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The Home Depot Announces Fourth Quarter and Fiscal 2019 Results; Reiterates Fiscal 2020 Business Outlook; Increases Quarterly Dividend by 10 Percent

February 25, 2020 GMT
The Home Depot logo. (PRNewsFoto/The Home Depot) (PRNewsFoto/)
The Home Depot logo. (PRNewsFoto/The Home Depot) (PRNewsFoto/)

ATLANTA, Feb. 25, 2020 /PRNewswire/ -- The Home Depot®, the world’s largest home improvement retailer, today reported fourth quarter and fiscal 2019 results.

Fourth Quarter 2019

Comparable sales for the fourth quarter of fiscal 2019 increased 5.2 percent, and comparable sales in the U.S. increased 5.3 percent.

Sales for the fourth quarter of fiscal 2019 were $25.8 billion compared to sales of $26.5 billion in the fourth quarter of fiscal 2018. Fiscal 2018 included an extra week of operations compared to fiscal 2019. The extra week of operations added approximately $1.7 billion of sales to the fourth quarter of fiscal 2018.

Net earnings for the fourth quarter of fiscal 2019 were $2.5 billion, or $2.28 per diluted share, compared to net earnings of $2.3 billion, or $2.09 per diluted share, in the fourth quarter of fiscal 2018. The extra week of operations added approximately $0.21 per diluted share to the fourth quarter of fiscal 2018.

Fiscal 2019

Comparable sales for fiscal 2019 increased 3.5 percent, and comparable sales in the U.S. increased 3.8 percent.

Sales for fiscal 2019 were $110.2 billion compared to sales of $108.2 billion in fiscal 2018.

Net earnings for fiscal 2019 were $11.2 billion, or $10.25 per diluted share, compared to net earnings of $11.1 billion, or $9.73 per diluted share in fiscal 2018.

“Fiscal 2019 was a record year for our business and one marked by significant progress as we invest to transform ourselves into The Home Depot of the future. We had a strong finish to the year as our fourth quarter results reflect strength in our core business, solid execution around our holiday events and the overall health of the consumer,” said Craig Menear, chairman, CEO and president.

“We are now two years into our multi-year investment program and have more conviction than ever that our strategic initiatives are creating a value proposition that is unique to the marketplace and will extend our leadership position for years to come. Through the second year of our One Home Depot investment program, we have grown sales by over $9 billion dollars – a level of growth unmatched in our market. I am proud of the way our associates continue to focus on our customers, and I want to thank them for their hard work and dedication in the fourth quarter and throughout the year.”

Dividend Declaration

The Company today announced that its board of directors approved a 10 percent increase in its quarterly dividend to $1.50 per share, which equates to an annual dividend of $6.00 per share.

“As a testament to our commitment to create value for our shareholders and a demonstration of confidence in the business going forward, the board has increased the dividend for the eleventh consecutive year,” said Richard McPhail, CFO and executive vice president. The dividend is payable on March 26, 2020, to shareholders of record on the close of business on March 12, 2020. This is the 132nd consecutive quarter the Company has paid a cash dividend.

Fiscal 2020 Guidance

The Company provided the following guidance for fiscal 2020:

  • Total sales growth of approximately 3.5 percent to 4.0 percent
  • Comparable sales growth of approximately 3.5 percent to 4.0 percent
  • Six new stores
  • Operating margin of approximately 14.0 percent
  • Net interest expense of approximately $1.2 billion
  • Effective tax rate assumption of approximately 24.0 percent
  • Share repurchases of at least $5.0 billion
  • Diluted earnings-per-share growth of approximately 2.0 percent to $10.45
  • Capital spending of approximately $2.8 billion
  • Depreciation and amortization expense of approximately $2.4 billion
  • Cash flow from operations of approximately $13.5 billion

The Home Depot will conduct a conference call today at 9 a.m. ET to discuss information included in this news release and related matters. The conference call will be available in its entirety through a webcast and replay at ir.homedepot.com/events-and-presentations.

