Home Depot Sees Strong Delivery Growth In Q1

As Home Depot ramps up its delivery efforts and focuses on its Pro customers, the home improvement retailer beat bottom-line, first-quarter earnings estimates, but fell short on its top-line revenues. The company reported earnings per share of $2.08 and revenues of $25 billion compared to $2.06 and $25.2 billion, respectively.

Though Home Depot saw strength in its Pro, maintenance and interior projects segments, the retailer faced challenges in another aspect of its business: The company took a hit on it seasonal businesses because of harsh weather.

Home Depot Executive Vice President of Merchandising Ted Decker said on the company’s earnings conference call, “The extreme winter weather in the quarter had a negative impact on our garden categories, which historically represents around 15 percent to 20 percent of our first quarter sales.”

But Decker said the weather didn’t prevent its customers from completing interior projects: Categories such as bath fixtures and door locks had “comps above the company average.”

In addition, the company also expanded upon its delivery efforts by adding two- and four-hour delivery window options, with its same-day car and van delivery in certain markets.

“These efforts help drive double-digit delivered sales growth in the quarter,” Home Depot Chairman, CEO and President Craig Menear said in the call. Though Menear said the company doesn’t break out its delivery numbers, “we are seeing very nice growth.”

And, even though the delivery service is still in a nascent stage, Menear said customers are buying many different items through the service: Pros on a job site are making use of the service, too, he said. But he also noted that there was a lot of interest in “Buy Online, Delivery From Store.” However, “it’s not taking a real pattern at this point,” Menear said.

In terms of eCommerce, the company also rolled out a feature that allows consumers to buy installation services when they purchase products online in certain markets — they can buy these services with a faucet, for example. Overall, Menear said traffic growth for its online business was “healthy and our first quarter online sales grew approximately 20 percent from the first quarter of 2017.”

In February, Home Depot’s CFO Carol Tomé revealed that Home Depot saw a 21.5 percent growth in online sales last year, and that its online business now makes up almost 7 percent of its overall business. In addition, 46 percent of those sales were picked up inside of a store, which often resulted in the customer purchasing additional products. Tomé told TheStreet that she believes the company is safe against the power of Amazon as Home Depot is a home improvement player — not an item retailer.

“We are a project retailer,” Tomé said to TheStreet. “That is very different than selling consumable items … We also help you when you have a problem. If your bathroom is leaking water, that’s a very different need than if you are trying to match a sweater to your eye color. And then housing is a good asset class. So, do we have an Amazon-protected moat around our business? Of course not. But do we have barrier islands around our business? Yes, we do. Our job is to continue to invest in those barrier islands.”