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

May 19, 2015, 06:00 ET from The Home Depot

ATLANTA, May 19, 2015 /PRNewswire/ -- The Home Depot®, the world's largest home improvement retailer, today reported sales of $20.9 billion for the first quarter of fiscal 2015, a 6.1 percent increase from the first quarter of fiscal 2014. Comparable store sales for the first quarter of fiscal 2015 were positive 6.1 percent, and comp sales for U.S. stores were positive 7.1 percent.

Net earnings for the first quarter of fiscal 2015 were $1.6 billion, or $1.21 per diluted share, compared with net earnings of $1.4 billion, or $1.00 per diluted share, in the same period of fiscal 2014. For the first quarter of fiscal 2015, diluted earnings per share increased 21.0 percent from the same period in the prior year.

First quarter of fiscal 2015 results reflect a benefit to earnings of $71 million, or $0.05 per diluted share, primarily attributable to the settlement of a tax audit.

"We had a stronger than expected start to the year as we experienced a more normal spring across much of the country and 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, the Company raised its fiscal 2015 sales guidance and now expects sales will be up approximately 4.2 percent to 4.8 percent and comp sales will be up approximately 4.0 percent to 4.6 percent. The Company also raised its diluted earnings-per-share guidance for the year and now expects diluted earnings per share to grow approximately 11 to 12 percent from fiscal 2014 to $5.24 to $5.27.

This earnings-per-share guidance includes the benefit of a favorable settlement of a tax audit, the Company's year-to-date share repurchases and the Company's intent to repurchase $3.4 billion in additional shares over the remainder of the fiscal year.

The Company's fiscal 2015 diluted earnings-per-share guidance does not include an accrual for contingent losses related to the data breach discovered in September 2014. Other than $7 million of net breach-related costs contained in the Company's first quarter fiscal 2015 earnings, at this time the Company is not able to estimate the costs, or a range of costs, related to the breach. Costs related to the breach may include liabilities to payment card networks for reimbursements of credit card fraud and card reissuance costs; liabilities related to the Company's private label credit card fraud and card reissuance; liabilities from current and future civil litigation, governmental investigations and enforcement proceedings; future expenses for legal, investigative and consulting fees; and additional expenses and capital investments for remediation activities. Those costs may have a material adverse effect on the Company's financial results in fiscal 2015 and/or future periods.

Change in Accounting Policy

During the first quarter of fiscal 2015, the Company voluntarily changed its accounting policy for certain shipping and handling costs from the Company's stores, locations or distribution centers to customers and for online fulfillment center costs. Under the new accounting policy, these costs are included in cost of sales, whereas they were previously included in operating expenses. Including these expenses in cost of sales will better align these costs with the related revenue in the gross profit calculation.

The Consolidated Statements of Earnings for the first quarter of fiscal 2014 have been reclassified to reflect this change in accounting policy. The impact of this reclassification was an increase of $128 million to cost of sales and a corresponding decrease of $128 million to operating expenses for the first quarter of fiscal 2014. There is no impact from this reclassification on net sales, operating income, net earnings or earnings per share.

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 first 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; and financial outlook. 

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 MONTHS ENDED MAY 3, 2015 AND MAY 4, 2014

(Unaudited)

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

 

Three Months Ended

May 3,

 2015

May 4,

 2014

% Increase

(Decrease)

NET SALES

$

20,891

$

19,687

6.1

%

Cost of Sales

13,712

12,930

6.0

GROSS PROFIT

7,179

6,757

6.2

Operating Expenses:

Selling, General and Administrative

4,163

4,067

2.4

Depreciation and Amortization

419

413

1.5

Total Operating Expenses

4,582

4,480

2.3

OPERATING INCOME

2,597

2,277

14.1

Interest and Other (Income) Expense:

Interest and Investment Income

(4)

(100)