At the end of the fourth quarter, the Company operated a total of 2,291 retail stores in all 50 states, the District of Columbia, Puerto Rico, the U.S. Virgin Islands, Guam, 10 Canadian provinces and Mexico. The Company employs more than 400,000 associates. The Home Depot’s stock is traded on the New York Stock Exchange (NYSE: HD) and is included in the Dow Jones industrial average and Standard & Poor’s 500 index.

Certain statements contained herein constitute “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements may relate to, among other things, the demand for our products and services; net sales growth; comparable sales; effects of competition; implementation of store, interconnected retail, supply chain and technology initiatives; inventory and in-stock positions; state of the economy; state of the housing and home improvement markets; state of the credit markets, including mortgages, home equity loans and consumer credit; impact of tariffs; issues related to the payment methods we accept; demand for credit offerings; management of relationships with our associates, suppliers and vendors; international trade disputes, natural disasters, public health issues, and other business interruptions that could disrupt supply or delivery of, or demand for, the Company’s products; continuation of share repurchase programs; net earnings performance; earnings per share; dividend targets; capital allocation and expenditures; liquidity; return on invested capital; expense leverage; stock-based compensation expense; commodity price inflation and deflation; the ability to issue debt on terms and at rates acceptable to us; the impact and expected outcome of investigations, inquiries, claims and litigation; the effect of accounting charges; the effect of adopting certain accounting standards; the impact of the Tax Cuts and Jobs Act of 2017 and other regulatory changes; store openings and closures; guidance for fiscal 2020 and beyond; financial outlook; and the integration of acquired companies into our organization and the ability to recognize the anticipated synergies and benefits of those acquisitions. Forward-looking statements are based on currently available information and our current assumptions, expectations and projections about future events. You should not rely on our forward-looking statements. These statements are not guarantees of future performance and are subject to future events, risks and uncertainties – many of which are beyond our control, dependent on the actions of third parties, or are currently unknown to us – as well as potentially inaccurate assumptions that could cause actual results to differ materially from our expectations and projections. These risks and uncertainties include, but are not limited to, those described in Item 1A, “Risk Factors,” and elsewhere in our Annual Report on Form 10-K for our fiscal year ended February 3, 2019 and in our subsequent Quarterly Reports on Form 10-Q.

Forward-looking statements speak only as of the date they are made, and we do not undertake to update these statements other than as required by law. You are advised, however, to review any further disclosures we make on related subjects in our periodic filings with the Securities and Exchange Commission.

THE HOME DEPOT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)



Three Months Ended (1)




Fiscal Year Ended (1)




in millions, except per share data

February 2,
2020


February 3,
2019


% Change


February 2,
2020


February 3,
2019


% Change

Net sales

$

25,782


$

26,491


(2.7)%


$

110,225


$

108,203


1.9%

Cost of sales

17,046


17,464


(2.4)


72,653


71,043


2.3

Gross profit

8,736


9,027


(3.2)


37,572


37,160


1.1

Operating expenses:












Selling, general and administrative

4,814


4,922


(2.2)


19,740


19,513


1.2

Depreciation and amortization

519


480


8.1


1,989


1,870


6.4

Impairment loss


247


N/M



247


N/M

Total operating expenses

5,333


5,649


(5.6)


21,729


21,630


0.5

Operating income

3,403


3,378


0.7


15,843


15,530


2.0

Interest and other (income) expense:












Interest and investment income

(17)


(20)


(15.0)


(73)


(93)


(21.5)

Interest expense

309


269


14.9


1,201


1,051


14.3

Other


16


N/M



16


N/M

Interest and other, net

292


265


10.2


1,128


974


15.8

Earnings before provision for income taxes

3,111


3,113


(0.1)


14,715


14,556


1.1

Provision for income taxes

630


769


(18.1)


3,473


3,435


1.1

Net earnings

$

2,481


$

2,344


5.8%


$

11,242


$

11,121


1.1%













Basic weighted average common shares

1,083


1,116


(3.0)%


1,093


1,137


(3.9)%

Basic earnings per share

$

2.29


$

2.10


9.0


$

10.29


$

9.78


5.2













Diluted weighted average common shares

1,088


1,121


(2.9)%


1,097


1,143


(4.0)%

Diluted earnings per share

$

2.28


$

2.09


9.1


$

10.25


$

9.73


5.3














Three Months Ended




Fiscal Year Ended




Selected Sales Data (2) (3)

