Home Depot Q4 Earnings Beat; Sets $18 Billion Buyback

By Mani
Updated on

Home Depot unveiled a 36% increase in fourth-quarter profit Tuesday and authorized an $18 billion share repurchase program to replace its prior authorization. The world’s number one home improvement chain, however, painted a cautious outlook for 2015, citing currency headwinds.

Home Depot’s profit tops estimates

Thanks to improved customer service and online operations, Home Depot posted same-store sales growth of 7.9%, excluding newly opened or closed stores. For the quarter ended Feb. 1, U.S. stores posted 8.9% growth, while total customer transactions rose 5.1%. Moreover, average ticket size rose 3% to $57.79.

Home Depot’s profit excluding some items was $1 a share in the three months through Feb. 1, while the average of 25 analysts’ estimates compiled by Bloomberg was 89 cents. Its earnings beat was the biggest on a percentage basis in three years. Its revenue rose 8.3% to $19.2 billion, topping analysts’ $18.7 billion average projection.

The home improvement retailer also unveiled plans to return cash to shareholders. Its board approved an $18 billion stock buyback program, replacing its previous authorization, and enhanced the quarterly dividend 26% to 59 cents a share. The retailer plans to buy back about $4.5 billion in stock in its current fiscal year.

According to a survey by the National Association of Home Builders published last week, U.S. householders remain upbeat about market conditions. The improved job market encouraged Americans to spend more on renovations, helping the home improvement retailer’s performance.

Paints cautious outlook for 2015

Home Depot indicated that it anticipates full year 2015 earnings of $5.11 to $5.17 per share after accounting for buybacks. The retailer warned that it expects currency headwinds will impact 2015 earnings. At current rates, the retailer estimated that foreign exchange rates would bring down its 2015 sales growth by $1 billion and its per-share earnings by 6 cents. Thomson Reuters analysts recently projected per-share earnings of $5.23 on sales growth of 5%.

As reported by ValueWalk, earlier this month, the world’s largest home improvement retailer unveiled plans to fill over 80,000 positions ahead of spring, its busiest season.

Home Depot said last year that 53 million e-mail addresses were stolen during the data breach of its payment data systems. The retailer disclosed that the stolen e-mail addresses were in addition to the approximately 56 million debit and credit cards that were compromised during the data breach.

The retailer said today that it couldn’t yet estimate costs of the breach. The retailer faces several dozen civil suits in the issue. However, to combat future thefts, the company has completed a project to encrypt credit card data at the point of sale.

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