methods we accept; demand for credit offerings; management of relationships with our associates, 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 and other regulatory changes; store openings and closures; guidance for fiscal 2019 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, dependent on the actions of third parties, 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 (1)




Fiscal Year Ended (2)



in millions, except per share data

February 3,
2019


January 28,
2018


% Change


February 3,
2019


January 28,
2018


% Change

Net sales

$

26,491



$

23,883



10.9

%


$

108,203



$

100,904



7.2

%

Cost of sales

17,464



15,790



10.6



71,043



66,548



6.8


Gross profit

9,027



8,093



11.5



37,160



34,356



8.2


Operating expenses:












Selling, general and administrative

4,922



4,440



10.9



19,513



17,864



9.2


Depreciation and amortization

480



464



3.4



1,870



1,811



3.3


Impairment loss

247







247






Total operating expenses

5,649



4,904



15.2



21,630



19,675



9.9


Operating income

3,378



3,189



5.9



15,530



14,681



5.8


Interest and other (income) expense:












Interest and investment income

(20)



(23)



(13.0)



(93)



(74)



25.7


Interest expense

269



269





1,051



1,057



(0.6)


Other

16







16






Interest and other, net

265



246



7.7



974



983



(0.9)


Earnings before provision for income 
     taxes

3,113



2,943



5.8



14,556



13,698



6.3


Provision for income taxes

769



1,164



(33.9)



3,435



5,068



(32.2)


Net earnings

$

2,344



$

1,779



31.8

%


$

11,121



$

8,630



28.9

%













Basic weighted average common shares

1,116



1,160



(3.8)

%


1,137



1,178



(3.5)

%

Basic earnings per share

$

2.10



$

1.53



37.3



$

9.78



$

7.33



33.4














Diluted weighted average common shares

1,121



1,167



(3.9)

%


1,143



1,184



(3.5)

%

Diluted earnings per share

$

2.09



$

1.52



37.5



$

9.73



$

7.29



33.5















Three Months Ended (1)




Fiscal Year Ended (2)



Selected Sales Data (3)

February 3,
2019


January 28,
2018


% Change


February 3,
2019


January 28,
2018


% Change

Customer transactions (in millions)

394.8



366.5



7.7

%


1,620.8



1,578.6



2.7

%

Average ticket

$

65.59



$

64.00



2.5



$

65.74



$

63.06



4.2


Sales per square foot

$

414.17



$

394.87



4.9



$

446.86



$

417.02



7.2


—————

(1)

Three months ended February 3, 2019 include 14 weeks. Three months ended January 28, 2018 include 13 weeks.

(2)

Fiscal year ended February 3, 2019 includes 53 weeks. Fiscal year ended January 28, 2018 includes 52 weeks.

(3)

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

February 3,
2019


January 28,
2018

Assets




Cash and cash equivalents

$

1,778



$

3,595


Receivables, net

1,936



1,952


Merchandise inventories

13,925



12,748


Other current assets

890



638


Total current assets

18,529



18,933


Net property and equipment

22,375



22,075


Goodwill

2,252



2,275


Other assets

847



1,246


Total assets

$

44,003



$

44,529






Liabilities and Stockholders' Equity




Short-term debt

$

1,339



$

1,559


Accounts payable

7,755



7,244


Accrued salaries and related expenses

1,506



1,640


Current installments of long-term debt

1,056



1,202


Other current liabilities

5,060



4,549


Total current liabilities

16,716



16,194


Long-term debt, excluding current installments

26,807



24,267


Other liabilities

2,358



2,614


Total liabilities

45,881



43,075


Total stockholders' (deficit) equity

(1,878)



1,454


Total liabilities and stockholders' (deficit) equity

$

44,003



$

44,529


 

 

THE HOME DEPOT, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)



Fiscal Year Ended (1)

in millions

February 3,
2019


January 28,
2018

Cash Flows from Operating Activities:




Net earnings

$

11,121



$

8,630


Reconciliation of net earnings to net cash provided by operating activities:




Depreciation and amortization

2,152



2,062


Stock-based compensation expense

282



273


Impairment loss

247




Changes in working capital, net of acquisition effects

(687)



554


Changes in deferred income taxes

26



92


Other operating activities

(103)



420


Net cash provided by operating activities

13,038



12,031






Cash Flows from Investing Activities:




Capital expenditures, net of non-cash capital expenditures

(2,442)



(1,897)


Payments for business acquired, net

(21)



(374)


Proceeds from sales of property and equipment

33



47


Other investing activities

14



(4)


Net cash used in investing activities

(2,416)



(2,228)






Cash Flows from Financing Activities:




(Repayments of) proceeds from short-term debt, net

(220)



850


Proceeds from long-term debt, net of discounts

3,466



2,991


Repayments of long-term debt

(1,209)



(543)


Repurchases of common stock

(9,963)



(8,000)


Proceeds from sales of common stock

236



255


Cash dividends

(4,704)



(4,212)


Other financing activities

(26)



(211)


Net cash used in financing activities

(12,420)



(8,870)


Change in cash and cash equivalents

(1,798)



933


Effect of exchange rate changes on cash and cash equivalents

(19)



124


Cash and cash equivalents at beginning of period

3,595



2,538


Cash and cash equivalents at end of period

$

1,778



$

3,595


—————

(1)

Fiscal year ended February 3, 2019 includes 53 weeks. Fiscal year ended January 28, 2018 includes 52 weeks.

 

 

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 statements of earnings for the three and twelve month periods ended February 3, 2019. 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 February 03, 2019 (1)

in millions

As

Reported


% of

Net Sales


ASU No. 2014-
09
Impact


Excluding
ASU No. 2014-
09 Impact


% of

Net Sales

Net sales

$

26,491



100.0

%


$

86



$

26,405



100.0

%

Cost of sales

17,464



65.9



(82)



17,546



66.4


Gross profit

9,027



34.1



168



8,859



33.6


Selling, general and administrative

4,922



18.6



168



4,754



18.0


Total operating expenses

5,649



21.3



168



5,481



20.8



Fiscal Year Ended February 03, 2019 (2)

in millions

As

Reported


% of

Net Sales


ASU No. 2014-
09
Impact


Excluding
ASU No. 2014-
09 Impact


% of

Net Sales

Net sales

$

108,203



100.0

%


$

216



$

107,987



100.0

%

Cost of sales

71,043



65.7



(382)



71,425



66.1


Gross profit

37,160



34.3



598



36,562



33.9


Selling, general and administrative

19,513



18.0



598



18,915



17.5


Total operating expenses

21,630



20.0



598



21,032



19.5


—————

(1)   Three months ended February 3, 2019 include 14 weeks.

(2)   Fiscal year ended February 3, 2019 includes 53 weeks.

 

 

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 February 3, 2019.



February 3, 2019

in millions

As

Reported


ASU No. 2014-
09
Impact


Excluding
ASU No. 2014-
09 Impact

Assets






Receivables, net

$

1,936



$

(40)



$

1,976


Other current assets

890



256



634


Total current assets

18,529



216



18,313


Total assets

44,003



216



43,787








Liabilities and Stockholders' Equity






Other current liabilities

$

5,060



$

117



$

4,943


Total current liabilities

16,716



117



16,599


Other liabilities

2,358



24



2,334


Total liabilities

45,881



141



45,740


Total stockholders' deficit

(1,878)



75



(1,953)


Total liabilities and stockholders' deficit

44,003



216



43,787


 

 

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

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