Home Depot Expecting a Massive Year in 2022: Here’s Why

by TK Sanders
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Retail do-it-yourself giant Home Depot experienced nice sales growth of 11 percent in Q4 of 2021, topping Wall Street’s expectations. The company also said it sees sales growth ahead for 2022 thanks to a few key indicators, CNBC reports.

While the COVID pandemic destroyed many businesses, some absolutely flourished. Home Depot experienced growth during the lockdowns because of Americans spending more time at home and wanting to improve their new “work” spaces. The real estate market has never been hotter; and any time houses move quickly, so do improvement supplies. In fact, houses move right now with such fluidity that much of the country’s aging stock of homes is up for sale, too. Those houses need significant repair and maintenance before landing on the market.

Big box retailers like Home depot benefit from all of these market trends. They also enjoy relative insulation from e-commerce whales like Amazon due to the tangible nature of DIY projects. In other words, consumers like to see, hold, and feel the supplies in their hands before purchasing. Consumers also need home improvement supplies quickly if they are in the middle of a job; even two day Prime shipping feels too long to a weekend warrior.

As a result, Home Depot said it expects low single digits earnings per share growth and “slightly positive” sales growth in the coming fiscal year. Home Depot’s stock waned a tad in pre-market trading as the market adjusted to the Russian-Ukraine conflict, but it rebounded after the bell.

Home Depot outperformed the broader market more than 2 to 1

On the balance sheet, Home Depot beat EPS by three cents and revenue expectations by nearly a billion dollars. Net income for the fiscal fourth quarter grew to $3.35 billion, or $3.21 per share, from $2.86 billion, or $2.65 per share, year-over-year. Analysts expected earnings per share of $3.18. Sales per retail square foot also jumped to $571.79 from $528.01 year-over-year, suggesting that customers are taking on bigger projects.

Home Depot currently has every reason to cheer, and yet the retail giant provided very conservative guidance for analysts on their Q4 investor call. Now that pandemic money has dried up, mortgage rates are set to rise, and the world has largely opened up again, the do-it-yourself boom may calm back down to more regular levels. The company expects sales to rise 2.5 percent and earnings per share to increase 4.7 percent for the full year.

Furthermore, a new CEO will take responsibility for achieving those numbers. On March 1, Chief Operating Officer Ted Decker, a Home Depot veteran, will succeed Craig Menear as CEO. Menear will continue to serve as chair of the board.

As of Friday’s close, Home Depot shares are up 24 percent over the past 12 months and have outperformed the broader market more than 2 to 1.

Outsider.com