Holiday spending, mild winter boost Home Depot
The home improvement company, however, maintains a cautious view on the housing market recovery.
Last quarter, the holiday season helped boost customer traffic, which led to stronger sales. The uncharacteristic warm weather drove increased demand for exterior project categories, helping sales by another 2% to 2.5%, more than offsetting the negative performance in winter weather categories like heating and insulation.
The core merchandising areas stayed strong, particularly maintenance-repair and interior categories. All categories reported positive comps, except mill work, which reported a negative performance as the energy-efficient tax credit expired in the U.S. in 2010. Overall, total transactions grew by 3.6%, while average tickets also increased 2.4% for the quarter.
The company noted a steady recovery in the hardest-hit housing markets, particularly in Florida and California. Nonetheless, the company maintained a cautious view on housing, despite signs of some improvements in private fixed residential investments (which are still at historical lows) and home builder sentiment.
For fiscal 2012, Home Depot expects sales growth of approximately 4%, including the 53rd week, which could add up to $1 billion to total sales. Comparable store sales could grow in low single-digits, with moderate gross margin expansion and operating margin improvements by up to 50 basis points.
We are in the process of revising our Trefis price estimate of $40 for Home Depot's stock.
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Serious issues like drought and the deterioration of the developed world spell opportunity for this industry leader.
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