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Category: The Home Depot and Stock Market
Last updated: 26 May 2020 Stock price: $245.47 On this page we will look to provide more details about The Home Depot, the world's largest home improvement retailer with over 2 200 stores in North America and annual sales in 2019 topping $110.2 billion.
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About The Home Depot
The Home Depot, Inc. is the world’s largest home improvement retailer based on net sales for fiscal 2019. We offer our customers a wide assortment of building materials, home improvement products, lawn and garden products, and décor products and provide a number of services, including home improvement installation services and tool and equipment rental. As of the end of fiscal 2019, we had 2,291 The Home Depot stores located throughout the U.S. (including the Commonwealth of Puerto Rico and the territories of the U.S. Virgin Islands and Guam), Canada, and Mexico. The Home Depot stores average approximately 104,000 square feet of enclosed space, with approximately 24,000 additional square feet of outside garden area. We also maintain a network of distribution and fulfillment centers, as well as a number of e-commerce websites
Quick facts about The Home Depot
- The Home Depot is listed on the New York Stock Exchange under stock code ticker: HD
- Total revenues for 2019 fiscal year : $110.225 billion
- Number of Home Depot Stores: 2 291
- Average Home Depot store size: 104 000 square feet plus an average of 24 000 square feet for the outdoor and garden section
The data below refers to the full fiscal 2019:
- Comparable sales increase: 3.5%
- Comparable customer transactions increase: 1.1%
- Comparable average ticket increase:2.5%
- Customer transactions (in millions): 1,616.0
- Average ticket: $ 67.30
- Sales per retail square foot: $454.82
- Diluted earnings per share $ 10.25
Sourcing and quality assessment of goods acquired by The Home Depot
We maintain a global sourcing program to obtain high-quality and innovative products directly from manufacturers around the world. During fiscal 2019, in addition to our U.S. sourcing operations, we maintained sourcing offices in Mexico, Canada, China, India, Vietnam and Europe. To ensure that suppliers adhere to our high standards of social and environmental responsibility, we also have a global responsible sourcing program. Our suppliers are contractually obligated to ensure that their products comply with applicable international, federal, state and local laws. All of our vendors and service providers must also comply with our responsible sourcing standards, which cover a variety of expectations across multiple areas of social compliance, including supply chain transparency, sources of supply, and child and forced labor. In addition, we have both quality assurance and engineering resources dedicated to establishing criteria and overseeing compliance with safety, quality and performance standards for our proprietary branded products, including conducting factory audits and compliance visits
Number of stores in various regions/states in the United States
The summary below shows the number of Home Depot stores per state/ region in the United States
- Alabama 28
- Montana 6
- Alaska 7
- Nebraska 8
- Arizona 56
- Nevada 21
- Arkansas 14
- New Hampshire 20
- California 232
- New Jersey 67
- Colorado 46
- New Mexico 13
- Connecticut 30
- New York 100
- Delaware 9
- North Carolina 40
- District of Columbia 1
- North Dakota 2
- Florida 155
- Ohio 70
- Georgia 90
- Oklahoma 16
- Guam 1
- Oregon 27
- Hawaii 7
- Pennsylvania 70
- Idaho 11
- Puerto Rico 9
- Illinois 76
- Rhode Island 8
- Indiana 24
- South Carolina 26
- Iowa 10
- South Dakota 1
- Kansas 16
- Tennessee 39
- Kentucky 14
- Texas 179
- Louisiana 28
- Utah 22
- Maine 11
- Vermont 3
- Maryland 41
- Virgin Islands 2
- Massachusetts 45
- Virginia 49
- Michigan 70
- Washington 45
- Minnesota 33
- West Virginia 6
- Mississippi 14
- Wisconsin 27
- Missouri 34
- Wyoming 5
The Home Depot sales mix
The summary below shows the sales and the relative contribution of the various merchandising departments of The Home Depot during their 2019 fiscal year. (Sales reported is in Dollar millions).
