Home Depot, Lowe's post strong fourth quarter as housing category continues to grow

Consumers have been confined to their homes for the past year , so they've invested more in their homes, which means home improvement retailers are not going to let up on sales .

Home Depot reported Tuesday that its fourth-quarter net sales rose 25.1% year-over-year to $32.3 billion, with comparable sales up 24.5%.

“At the beginning of the year, I never would have imagined that the business could grow to more than $21 billion in 2020. It took us 19 years as a company to achieve the first $20 billion in total sales, and our growth in 2020 has exceeded our expectations. “We have been able to do this in this year alone,” said Craig Menear, the company’s CEO, according to Seeking Alpha. “This is driven by the investments we have made in the business and the team’s outstanding execution and cross-functional coordination.”

Home Depot reported net income of $2.9 billion for the quarter, up 15% from the same period last year. However, the company noted that expenses related to the HD Supply Holdings acquisition, which closed in late December, hurt quarterly and financial earnings. But according to Wedbush analyst Seth Basham, these investments will benefit the retailer in the long term as it works to gain market share.

Home-related projects, which are undertaken by consumers themselves or completed by professionals, continued to gain momentum in the fourth quarter. Home Depot's transaction volume in the period increased 12.8% from the same period last year to $416.8 million, with the company seeing "strong double-digit growth" in both Pro and DIY customers, Menear said.

As the pandemic has prevented consumers from attending events they would normally attend and confined them to their homes, the home improvement industry has seen increased demand. “Savings from lower spending due to commuting , dining out and missed vacations have all been redirected to home projects and activities, ” said Neil Saunders, managing director at GlobalData.

Sanders added that sales were expected to slow heading into January, but momentum continued as the latest round of stimulus checks began to be distributed in December. According to GlobalData’s findings, more than 62% of consumers took on at least one home or garden-related project in the fourth quarter, up from 49% in the same period last year.

He added: "Based on our preliminary data, we estimate that the average recipient spent around 28% of their stimulus check on home-related products, which very clearly shows that home remains a priority area for most consumers. If further stimulus is provided, we expect the home retail sector, including Home Depot, to further boost sales."

In fact, according to Placer data, foot traffic to Home Depot increased 16.4%, 12% and 22.2% in November , December and January, respectively, compared to the previous year. Similarly, Lowe’s foot traffic increased 18.7%, 17.4% and 30.4% in the same periods.

Home Depot's online sales in the quarter were up 83% from the same period last year, and 55% of sales made through its digital channels were completed in-store. Menear said this was supported by previous investments in technology and infrastructure, which enabled it to expand its BOPIS and curbside offerings.

For the full year, the retailer's net sales rose nearly 20% from last year to $132.1 billion, while comps rose 19.7%.

Meanwhile, Lowe 's reported Wednesday that fourth-quarter net sales rose nearly 27% to $20.3 billion, while its total sales rose 28.1%. Revenue in the U.S. market rose 28.6%.

"Lowe's crushed very high sales expectations and even higher following yesterday's strong results from Home Depot," Joseph Feldman, senior managing director at Telsey Advisory Group, said in an email.

The retailer also reported that net income for the quarter rose about 92% to $978 million, while operating income increased 59% to $1.5 billion.

“Strong execution enabled us to meet broad- based demand driven by consumers’ continued focus on the home, with growth exceeding 16% across all merchandise segments, growth exceeding 19% across all U.S. regions, and growth exceeding 121% across the Lowes platform , ” said CEO Marvin Ellison. “ Looking forward to 2021, we expect to increase market share and drive further operating margin expansion.”

For the full year, Lowe's reported net sales rose 24.2% to $89.4 billion, while net income rose 36% to $5.8 billion.

Winning over professional customers could be the biggest feat for the space's two largest retailers, as it could lead to sustained gains as pandemic -induced home improvement projects fade among consumers.

Home Depot

Lowe

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Fourth quarter