N/M

Interest Expense

197

191

3.1

Interest and Other, net

193

91

N/M

EARNINGS BEFORE PROVISION FOR

INCOME TAXES

2,404

2,186

10.0

Provision for Income Taxes

825

807

2.2

NET EARNINGS

$

1,579

$

1,379

14.5

%

Weighted Average Common Shares

1,298

1,367

(5.0)

%

BASIC EARNINGS PER SHARE

$

1.22

$

1.01

20.8

Diluted Weighted Average Common Shares

1,305

1,376

(5.2)

%

DILUTED EARNINGS PER SHARE

$

1.21

$

1.00

21.0

Three Months Ended

SELECTED HIGHLIGHTS

May 3,

 2015

May 4,

 2014

% Increase

(Decrease)

Number of Customer Transactions

360.2

344.5

4.6

%

Average Ticket (actual)

$

58.60

$

57.59

1.8

Sales per Square Foot (actual)

$

353.70

$

334.01

5.9

N/M – Not Meaningful

 

 

 

 

THE HOME DEPOT, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

AS OF MAY 3, 2015, MAY 4, 2014 AND FEBRUARY 1, 2015

(Unaudited)

(Amounts in Millions)

 

May 3,

 2015

May 4,

 2014

February 1,

 2015

ASSETS

Cash and Cash Equivalents

$

2,827

$

2,511

$

1,723

Receivables, net

1,839

1,831

1,484

Merchandise Inventories

12,306

12,343

11,079

Other Current Assets

1,023

830

1,016

Total Current Assets

17,995

17,515

15,302

Property and Equipment, net

22,562

23,238

22,720

Goodwill

1,359

1,293

1,353

Other Assets

594

583

571

TOTAL ASSETS

$

42,510

$

42,629

$

39,946

LIABILITIES AND STOCKHOLDERS' EQUITY

Short-Term Debt

$

$

$

290

Accounts Payable

8,070

7,739

5,807

Accrued Salaries and Related Expenses

1,283

1,233

1,391

Current Installments of Long-Term Debt

3,054

34

38

Other Current Liabilities

4,598

4,259

3,743

Total Current Liabilities

17,005

13,265

11,269

Long-Term Debt, excluding current installments

13,818

14,707

16,869

Other Long-Term Liabilities

2,483

2,511

2,486

Total Liabilities

33,306

30,483

30,624

Total Stockholders' Equity

9,204

12,146

9,322

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$

42,510

$

42,629

$

39,946

 

 

 

 

THE HOME DEPOT, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED MAY 3, 2015 AND MAY 4, 2014

(Unaudited)

(Amounts in Millions)

 

Three Months Ended

May 3,  2015

May 4,  2014

CASH FLOWS FROM OPERATING ACTIVITIES:

Net Earnings

$

1,579

$

1,379

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

Depreciation and Amortization

454

447

Stock-Based Compensation Expense

69

67

Changes in Working Capital and Other

1,302

675

Net Cash Provided by Operating Activities

3,404

2,568

CASH FLOWS FROM INVESTING ACTIVITIES:

Capital Expenditures

(322)

(287)

Proceeds from Sales of Property and Equipment

5

7

Net Cash Used in Investing Activities

(317)

(280)

CASH FLOWS FROM FINANCING ACTIVITIES:

Repayments of Short-Term Borrowings, net

(290)

Repayments of Long-Term Debt

(10)

(12)

Repurchases of Common Stock

(1,125)

(1,250)

Proceeds from Sales of Common Stock

47

69

Cash Dividends Paid to Stockholders

(769)

(646)

Other Financing Activities

146

133

Net Cash Used in Financing Activities

(2,001)

(1,706)

 

Change in Cash and Cash Equivalents

 

1,086

582

Effect of Exchange Rate Changes on Cash and Cash Equivalents

18

Cash and Cash Equivalents at Beginning of Period

1,723

1,929

 

Cash and Cash Equivalents at End of Period

$

2,827

$

2,511

 

 

 

 

