(Bloomberg) – Home Depot Inc. reported sales growth that was more than double what the already fast rate analysts had expected, but increasing spending meant flat margins in an otherwise standout quarter.
Sales of the same store went up by 23.4%, beating the estimate for a 11.4% gain from Consensus Metrix. Revenues of $ 38.1 billion also exceeded expectations. The profit was driven by both higher average customer checks and more transactions, which means more customers buy from Home Depot during the quarter and they spend more each time they come in. Similar sales in August are at similar levels as last quarter, executives said in an interview with analysts.
In an interview, Chief Financial Officer Richard McPhail said consumers “spend less on travel and entertainment and restaurants and spend more on where they spend most of their time – that’s home.”
But even though Americans have opened their wallets for home improvement during the pandemic, the retailer has also incurred higher costs to serve those customers. Sales, general and administrative expenses jumped 26% in the quarter, with Simeon Gutman of Morgan Stanley noting that the company is spending more than expected on virus-related costs and benefits.
Like many companies during the pandemic, Home Depot suspended its forecast for several years in May due to widespread uncertainty about Covid-19 and its impact on the wider economy. It did not include it again in Tuesday’s results.
Home Depot, long considered a proxy for the U.S. housing market, benefited when mortgage rates were at a record low, driving demand for new homes and keeping the merchant’s goods in Atlanta in high demand. U.S. house building starts to pick up in July with more than forecast, according to data released Tuesday. Home Depot said its business-to-self customers are growing faster than its pro business, targeting contractors.
Home Depot shares fell 1.1% to $ 285.11 at 11:55 a.m. in New York. The stock was up 32% this year through Monday, and it fared the S&P 500 index far. Home Depot’s biggest competitor, Lowe’s Cos., Reported its quarterly results on Wednesday.
(Adds CFO comment in third paragraph and updates trading shares.)
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