The Home Depot has reported sales growth for the third quarter, largely as a result of its recent acquisition of roofing and building supplies firm SRS Distribution.
The company’s sales rose 6.6 per cent year-on-year to $40.2 billion, which management said exceeded expectations despite continued “macroeconomic uncertainty”.
According to GlobalData MD Neil Saunders, the increase was a function of the acquisition of SRS Distribution, which was completed in June and is expected to add $6.4 billion in incremental sales across the course of this fiscal year.
“This was a smart deal that allows Home Depot to strengthen its hand in the professional space and reach a new base of customers,” he added.
On a comparable basis, sales were down 1.3 per cent overall and fell 1.2 per cent in the US. Saunders believes this sends a positive signal that the company has reached the bottom of its long sales slump and will soon return to growth.
Another good news was the strengthening of the housing market, where house sales decreased by just 2.5 per cent compared to the 5.7 per cent drop in the prior quarter, the analyst continued. He added that a robust housing market is critical for Home Depot as it underpins higher demand for home improvement spending.
On the bottom line, the company’s net earnings were down from $3.8 billion last year to $3.6 billion.
For the full year, Home Depot has lifted its forecast and expects comparable sales to drop 2.5 per cent, compared to the 3-4 per cent decline in the previous guidance. Total sales, including SRS, is expected to grow approximately 4 per cent.
Saunders believes Home Depot remains a “best-in-class retailer” thanks to strong levels of availability and great effort around driving sales with expert advice and strong customer service.
“While it might not be quite enough to offset the weakness in the overall market, it is helping Home Depot to take some market share and sustain loyalty. These things will serve it very well once the market improves,” he added.
Last week, Bernie Marcus – co-founder of Home Depot – died at the age of 95. Marcus established the business with Arthur Blank back in 1978, and the first shops opened a year later.
