The Home Depot Announces Fourth Quarter and Fiscal 2018 Results; Increases Quarterly...

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-HISPANIC PR WIRE/ — 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.

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

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