Highlights from Home Depot's Q2
The Home Depot’s second-quarter performance was highly anticipated, as consumers faced many new outlets to spend their money in the three months ended Aug. 1. Restaurants, travel and stores deemed non-essential during the height of the pandemic all opened their arms to home-nesting consumers.
The world’s largest home improvement retailer responded with Q2 sales growth, and a record $41.1 billion in quarterly sales. But the growth came at a significantly slower pace.
The company posed domestic comps of positive 3.4%, after four consecutive quarters of comps in the mid to high twenties and on top of a 25.0% comp store surge in the year-ago quarter.
Sales increased 8.1%, crossing the $40 billion mark for the first time ever.
In his comments to investors and analysts, CEO Craig Menear pointed to changing home-improvement consumer patterns, with weekday sales picking up the pace, relative to the weekend. "We attributed this to consumers returning to travel and other recreational activities, Menear said. "And while the consumer is returning to pre-pandemic activities, we continue to see them engaged in home improvement projects."
More second-quarter stats
Menear said customers seemed happy to take on larger projects in the quarter, as sales to the pro outpaced sales to the DIY customer for the second straight quarter.
"Over the last six quarters, we have grown the business by more than $34 billion, a level unmatched in our market," he added.
The Home Depot was not immune to supply chain challenges in the second quarter, said Ted Decker, president and COO. But he said the company is leveraging its size to mitigate the challenge -- including booking "several container vessels for our exclusive use," he said.
Turning to the merchandise, Decker pointed to positive comps in 10 of the company's 14 departments.
While kitchen and bath and lumber led the way, the four categories that single-digit negative comps were paint, hardware and indoor and outdoor garden -- categories that had tough prior-year performances to match. "It is important to note that these were some of our strongest performing departments during the second quarter of last year," Decker explained.
Decker explained that comp average ticket increased 11.3%, while comp transactions were down 6%. Inflation drove the ticket, particularly in lumber, he said.
Early in the quarter, lumber prices (both framing and panel) hit all time highs, then fell quickly. Framing lumber peaked at about $1,500 per thousand board feet, then fell to about $500.
"While pricing for both framing and panel has come down from the peaks, the average price during the second quarter was still significantly higher in the same period last year," Decker said.
And also in the realm of the pro: big ticket transaction of $1,000 or more were up about 24% compared to the second quarter of a year ago. Pro-heavy categories that benefited were lumber, vinyl plank flooring, gypsum and pipe fittings.
The company announced a new big box home improvement exclusive relationship with LP Building Solutions, plus a new exclusive Behr paint product: Behr Dynasty, described as a 4-in-1 indoor paint that repels stains, resists scuffs, dries fast and covers in one coat.
Digital platforms
A year ago, the company's sales that leveraged Home Depot's digital platforms were up triple digits. In the second quarter this year, these sales were essentially flat. But Decker explained that the company knows that the vast majority of its customers engage with Home Depot in an interconnected manner.
"Whether it be through project, inspiration, and research, transacting, fulfillment, or support; our customers blend physical and digital worlds," Decker said.
More than 55% of the company's online orders were fulfilled through its stores.
"And while customers have gotten more comfortable buying online, we've never been more confident in the importance of our physical stores as they remain the center of our customer experience due to the project nature of our business," Decker said.
The company ended the quarter with 2,298 stores, no change from the end of the first quarter.
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Bottom line: Net earnings for the second quarter of fiscal 2021 were $4.8 billion, up 11% over with net earnings of $4.3 billion. In the same quarter last year.
What the CEO said: “We achieved a milestone of over $40 billion in quarterly sales for the first time in company history,” said Craig Menear, chairman and CEO. “I would like to extend my sincere appreciation to our team, as well as our supplier and supply chain partners, as they continue to operate in this dynamic and challenging environment.”
More information: The earnings release can be found here.
