10-QPeriod: Q2 FY2015

HOME DEPOT, INC. Quarterly Report for Q2 Ended Aug 3, 2014

Filed August 27, 2014For Securities:HD

Summary

The Home Depot, Inc. reported strong financial results for the second quarter and the first six months of fiscal year 2014, demonstrating robust sales growth and improved profitability. Net sales increased by 5.7% to $23.8 billion in the second quarter and by 4.4% to $43.5 billion for the first six months compared to the prior year periods. This growth was driven by a comparable store sales increase of 5.8% in the second quarter, fueled by higher customer transactions and an increased average ticket price. Profitability also saw significant improvement, with Net Earnings rising by 14.2% to $2.1 billion in the second quarter and by 13.5% to $3.4 billion for the first six months. This was supported by effective expense management, with Selling, General, and Administrative (SG&A) expenses as a percentage of net sales decreasing year-over-year. The company also benefited from a $112 million pre-tax gain from the sale of a portion of its equity in HD Supply Holdings, Inc. The company continued its commitment to shareholder returns through substantial share repurchases and dividend payments.

Financial Highlights

50 data points
Beta

Revenue

$23.81B

33.6% Gross Margin

Net Income

$2.05B

8.6% Net Margin

EPS (Diluted)

$1.52

Total Assets

$43.48B

Cash & Equivalents

$4.22B

Free Cash Flow

$2.72B

Financial Statements
Beta
Revenue$23.81B
Cost of Revenue$15.80B
Gross Profit$8.01B
SG&A Expenses$4.15B
Operating Expenses$4.56B
Operating Income$3.45B
Interest Expense$208.00M
Net Income$2.05B
EPS (Basic)$1.52
EPS (Diluted)$1.52
Shares Outstanding (Basic)1.35B
Shares Outstanding (Diluted)1.35B

Key Highlights

  • 1Net sales increased by 5.7% to $23.8 billion in Q2 FY2014 and 4.4% to $43.5 billion for the first six months of FY2014.
  • 2Comparable store sales increased by 5.8% in Q2 FY2014, driven by a 4.1% increase in customer transactions and a 1.7% increase in average ticket.
  • 3Net Earnings grew by 14.2% to $2.1 billion in Q2 FY2014 and 13.5% to $3.4 billion for the first six months of FY2014.
  • 4Diluted Earnings Per Share (EPS) rose to $1.52 in Q2 FY2014 and $2.51 for the first six months, up from $1.24 and $2.07 respectively in the prior year.
  • 5The company repurchased $3.5 billion of common stock in the first six months of FY2014 through Accelerated Share Repurchase (ASR) agreements and open market purchases.
  • 6Cash flow from operations was strong at $5.3 billion for the first six months of FY2014.
  • 7Online sales experienced significant growth, increasing by over 38% for both Q2 and the first six months of FY2014, and represented approximately 4.2% of total net sales.

Frequently Asked Questions

The increase in net sales was primarily driven by positive comparable store sales growth, which rose by 5.8% in the second quarter of fiscal year 2014. This growth was supported by an increase in customer transactions (4.1%) and a higher average ticket price (1.7%).

The Home Depot effectively managed its Selling, General, and Administrative (SG&A) expenses. SG&A as a percentage of net sales decreased from 19.1% in Q2 2013 to 18.1% in Q2 2014, and from 20.4% to 19.5% for the six-month period. This expense leverage, combined with positive sales trends, contributed to a significant increase in operating income and net earnings.

The company recognized a pre-tax gain of $112 million from the sale of a portion of its equity ownership in HD Supply Holdings, Inc. during the first six months of fiscal year 2014. This gain contributed positively to net earnings, adding $0.05 to the diluted EPS for the six-month period and $0.01 for the second quarter.

The Home Depot continued to prioritize shareholder returns through significant share repurchases and dividend payments. In the first six months of fiscal year 2014, the company repurchased $3.5 billion of its common stock, including a $1.75 billion Accelerated Share Repurchase (ASR) agreement. Additionally, cash dividends paid to stockholders amounted to $1.3 billion during the same period.