Home Depot sees sales boost from hurricanes Harvey, Irma and Maria
The hurricanes that ravaged Texas, Florida and Puerto Rico and the rebuilding effort that has begun are buoying the bottom line of Home Depot.
The home-improvement chain said Tuesday that it saw a sales surge in the last quarter and expects the uptick to continue through the rest of the year as victims of hurricanes Harvey, Irma and Maria reconstruct their homes.
The need for building supplies, from plywood and generators to wiring and shutters, led to about $282 million in hurricane-related sales at Home Depot stores open at least a year, the company reported Tuesday.
Storm-related purchases contributed to overall sales of $25 billion during the third quarter -- an 8.1% bump as compared to the same period last year, and a 7.7% increase at U.S. stores that had been open at least 12 months, a key industry measure that takes change in number of stores out of the equation.
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The continued recovery effort in the wake of the hurricanes, coupled with a strong economy that is spurring Americans to remodel or buy new homes, led the home improvement chain to increase its financial forecast for the year.
The company now expects sales to be up roughly 6.3%, and diluted earnings to leap roughly 14% to $7.36 a share.
"We expect to see . . ..sales continue to increase,'' Craig Menear, The Home Depot's CEO said in an earnings call with investors Tuesday.
The third quarter brought in $2.2 billion in net earnings, or $1.84 per diluted share, up from $2 billion, or $1.60 per diluted share during the comparable period last year. Earnings also beat the expectations of S&P Global analysts by two cents.
But the same storms that boosted Home Depot's sales also forced the closure of 236 stores at some point in the storm-affected areas. Hiring more security and taking other steps during the storms tacked on roughly $104 million in costs that dented the company's operating profit by roughly $51 million. Also, Home Depot said that sales of supplies related to the hurricane were less profitable than most of its regular items.
The company's stock was down .73% to $164.15 a share in morning trading.
"A lower margin rate on rebuilding products as well as higher hurricane-related expenses from disruption to stores and supply chains has damaged the bottom line,'' Neil Saunders, managing director of retail consultancy Global Data said in a note, adding that while the retailer's operating profit increased 10.8%, it would have grown 12.4% if not for the storm-related costs.
But the company has many forces in its favor, including an e-commerce business that is accelerating. Online sales rose roughly 19% in the last three-month period, and now represent 6.2% of the company's total sales, Menear said.
"The short-term uplift from disaster-related spending,'' Saunders wrote in his note, " robust underlying demand, a good seasonal holiday offer. . . and strong traction online, all bode well for Home Depot.''