February 2,
2020


February 3,
2019


% Change


February 2,
2020


February 3,
2019


% Change

Customer transactions (in millions)

369.6


394.8


(6.4)%


1,616.0


1,620.8


(0.3)%

Average ticket

$

68.29


$

65.59


4.1


$

67.30


$

65.74


2.4

Sales per retail square foot

$

425.70


$

414.17


2.8


$

454.82


$

446.86


1.8


—————

(1)

The three months ended February 2, 2020 include 13 weeks and the three months ended February 3, 2019 include 14 weeks. The fiscal
year ended February 2, 2020 includes 52 weeks and the fiscal year ended February 3, 2019 includes 53 weeks. The additional week
included in three months and fiscal year ended February 3, 2019 added approximately $1.7 billion in net sales and $0.21 in diluted earnings per share.

(2)

Selected Sales Data does not include results for the legacy Interline Brands business, now operating as a part of The Home Depot Pro.

(3)

The additional week included in the three months and fiscal year ended February 3, 2019 increased customer transactions by 24.5 million,
added $0.01 to average ticket, and increased sales per retail square foot by $6.87.


THE HOME DEPOT, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)


in millions

February 2,
2020


February 3,
2019

Assets




Current assets:




Cash and cash equivalents

$

2,133



$

1,778


Receivables, net

2,106



1,936


Merchandise inventories

14,531



13,925


Other current assets

1,040



890


Total current assets

19,810



18,529


Net property and equipment

22,770



22,375


Operating lease right-of-use assets

5,595




Goodwill

2,254



2,252


Other assets

807



847


Total assets

$

51,236



$

44,003






Liabilities and Stockholders' Equity




Current liabilities:




Short-term debt

$

974



$

1,339


Accounts payable

7,787



7,755


Accrued salaries and related expenses

1,494



1,506


Current installments of long-term debt

1,839



1,056


Current operating lease liabilities

828




Other current liabilities

5,453



5,060


Total current liabilities

18,375



16,716


Long-term debt, excluding current installments

28,670



26,807


Long-term operating lease liabilities

5,066




Other liabilities

2,241



2,358


Total liabilities

54,352



45,881


Total stockholders' (deficit) equity

(3,116)



(1,878)


Total liabilities and stockholders' equity

$

51,236



$

44,003


THE HOME DEPOT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)



Fiscal Year Ended (1)

in millions

February 2,
2020


February 3,
2019

Cash Flows from Operating Activities:




Net earnings

$

11,242



$

11,121


Reconciliation of net earnings to net cash provided by operating activities:




Depreciation and amortization

2,296



2,152


Stock-based compensation expense

251



282


Impairment loss



247


Changes in working capital

(452)



(687)


Changes in deferred income taxes

202



26


Other operating activities

184



(103)


Net cash provided by operating activities

13,723



13,038






Cash Flows from Investing Activities:




Capital expenditures, net of non-cash capital expenditures

(2,678)



(2,442)


Payments for business acquired, net



(21)


Proceeds from sales of property and equipment

37



33


Other investing activities

(12)



14


Net cash used in investing activities

(2,653)



(2,416)






Cash Flows from Financing Activities:




Repayments of short-term debt, net

(365)



(220)


Proceeds from long-term debt, net of discounts and premiums

3,420



3,466


Repayments of long-term debt

(1,070)



(1,209)


Repurchases of common stock

(6,965)



(9,963)


Proceeds from sales of common stock

280



236


Cash dividends

(5,958)



(4,704)


Other financing activities

(176)



(26)


Net cash used in financing activities

(10,834)



(12,420)


Change in cash and cash equivalents

236



(1,798)


Effect of exchange rate changes on cash and cash equivalents

119



(19)


Cash and cash equivalents at beginning of year

1,778



3,595


Cash and cash equivalents at end of year

$

2,133



$

1,778



—————

(1) Fiscal year ended February 2, 2020 includes 52 weeks. Fiscal year ended February 3, 2019 includes 53 weeks.

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SOURCE The Home Depot