The Home Depot Announces First Quarter Results; Reaffirms Fiscal Year 2018 Guidance

The Home Depot Announces First Quarter Results; Reaffirms Fiscal Year 2018 Guidance



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ATLANTA, May 15, 2018 /PRNewswire-HISPANIC PR WIRE/ — The Home Depot®, the world’s largest home improvement retailer, today reported sales of $24.9 billion for the first quarter of fiscal 2018, a 4.4 percent increase from the first quarter of fiscal 2017. Comparable sales for the first quarter of fiscal 2018 were positive 4.2 percent, and comp sales in the U.S. were positive 3.9 percent.

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

Net earnings for the first quarter of fiscal 2018 were $2.4 billion, or $2.08 per diluted share, compared with net earnings of $2.0 billion, or $1.67 per diluted share, in the same period of fiscal 2017. For the first quarter of fiscal 2018, diluted earnings per share increased 24.6 percent from the same period in the prior year.

“We are pleased by the strength of our business despite a slow start to the spring selling season,” said Craig Menear, chairman, CEO and president. “Outside of our seasonal business, we had solid results in all markets and categories and are seeing strong momentum in all lines of business during these first few weeks of May. These trends, as well as a favorable housing and macroeconomic backdrop, give us confidence to reaffirm our sales and earnings guidance for fiscal 2018. I would like to thank our associates for their hard work and continued dedication to our customers.”

Fiscal 2018 Guidance

Including the adoption of ASU No. 2014-09 discussed below, the Company expects its fiscal 2018 sales to grow by approximately 6.7 percent and comp sales to be up approximately 5.0 percent. The Company also reaffirmed its diluted earnings-per-share growth guidance for the year and expects diluted earnings-per-share growth of approximately 28.0 percent from fiscal 2017 to $9.31.

Recent Accounting Pronouncement – Revenue Recognition

During the first quarter of fiscal 2018, the Company adopted ASU No. 2014-09, which pertains to revenue recognition. The adoption of this standard will not materially impact the Company’s consolidated financial statements or related disclosures. Under ASU No. 2014-09, the Company has changed the presentation of certain expenses and cost reimbursements associated with its private label credit card program, certain expenses related to the sale of gift cards to customers, and gift card breakage income. The Company also has changed its recognition of gift card breakage income to be recognized proportionately as redemption occurs, rather than based on historical redemption patterns. 

The Company has adopted this standard on a modified retrospective basis. In accordance therewith, financial information prior to fiscal 2018 will not be recast. The consolidated statement of earnings and balance sheet for the first quarter of fiscal 2018 reflect the effect of this accounting policy adoption. The impact of adoption was an increase of $33 million to net sales, a decrease of $98 million to cost of sales, and a corresponding increase of $131 million to operating expenses for the first quarter of fiscal 2018. There is no impact from the Company’s adoption on operating income, net earnings or earnings per share. The balance sheet reflects the cumulative impact of adoption using the modified retrospective method as well as the impact of recording the sales return allowance on a gross basis rather than as a net liability. Additional information about the impact of the adoption of ASU No. 2014-09 is available at http://ir.homedepot.com/financial-reports/quarterly-earnings/2018.  

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

At the end of the first quarter, the Company operated a total of 2,285 retail stores in all 50 states, the District of Columbia, Puerto Rico, 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.

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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; issues related to the payment methods we accept; 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; demand for credit offerings; inventory and in-stock positions; management of relationships with our 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; store openings and closures; guidance for fiscal 2018 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 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

in millions, except per share data

April 29,
2018

April 30,
 2017

% Change

Net sales

$

24,947

$

23,887

4.4

%

Cost of sales

16,330

15,733

3.8

Gross profit

8,617

8,154

5.7

Operating expenses:

Selling, general and administrative

4,779

4,361

9.6

Depreciation and amortization

457

444

2.9

  Total operating expenses

5,236

4,805

9.0

Operating income

3,381

3,349

1.0

Interest and other (income) expense:

Interest and investment income

(22)

(13)

69.2

Interest expense

261

254

2.8

  Interest and other, net

239

241

(0.8)

Earnings before provision for income taxes

3,142

3,108

1.1

Provision for income taxes

738

1,094

(32.5)

  Net earnings

$

2,404

$

2,014

19.4

%

Basic weighted average common shares

1,152

1,198

(3.8)

