Powered by a healthy demand for tools and seasonal gardening products and a shift in its marketing strategy, the Home Depot reported sales and earnings that beat expectations. And it’s raising its forecasts for the remainder of the year.
The Atlanta-based home-improvement chain says sales rose 5.7% to $23.8 billion for its second fiscal quarter, propelled by a 5.8% gain in overall same-store sales, and a 6.4% gain in the U.S. On a conference call with investors, company executives say gains came in every geographic region and across every store category, with sales in tools, millwork, outdoor garden and kitchen showing special strength. And net earnings jumped 14.2% to $2.05 billion, up from $1.79 billion last year.
While consumer demand helped drive these results, with a record number of transactions in the quarter, the company says its continued transition to online sales and digital marketing are also key. “We’ve shifted to more targeted personalized messaging to become more relevant to customers, and as a result, costs attributable to print advertising are down 60% since 2010, and have been shifted to more efficient advertising,” says Craig Menear, president, U.S. Retail, in the call.
He says the company is using these digital transactions across all departments, and “we believe this shift of how we communicate is a piece of what’s been driving our results.” Print now accounts for less than 10% of its advertising budget, “while digital is 36% and trending higher. We like the ROI,” says CFO Carol Tome.
The company continues to be well ahead of its sales plan, despite mixed signals in the housing market, says CEO Frank Blake, with some gains attributable to its full rollout of its buy online and ship to store program. About a third of its online transactions now culminate in the store.