The Home Depot Announces Second Quarter Results; Raises Fiscal Year 2015 Guidance

Aug 18, 2015, 06:00 ET from Home Depot

ATLANTA, Aug. 18, 2015 /PRNewswire/ -- The Home Depot®, the world's largest home improvement retailer, today reported sales of $24.8 billion for the second quarter of fiscal 2015, a 4.3 percent increase from the second quarter of fiscal 2014. Comparable store sales for the second quarter of fiscal 2015 were positive 4.2 percent, and comp sales for U.S. stores were positive 5.7 percent.

Net earnings for the second quarter of fiscal 2015 were $2.2 billion, or $1.73 per diluted share, compared with net earnings of $2.1 billion, or $1.52 per diluted share, in the same period of fiscal 2014. For the second quarter of fiscal 2015, diluted earnings per share increased 13.8 percent from the same period in the prior year.

Second quarter of fiscal 2015 results include a pretax net expense of $92 million, or $0.05 per diluted share, related to the Company's 2014 data breach. This expense includes an accrual for estimated probable losses that the Company expects to incur in connection with the claims made by the payment card networks. Second quarter of fiscal 2015 results also reflect a pretax gain on sale of $144 million, or $0.07 per diluted share, related to the sale of the remaining portion of the Company's equity ownership in HD Supply Holdings, Inc. Adjusting for these two items, diluted earnings per share for the second quarter of fiscal 2015 were $1.71.

"We were pleased with this quarter's results. We saw balanced growth across our business resulting from strength in the core of the store as well as the continued recovery of the U.S. housing market," said Craig Menear, chairman, CEO and president. "I would like to thank our associates for their hard work and dedication."

Updated Fiscal 2015 Guidance

The Company has provided a range of sales, comp sales and diluted earnings-per-share growth to reflect the difference between 2014 average exchange rates and current exchange rates. The low-end of the Company's sales, comp sales and diluted earnings-per-share growth guidance reflects the U.S. dollar remaining at current foreign exchange rates.

Based on its year-to-date performance and to reflect the planned completion of the acquisition of Interline Brands, Inc., the Company raised its fiscal 2015 sales guidance and now expects sales will grow in a range of approximately 5.2 percent to 6.0 percent and comp sales will grow in a range of approximately 4.1 percent to 4.9 percent. The Company also raised its diluted earnings-per-share guidance for the year and now expects diluted earnings per share to grow in a range of approximately 13 percent to 14 percent from fiscal 2014 to $5.31 to $5.36.

The Company's earnings-per-share guidance reflects the benefit of the Company's year-to-date share repurchases of $3.1 billion and the Company's intent to repurchase an additional $3.9 billion of shares during the remainder of the year for a total of $7.0 billion.

The Company's estimated probable losses related to the claims made by the payment card networks in connection with the data breach discovered in September 2014 are based on currently available information and expected payments associated with those claims. These estimates may change as new information becomes available or circumstances change. The accrual does not reflect liabilities from current and future civil litigation, governmental investigations and enforcement proceedings, which may have an adverse effect on the Company's financial results in a future period. The accrual also does not reflect future breach-related legal, consulting or administrative fees, which are expensed as incurred and not expected to be material in any individual period.

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 earnings.homedepot.com.

At the end of the second quarter, the Company operated a total of 2,270 retail stores in all 50 states, the District of Columbia, Puerto Rico, U.S. Virgin Islands, Guam, 10 Canadian provinces and Mexico. The Company employs more than 300,000 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 store sales; effects of competition; state of the economy; state of the residential construction, housing and home improvement markets; state of the credit markets, including mortgages, home equity loans and consumer credit; demand for credit offerings; inventory and in-stock positions; implementation of store, interconnected retail and supply chain initiatives; management of relationships with our suppliers and vendors; the impact and expected outcome of investigations, inquiries, claims and litigation, including those related to the data breach; issues related to the payment methods we accept and the timing of upgrades and enhancements impacting point of sale devices; 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 effect of accounting charges; the effect of adopting certain accounting standards; store openings and closures; guidance for fiscal 2015 and beyond; financial outlook; successful closing of the Interline acquisition; and the subsequent integration of Interline into our organization and the ability to recognize the anticipated synergies and benefits of the acquisition.  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 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 1, 2015 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. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS

FOR THE THREE AND SIX MONTHS ENDED AUGUST 2, 2015 AND AUGUST 3, 2014

(Unaudited)

(Amounts in Millions Except Per Share Data and as Otherwise Noted)

Three Months Ended

Six Months Ended

August 2,  2015

August 3,  2014

% Increase

(Decrease)

August 2, 2015

August 3, 2014

% Increase (Decrease)

NET SALES

$

24,829

$

23,811

4.3

%

$

45,720

$

43,498

5.1

%

Cost of Sales

16,464

15,804

4.2

30,176

28,734

5.0

GROSS PROFIT

8,365

8,007

4.5

15,544

14,764

5.3

 

Operating Expenses:

Selling, General and Administrative

4,299

4,146

3.7

8,462

8,213

3.0

Depreciation and Amortization

419

413

1.5

838

826

1.5

Total Operating Expenses

4,718

4,559

3.5

9,300

9,039

2.9

OPERATING INCOME

3,647

3,448

5.8

6,244

5,725

9.1

Interest and Other (Income) Expense:

Interest and Investment Income

(149)

(17)

N/M

(153)

(117)

30.8

Interest Expense

233

208

12.0

430

399

7.8

Interest and Other, net

84

191

(56.0)

277

282

(1.8)

EARNINGS BEFORE PROVISION FOR

INCOME TAXES

3,563

3,257

9.4

5,967

5,443

9.6

Provision for Income Taxes

1,329

1,207

10.1

2,154

2,014

7.0

NET EARNINGS

$

2,234

$

2,050

9.0

%

$

3,813

$

3,429

11.2

%

Weighted Average Common Shares

1,283

1,346

(4.7)%

1,291

1,358

(4.9)

%

BASIC EARNINGS PER SHARE

$

1.74

$

1.52

14.5

$

2.95

$

2.53

16.6

Diluted Weighted Average Common Shares

1,289

1,353

(4.7)%

1,298

1,365

(4.9)

%

DILUTED EARNINGS PER SHARE

$

1.73

$

1.52

13.8

$

2.94

$

2.51

17.1

Three Months Ended

Six Months Ended

SELECTED HIGHLIGHTS

August 2,  2015

August 3,  2014

% Increase

(Decrease)

August 2, 2015

August 3, 2014

% Increase

(Decrease)

Number of Customer Transactions

420.4

409.7

2.6

%

780.6

754.2

3.5

%

Average Ticket (actual)

$

59.42

$

58.43

1.7

$

59.04

$

58.05

1.7

Sales per Square Foot (actual)

$

420.37

$

403.90

4.1

$

387.04

$

368.92

4.9

N/M – Not Meaningful

 

THE HOME DEPOT, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

AS OF AUGUST 2, 2015, AUGUST 3, 2014 AND FEBRUARY 1, 2015

(Unaudited)

(Amounts in Millions)

August 2,  2015

August 3,  2014

February 1,  2015

ASSETS

Cash and Cash Equivalents

$

4,936

$

4,216

$

1,723

Receivables, net

1,696

1,637

1,484

Merchandise Inventories

11,859

11,665

11,079

Other Current Assets

1,040

973

1,016

Total Current Assets

19,531

18,491

15,302

 

Property and Equipment, net

22,302

23,126

22,720

Goodwill

1,340

1,295

1,353

Other Assets

625

567

571

TOTAL ASSETS

$

43,798

$

43,479

$

39,946

LIABILITIES AND STOCKHOLDERS' EQUITY

Short-Term Debt

$

$

$

290

Accounts Payable

7,495

7,165

5,807

Accrued Salaries and Related Expenses

1,384

1,325

1,391

Current Installments of Long-Term Debt

3,057

34

38

Other Current Liabilities

4,463

4,315

3,743

Total Current Liabilities

16,399

12,839

11,269

 

Long-Term Debt, excluding current installments

16,318

16,702

16,869

Other Long-Term Liabilities

2,444

2,481

2,486

Total Liabilities

35,161

32,022

30,624

 

Total Stockholders' Equity

8,637

11,457

9,322

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$

43,798

$

43,479

$

39,946

 

THE HOME DEPOT, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED AUGUST 2, 2015 AND AUGUST 3, 2014

(Unaudited)

(Amounts in Millions)

Six Months Ended

August 2,  2015

August 3,  2014

CASH FLOWS FROM OPERATING ACTIVITIES:

Net Earnings

$

3,813

$

3,429

Reconciliation of Net Earnings to Net Cash Provided by Operating Activities:

Depreciation and Amortization

915

896

Stock-Based Compensation Expense

122

119

Gain on Sales of Investments

(144)

(112)

Changes in Working Capital and Other

1,228

953

Net Cash Provided by Operating Activities

5,934

5,285

CASH FLOWS FROM INVESTING ACTIVITIES:

Capital Expenditures

(705)

(631)

Proceeds from Sales of Investments

144

112

Proceeds from Sales of Property and Equipment

8

16

Net Cash Used in Investing Activities

(553)

(503)

CASH FLOWS FROM FINANCING ACTIVITIES:

Repayments of Short-Term Borrowings, net

(290)

Proceeds from Long-Term Borrowings, net of discount

2,492

1,981

Repayments of Long-Term Debt

(19)

(21)

Repurchases of Common Stock

(3,085)

(3,500)

Proceeds from Sales of Common Stock

134

148

Cash Dividends Paid to Stockholders

(1,533)

(1,285)

Other Financing Activities

161

181

Net Cash Used in Financing Activities

(2,140)

(2,496)

 

Change in Cash and Cash Equivalents

 

3,241

2,286

Effect of Exchange Rate Changes on Cash and Cash Equivalents

(28)

1

Cash and Cash Equivalents at Beginning of Period

1,723

1,929

 

Cash and Cash Equivalents at End of Period

$

4,936

$

4,216

 

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SOURCE Home Depot