%

Basic earnings per share

$

2.09

$

1.68

24.4

Diluted weighted average common shares

1,158

1,204

(3.8)

%

Diluted earnings per share

$

2.08

$

1.67

24.6

Three Months Ended

Selected Sales Data (1)

April 29,
2018

April 30,
 2017

% Change

Customer transactions (in millions)

375.9

380.8

(1.3)

%

Average ticket

$

66.02

$

62.39

5.8

Sales per square foot

412.03

394.17

4.5

 —————

(1)

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

April 29,
2018

April 30,
 2017

January 28,
 2018

Assets

Cash and cash equivalents

$

3,599

$

3,565

$

3,595

Receivables, net

2,296

2,164

1,952

Merchandise inventories

14,432

13,609

12,748

Other current assets

887

558

638

Total current assets

21,214

19,896

18,933

Net property and equipment

21,928

21,789

22,075

Goodwill

2,281

2,095

2,275

Other assets

1,227

1,164

1,246

Total assets

$

46,650

$

44,944

$

44,529

Liabilities and Stockholders’ Equity

Short-term debt

$

350

$

$

1,559

Accounts payable

9,726

9,138

7,244

Accrued salaries and related expenses

1,413

1,353

1,640

Current installments of long-term debt

1,199

544

1,202

Other current liabilities

5,445

5,403

4,549

Total current liabilities

18,133

16,438

16,194

Long-term debt, excluding current installments

24,244

22,393

24,267

Other liabilities

2,586

2,151

2,614

Total liabilities

44,963

40,982

43,075

Total stockholders’ equity

1,687

3,962

1,454

Total liabilities and stockholders’ equity

$

46,650

$

44,944

$

44,529

 

 

THE HOME DEPOT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

Three Months Ended

in millions

April 29,
2018

April 30,
 2017

Cash Flows from Operating Activities:

Net earnings

$

2,404

$

2,014

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

Depreciation and amortization

532

505

Stock-based compensation expense

84

81

Changes in working capital and other, net of acquisition effects

961

1,964

  Net cash provided by operating activities

3,981

4,564

Cash Flows from Investing Activities:

Capital expenditures, net of non-cash capital expenditures

(556)

(458)

Proceeds from sales of property and equipment

8

13

Net cash used in investing activities

(548)

(445)

Cash Flows from Financing Activities:

Repayments of short-term debt, net

(1,209)

(710)

Repayments of long-term debt

(10)

(11)

Repurchases of common stock

(1,121)

(1,289)

Proceeds from sales of common stock

14

31

Cash dividends

(1,189)

(1,069)

Other financing activities

115

(33)

Net cash used in financing activities

(3,400)

(3,081)

Change in cash and cash equivalents

33

1,038

Effect of exchange rate changes on cash and cash equivalents

(29)

(11)

Cash and cash equivalents at beginning of period

3,595

2,538

Cash and cash equivalents at end of period

$

3,599

$

3,565

 

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 statement of earnings for the first quarter of fiscal 2018. 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 April 29, 2018

in millions

As Reported

% of

Net Sales

ASU No. 2014-09
Impact

Excluding
ASU No. 2014-09
Impact

% of

Net Sales

Net sales

$

24,947

100.0

%

$

33

$

24,914

100.0

%

Cost of sales

16,330

65.5

(98)

16,428

65.9

Gross profit

8,617

34.5

131

8,486

34.1

Selling, general and administrative

4,779

19.2

131

4,648

18.7

Total operating expenses

5,236

21.0

131

5,105

20.5

 

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 April 29, 2018.

April 29, 2018

in millions

As Reported

ASU No. 2014-09
Effect

Excluding
ASU No. 2014-09
Effect

Assets

Receivables, net

$

2,296

$

(46)

$

2,342

Other current assets

887

269

618

Total current assets

21,214

223

20,991

Total assets

46,650

223

46,427

Liabilities and Stockholders’ Equity

Other current liabilities

$

5,445

$

124

$

5,321

Total current liabilities

18,133

124

18,009

Other liabilities

2,586

24

2,562

Total liabilities

44,963

148

44,815

Total stockholders’ equity

1,687

75

1,612

Total liabilities and stockholders’ equity

46,650

223

46,427

 

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

The Home Depot Announces First Quarter Results; Reaffirms Fiscal Year 2018 Guidance