THE HOME DEPOT, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS ITEMS AS RECLASSIFIED FOR CURRENT PRESENTATION

FOR THE FISCAL YEARS ENDED FEBRUARY 1, 2015 (FISCAL YEAR 2014)

AND FEBRUARY 2, 2014 (FISCAL YEAR 2013)

(Unaudited)

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

 

Fiscal Year 2014

As Previously Reported

% of

Net Sales

Reclassification

As Currently Reported

% of

Net Sales

Net Sales

$

83,176

100.0

%

$

$

83,176

100.0

%

Cost of Sales

54,222

65.2

565

54,787

65.9

Total Operating Expenses

18,485

22.2

(565)

17,920

21.5

Operating Income

10,469

12.6

10,469

12.6

Net Earnings

6,345

7.6

6,345

7.6

Diluted Earnings per Share

$

4.71

$

$

4.71

Fiscal Year 2013

As Previously Reported

% of

Net Sales

Reclassification

As Currently Reported

% of

Net Sales

Net Sales

$

78,812

100.0

%

$

$

78,812

100.0

%

Cost of Sales

51,422

65.2

475

51,897

65.8

Total Operating Expenses

18,224

23.1

(475)

17,749

22.5

Operating Income

9,166

11.6

9,166

11.6

Net Earnings

5,385

6.8

5,385

6.8

Diluted Earnings per Share

$

3.76

$

$

3.76

 

 

 

 

THE HOME DEPOT, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS ITEMS AS RECLASSIFIED FOR CURRENT PRESENTATION

FOR THE QUARTERLY PERIODS DURING THE FISCAL YEAR ENDED FEBRUARY 1, 2015

(FISCAL YEAR 2014)

(Unaudited)

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

 

First Quarter of Fiscal Year 2014

As Previously Reported

% of

Net Sales

Reclassification

As Currently Reported

% of

Net Sales

Net Sales

$

 

19,687

100.0

%

$

$

19,687

100.0

%

Cost of Sales

12,802

65.0

128

12,930

65.7

Total Operating Expenses

4,608

23.4

(128)

4,480

22.8

Operating Income

2,277

11.6

2,277

11.6

Net Earnings

1,379

7.0

1,379

7.0

Diluted Earnings per Share

$

 

1.00

$

$

1.00

Second Quarter of Fiscal Year 2014

As Previously Reported

% of

Net Sales

Reclassification

As Currently Reported

% of

Net Sales

Net Sales

$

 

23,811

100.0

%

$

$

23,811

100.0

%

Cost of Sales

15,650

65.7

154

15,804

66.4

Total Operating Expenses

4,713

19.8

(154)

4,559

19.1

Operating Income

3,448

14.5

3,448

14.5

Net Earnings

2,050

8.6

2,050

8.6

Diluted Earnings per Share

$

 

1.52

$

$

1.52

Third Quarter of Fiscal Year 2014

As Previously Reported

% of

Net Sales

Reclassification

As Currently Reported

% of

Net Sales

Net Sales

$

 

20,516

100.0

%

$

$

20,516

100.0

%

Cost of Sales

13,331

65.0

142

13,473

65.7

Total Operating Expenses

4,632

22.6

(142)

4,490

21.9

Operating Income

2,553

12.4

2,553

12.4

Net Earnings

1,537

7.5

1,537

7.5

Diluted Earnings per Share

$

 

1.15

$

$

1.15

Fourth Quarter of Fiscal Year 2014

As Previously Reported

% of

Net Sales

Reclassification

As Currently Reported

% of

Net Sales

Net Sales

$

 

19,162

100.0

%

$

$

19,162

100.0

%

Cost of Sales

12,439

64.9

141

12,580

65.7

Total Operating Expenses

4,532

23.7

(141)

4,391

22.9

Operating Income

2,191

11.4

2,191

11.4

Net Earnings

1,379

7.2

1,379

7.2

Diluted Earnings per Share

$

 

1.05

$

$

1.05

 

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SOURCE The Home Depot



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