Renovate

Home Depot has its best quarter in 20 years — the "House Hype" is (still) real

Wednesday, August 19, 2020 by Snacks
_Time to go to Home Depot_

Time to go to Home Depot

Swapped the $30 red lipstick... for a $30 red Adirondack chair. Americans shifted their spending from restaurants and clothes to the only place that matters now: home. People re-painted kitchens, re-tiled floors and finally changed the broken toilet seat. We thought the DIY "house hype" might be slowing back in May. Based off Home Depot's latest earnings report, the hype is still strong:

  • Home Depot's sales soared 23%, coming in at $38B. That's Home Depot's biggest quarterly sales growth in almost 20 years.
  • It's extra impressive growth for a big old retailer like Home Depot, which is past its peak growth spurt. During the same quarter last year, sales jumped just 1%.

And yet... the stock fell after the news. Home Depot's CEO didn't sound too hyped about the outlook for this quarter. He's uncertain how long the home spending boom can last:

  • US retail spending jumped for the 3rd straight month in July. But the $600/week boosted unemployment benefit expired at the end of July.
  • Stimulus checks boosted spending, but now they've been... spent. TBD if we'll get a 2nd round (they could be smaller).
  • DIY Home Makeover isn't an everyday thing. Cleaning companies like Clorox can expect continued demand, but there's only so many times you can landscape your garden.
THE TAKEAWAY

Home Depot is consistent... It has paid dividends to shareholders for 134 quarters in a row. On Sept 17th, it'll pay each shareholder $1.50 per share as a cash dividend. Home Depot took home ~$11B in profit last year, which is about the same as what Amazon made. Yet Amazon is worth 5.5X more because investors see more potential future profit growth. Home Depot's present is pretty strong, though.

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