The Home Depot Q4 and Full Year 2016 Results

The Home Depot continued its strong performance in Q4 2016.  The Home Depot achieved the highest sales and net earnings in company history.  Fiscal 2016 sales grew $6.1 billion to $94.6 billion, an increase of 6.9% from fiscal 2015.

Comp Store Performance

• Comp sales were up 5.8% from last year.
• 5.7% in November, 7.1% in December and 4.7% in January
• U.S. stores had positive comps of 6.3%.  6% in November, 8% in December and 5.1% in January 

HomeDepot.Com Performance

• The online business grew over 19% versus the prior year, and now represents 5.9% of total sales.
• About 45% of online U.S. orders are picked up in our stores

Merchandise departments (Q4 performance)

• Flooring and tools had double-digit comps in the quarter.
• Lumber, Outdoor Garden, Appliances, Decor, Indoor Garden, Lighting and Plumbing were above the company's average comp.
• Hardware, Millwork, Electrical, Kitchen-Bath, Building Materials and Paint were all positive, but below the company average.

Transaction Summary (Q4 Performance)

• Total comp transactions increased 2.8%
• Comp average ticket grew by 2.9%.
• Looking at big ticket sales in the fourth quarter, transactions over $900, which represent approximately 20% of U.S. sales, were up 11.6%. The drivers behind the increase in big ticket purchases were Flooring, Appliances, and several Pro categories.

2017 Forecast

• Forecast 2017 comp sales of approximately 4.6%

Carol Tome’s comments on forecast methodology:  U.S., GDP is projected to grow by 2.3% in 2017. We then add to that the benefits we believe we will get from rising home prices, housing turnover, and household formation. And we think housing will add another point-and-a-half growth to our overall growth next year.  To that, we have added a little bit of share shift in Appliances and certain building categories. And just to put that in perspective, in 2016, Appliances contributed 50 basis points of our comp growth.  And then we're adding something else this year that we haven't included in the past, and that's what we call the cumulative wealth effect of home price appreciation. If you look at home equity, since 2011, home equity is up 108%. On average, that equates to $50,000 per household. And we believe that's contributing – as people use the equity of their house to spend back into their house, we believe that's contributing to our growth, so we factor that into our guidance, and that's how we got to the 4.6%.

• While private fixed residential investment as a percentage of GDP now stands at 3.8%, it has a way to go before it reaches the historical mean of 4.5%.
• Home price appreciation, housing turnover, and household formation continue to be tailwinds for our business.