Dive Brief:
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The Home Depot on Tuesday reported second quarter sales rose 8.4% year over year to $30.5 billion from the year-ago quarter, as comparable sales in the quarter rose 8%, according to a company press release.
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Net earnings for the quarter reached $3.5 billion, up from net earnings of $2.7 billion a year ago.
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Shares soared after the retailer upgraded its fiscal 2018 sales growth guidance, saying it now expects sales will grow some 7% including the 53rd week, with comp sales growth of some 5.3% for the comparable 52-week period.
Dive Insight:
Home Depot suffered from external forces that dampened spring sales, and the declining U.S. housing market could further undermine its momentum. But not by much, according to GlobalData Retail Managing Director Neil Saunders.
"The 8.4% uplift in sales along with the supporting 8% rise in comparables is partly the result of a rebound in seasonal improvement activities after bad weather during the first quarter delayed projects," he said in comments emailed to Retail Dive. "While we believe that some of the lost sales have now been recaptured, the first half growth figure of 6.6% remains a little below average and suggests that some impulse-based trade was lost."
When it comes to favorable outside forces, notably consumer confidence and investment in their homes, the retailer helps itself. "Home Depot's strong brand presence and its good marketing mean it has captured the lion's share of the growth in the DIY category," Saunders said.
That could falter as homes continue to become less affordable in some areas, an emerging pattern that Saunders deemed "a red flag" that could dampen home improvement demand in the next six to nine months. But some home improvement projects are necessary regardless of the economy or personal finances, and a particularly bad season of wildfires across some Western states will likely boost the retailer. Plus, more young consumers are becoming do-it-yourselfers, and that’s boosting Home Depot's customer base, according to GlobalData.
Home Depot is expanding its offering, too, adding a decor assortment that complements its core sales. While those sales are mostly online for now, the retailer may be able to capture a larger slice of the market, Saunders said.