10-QPeriod: Q1 FY2022

HOME DEPOT, INC. Quarterly Report for Q1 Ended May 2, 2021

Filed May 25, 2021For Securities:HD

Summary

Home Depot, Inc. reported strong financial results for the first quarter of fiscal year 2021, ending May 2, 2021. The company demonstrated robust sales growth, with net sales increasing by 32.7% year-over-year to $37.5 billion. This surge was driven by a significant increase in both comparable customer transactions and average ticket prices, indicating strong consumer demand across various merchandise departments. The acquisition of HD Supply, completed in late 2020, is now fully integrated and contributing to the company's performance. Profitability also saw substantial improvement, with net earnings rising by 85.6% to $4.1 billion, translating to diluted earnings per share of $3.86, up from $2.08 in the prior year. This was achieved despite a slight decrease in gross profit margin, thanks to strong sales leverage and effective expense management, particularly a significant reduction in COVID-19 related expenses. The company also generated substantial operating cash flow of $6.3 billion, which was utilized for significant share repurchases, dividend payments, and debt repayment.

Financial Highlights

48 data points
Beta

Revenue

$37.50B

34.0% Gross Margin

Net Income

$4.14B

11.1% Net Margin

EPS (Diluted)

$3.86

Total Assets

$72.57B

Cash & Equivalents

$6.65B

Free Cash Flow

$6.31B

Financial Statements
Beta
Revenue$37.50B
Cost of Revenue$24.76B
Gross Profit$12.74B
SG&A Expenses$6.37B
Operating Expenses$6.96B
Operating Income$5.78B
Interest Expense$339.00M
Net Income$4.14B
EPS (Basic)$3.87
EPS (Diluted)$3.86
Shares Outstanding (Basic)1.07B
Shares Outstanding (Diluted)1.07B

Key Highlights

  • 1Net sales surged by 32.7% to $37.5 billion, driven by a 31.0% increase in comparable sales.
  • 2Diluted earnings per share (EPS) grew significantly by 85.6% to $3.86 from $2.08 in the prior year.
  • 3Gross profit increased by 32.4% to $12.7 billion, with gross margin slightly contracting to 34.0% from 34.1%.
  • 4Selling, General & Administrative (SG&A) expenses decreased as a percentage of net sales to 17.0% from 20.6%, benefiting from strong sales leverage and reduced COVID-19 related expenses.
  • 5Operating cash flow was strong at $6.3 billion, supporting significant capital allocation activities.
  • 6The company repurchased $3.8 billion of common stock and paid $1.8 billion in dividends during the quarter.
  • 7Return on Invested Capital (ROIC) improved to 45.1% from 40.8% in the prior year.

Frequently Asked Questions

The significant increase in net sales and earnings was primarily driven by a strong rebound in consumer demand, evidenced by a 31.0% increase in comparable sales. This was further boosted by a 19.1% rise in comparable customer transactions and a 10.3% increase in comparable average ticket, reflecting higher project demand, commodity price inflation, and strong demand for new products. The integration of HD Supply also contributed to the top-line growth.

Home Depot demonstrated effective expense management. While Selling, General & Administrative (SG&A) expenses increased in absolute terms, they decreased significantly as a percentage of net sales to 17.0% from 20.6%. This leverage was achieved through strong sales performance and a substantial reduction in COVID-19 related expenses, which were $78 million in Q1 2021 compared to $864 million in Q1 2020. Depreciation and amortization also decreased as a percentage of net sales.

Home Depot generated $6.3 billion in cash flow from operations. This was primarily used for significant share repurchases totaling $3.8 billion, payment of $1.8 billion in dividends, and repayment of $1.4 billion in long-term debt. The company also invested $524 million in capital expenditures. In May 2021, a new $20 billion share repurchase authorization was approved, replacing the previous one.

The acquisition of HD Supply, completed on December 24, 2020, for $8.7 billion, has been accounted for using the acquisition method. HD Supply's results have been consolidated into Home Depot's financial statements since the acquisition date. The preliminary allocation of the purchase price to the acquired assets and liabilities has been recognized, with the final determination to be completed within the allowed measurement period. This acquisition is contributing to the company's overall financial performance.