Home Depot’s integrated strategy drives growth and increases inventories by 14% year-to-date
Home Depot Inc. HD has demonstrated resilience in the midst of the coronavirus pandemic, thanks to ongoing store operations as well as its ability to deliver an interconnected shopping experience by blending its physical and digital platforms. The company’s flexible interconnected infrastructure has helped it quickly adapt to changing customer preferences amid the coronavirus pandemic in late March. As a result, it recorded revenue growth of 7.1% in the first quarter of fiscal 2020, with overall lineups up 6.4% and US lineups up 7. , 5%.
The first quarter sales performance was divided into three phases. In the first phase (the first seven weeks of the quarter), the company saw strong sales across all stores, with all departments showing average double-digit growth, as customers prepared to step up to the shelter in place. During the second phase (last week of March in the first 2 weeks of April), the implementation of reduced opening hours, limited customer traffic in stores and the cancellation of the Spring Black event Friday resulted in negative comps in most departments. In phase three (the last 3 weeks of the quarter), the company saw strong comparisons across most departments, with clients focusing on a number of home improvement projects.
Supported by strong revenue performance, the company’s shares are up 14.1% year-to-date compared to industry growth of 12.5%. Additionally, Zacks Rank # 3 (Hold) stock has improved 1.5% since the last earnings report on May 19. In all likelihood, Home Depot, with a long-term profit growth rate of 11.3% and an VGM score of A, indicates continued growth to come.
Besides revenue, the stock is enjoying positive momentum as its interconnected retail strategy and underlying technology infrastructure have been more relevant amid the coronavirus crisis, driving record web traffic for several weeks without interruption. Sales using digital platforms grew 80% in the first fiscal quarter, and more than 60% for cases where customers chose to pick up their orders from a store. With the rollout of shelter-in-place orders, customers have turned online for their purchasing needs. As a result, the company saw accelerated growth in its digital business of almost 30% in early March, which reached triple-digit growth in late April.
Additionally, it was able to expand its in-store capabilities within days to offer curbside pickup, an additional fulfillment option for customers in the United States and Canada. Clearly, the company’s cutting-edge digital assets, flexible supply chain, and a world-class merchandising organization have enabled it to quickly adapt to changes in customer needs, preferences and behaviors over the course of of the first fiscal quarter. This has led to solid growth in the company’s turnover.
Obviously, the company has effectively exploited its various fulfillment capabilities such as ‘buy online, store pickup’ (BOPUS) as well as enhanced delivery capabilities such as a flatbed truck, box truck, or truck. car and van service during the first fiscal quarter. Notably, execution options BOPUS and Deliver from Store saw triple-digit growth in the first fiscal quarter. In fact, the flexibility of its systems made it possible to quickly deploy an execution option for customers, which was the BOPUS capability coupled with a contactless curbside pickup option.
Additionally, The Home Depot implemented several operational changes to prioritize associate safety and provide ongoing service to customers in mid-March. Among these, the company has put in place early store closures to ensure the disinfection of stores and the replenishment of shelves. In addition, he took early steps to limit customer traffic in stores to better maintain physical and social distancing protocols. He also canceled annual high traffic spring events like Spring Black Friday to avoid the rush to stores. Aside from that, the company has leveraged its long-standing investments in One Home Depot’s interconnected strategy to serve its customers.
Nonetheless, it incurred approximately $ 850 million in pre-tax (or $ 640 million after-tax) spending in the first quarter of fiscal 2020 in connection with measures taken to support associates during the pandemic, which has had a significant impact. impact on results. These costs resulted in an impact of 60 cents per share on earnings per share in the first quarter of fiscal 2020. Despite strong first quarter sales trends for the fiscal year and strong initial results in the second quarter, the company suspended its guidance for fiscal 2020, citing the unprecedented impacts of the pandemic.
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