10-QPeriod: Q1 FY2020

HOME DEPOT, INC. Quarterly Report for Q1 Ended May 5, 2019

Filed May 29, 2019For Securities:HD

Summary

The Home Depot, Inc. reported solid financial results for the first quarter of fiscal year 2019, with net sales increasing by 5.7% to $26.4 billion and net earnings rising to $2.5 billion. Diluted earnings per share improved to $2.27 from $2.08 in the prior year period, reflecting strong operational execution. The company demonstrated robust cash flow generation, with net cash provided by operating activities increasing to $4.6 billion. Key drivers for the sales growth included a 2.5% increase in comparable sales, fueled by a rise in both average ticket and customer transactions. Online sales also showed significant growth, up 23.0%, indicating successful integration of digital and physical retail strategies. The company continued its commitment to returning value to shareholders through substantial share repurchases totaling $1.3 billion and a notable increase in its quarterly cash dividend.

Financial Highlights

48 data points
Beta

Revenue

$26.38B

34.2% Gross Margin

Net Income

$2.51B

9.5% Net Margin

EPS (Diluted)

$2.27

Total Assets

$51.52B

Cash & Equivalents

$1.88B

Free Cash Flow

$4.71B

Financial Statements
Beta
Revenue$26.38B
Cost of Revenue$17.36B
Gross Profit$9.02B
SG&A Expenses$4.94B
Operating Expenses$5.42B
Operating Income$3.60B
Interest Expense$288.00M
Net Income$2.51B
EPS (Basic)$2.28
EPS (Diluted)$2.27
Shares Outstanding (Basic)1.10B
Shares Outstanding (Diluted)1.11B

Key Highlights

  • 1Net sales increased by 5.7% year-over-year to $26.4 billion for the first quarter of fiscal 2019.
  • 2Net earnings grew to $2.5 billion, resulting in a diluted EPS of $2.27, up from $2.08 in the prior year.
  • 3Comparable sales rose by 2.5%, driven by a 2.0% increase in average ticket and a 0.5% increase in customer transactions.
  • 4Online sales experienced robust growth of 23.0%, highlighting the effectiveness of the company's interconnected retail strategy.
  • 5Operating cash flow generation was strong, with $4.6 billion in net cash provided by operating activities.
  • 6The company repurchased $1.3 billion of its common stock and declared a quarterly cash dividend of $1.36 per share, signaling continued shareholder returns.
  • 7The adoption of new lease accounting standards (ASC 842) resulted in the recognition of significant operating lease right-of-use assets and liabilities on the balance sheet, with no material impact on results of operations or cash flows.

Frequently Asked Questions

The primary driver for the increase in net sales was positive comparable sales growth of 2.5%, which was attributed to an increase in comparable average ticket (2.0%) and comparable customer transactions (0.5%). Additionally, online sales grew significantly by 23.0%.

Merchandise inventories increased from $13.9 billion at the beginning of the period to $15.5 billion at the end of the quarter. The company's inventory turnover ratio was 4.7 times. The statement of cash flows shows a decrease in merchandise inventories of $1.6 billion, suggesting efficient inventory management or strong sales velocity.

The company demonstrated a strong commitment to capital allocation by generating $4.6 billion in operating cash flow. This was used to fund $1.5 billion in dividends, $1.3 billion in share repurchases, and $681 million in capital expenditures. A new $15.0 billion share repurchase program was authorized in February 2019, and the quarterly cash dividend was increased by 32.0% to $1.36 per share.

The adoption of ASC 842 on February 4, 2019, required the company to recognize operating lease right-of-use assets ($5.6 billion) and operating lease liabilities ($5.1 billion) on its balance sheet. However, management stated that the standard did not have a material impact on the company's consolidated financial statements, results of operations, or cash flows.