So the biggest contributor to The Home Depot's sales in their 2019 fiscal year was their indoor garden department (10% of sales), followed by Appliances with 8.9% of sales and this was followed very closely by Electrical/lighting department sales with 8.9% of sales
- Appliances: $ 9,852 (8.9%)
- Building Materials: 7,712 (7.0%)
- Décor/Storage: 3,758 (3.4%)
- Electrical/Lighting: 9,844 (8.9%)
- Flooring: 7,443 (6.8%)
- Hardware: 6,381 (5.8%)
- Indoor Garden: 10,989 (10.0%)
- Kitchen and Bath: 7,717 (7.0%)
- Lumber: 7,894 (7.2%)
- Millwork: 5,757 (5.2%)
- Outdoor Garden: 7,564 (6.9%)
- Paint: 8,620 (7.8%)
- Plumbing: 8,131 (7.4%)
- Tools: 8,563 (7.8%)
- Total: $ 110,225 (100.0%)
So the biggest contributor to The Home Depot's sales in their 2019 fiscal year was their indoor garden department (10% of sales), followed by Appliances with 8.9% of sales and this was followed very closely by Electrical/lighting department sales with 8.9% of sales
Competition for The Home Depot
Our industry is highly competitive, very fragmented, and evolving. As a result, we face competition for our products and services from a variety of retailers, suppliers, and service providers, ranging from traditional brick-and-mortar, to multichannel, to exclusively online. In each of the markets we serve, there are a number of other home improvement retailers; electrical, plumbing and building materials supply houses; and lumber yards. With respect to some products and services, we also compete with specialty design stores, showrooms, discount stores, local, regional and national hardware stores, paint stores, mail order firms, warehouse clubs, independent building supply stores, MRO companies, home décor retailers, and other retailers, as well as with providers of home improvement services and tool and equipment rental. We compete, both in-store and online, primarily based on customer experience, price, quality, availability, product assortment, and delivery options. With respect to our stores, we also compete based on store location and appearance as well as presentation of merchandise. Further, online and multichannel retailers are increasingly focusing on delivery services, with customers seeking faster and/or guaranteed delivery times, as well as low-price or free shipping. Our ability to be competitive on delivery times and delivery costs depends on many factors, including the success of our investments in One Supply Chain.
Intellectual Property of The Home Depot
Intellectual Property Our business has one of the most recognized brands in North America. As a result, we believe that The Home Depot® trademark has significant value and is an important factor in the marketing of our products, e-commerce, stores and business. We have registered or applied for registration of trademarks, service marks, copyrights and internet domain names, both domestically and internationally, for use in our business, including our proprietary brands such as HDX® , Husky® , Hampton Bay® , Home Decorators Collection® , Glacier Bay® , Vigoro® , Everbilt® and Lifeproof® . We also maintain patent portfolios relating to some of our products and services and seek to patent or otherwise protect innovations we incorporate into our products or business operations.
Seasonality of our business
Our business is subject to seasonal influences. Generally, our highest volume of sales occurs in our second fiscal quarter, and the lowest volume occurs either during our first or fourth fiscal quarter.
Our business is subject to seasonal influences. Generally, our highest volume of sales occurs in our second fiscal quarter, and the lowest volume occurs either during our first or fourth fiscal quarter.
The Home Depot (HD) stock performance
The graph below present our cumulative total shareholder returns relative to the performance of the S&P Retail Composite Index and the S&P 500 Index for the five most recent fiscal years. The graph assumes $100 was invested at the closing price of our common stock on the NYSE and in each index on the last trading day of fiscal 2014 and assumes that all dividends were reinvested on the date paid. The points on the graph represent fiscal year-end amounts based on the last trading day in each fiscal year.
A $100 invested at the end of February 2015 would have resulted in an investment worth $244.53 as at the end of February 2020. That is an annual growth rate of 19.53% over the last 5 years, which is very strong returns provided to stockholders, this while the S&P 500 provided an average annual return of 12.36%. So the stock of The Home Depot has grown at 1.58 times that of the S&P 500.
Our last Home Depot (HD) stock valuation as at 19 May 2020
So what is Home Depot stock worth based on their 1st quarter 2020 earnings report and the fact that The Home Depot withdrew their earnings guidance provided for their 2020 fiscal year? Based on their earnings report and the fiscal guidance being pulled our valuation model provides a target (full value) price for Home Depot at $196.30 a stock (down from our 4th quarter 2020 earnings report review of Home Depot).
We therefore believe the stock of The Home Depot is overvalued
We usually recommend long term fundamental or value investors look to enter a stock at least 10% below our target (full value) price, which in this case is $196.30, thus a good entry point into The Home Depot would be at $176.70 or below.
We expect the stock of Home Depot to pull back slightly from current levels in coming weeks and months to levels closer to our target price (full value price), as their stock is price is overvalued and has been for some time based on our previous valuations of The Home Depot.
We therefore believe the stock of The Home Depot is overvalued
We usually recommend long term fundamental or value investors look to enter a stock at least 10% below our target (full value) price, which in this case is $196.30, thus a good entry point into The Home Depot would be at $176.70 or below.
We expect the stock of Home Depot to pull back slightly from current levels in coming weeks and months to levels closer to our target price (full value price), as their stock is price is overvalued and has been for some time based on our previous valuations of The Home Depot.