Atlanta, GA, May 18--Home Depot today reported record first quarter net earnings of $1.1 billion, $0.49 per diluted share, up 26%, for the first quarter of fiscal 2004, compared with $907 million, $0.39 per diluted share, for first quarter fiscal 2003. Excluding the impact of the adoption of EITF 02-16, diluted earnings per share would have been $0.52, or 33% higher than last year. Consensus estimates were for 43 cents per share.
Sales for the period increased $2.4 billion, 16% to $17.6 billion. Comparable store sales rose 7.7%, the highest first quarter comparable store sales growth in five years.
"Our performance in the first quarter is the best illustration yet of how we executed our strategy to drive growth," said Bob Nardelli, chairman, president and CEO. "We continue to build on the momentum created in 2003 by staying focused on our strategy to enhance our stores, extend our business, and expand our markets. I'm proud of the achievements of our associates. Through their efforts we generated record sales and earnings performance."
The company ended the quarter with $38 billion in total assets, including $4.3 billion in cash, and stockholders' equity in excess of $22 billion. Over the past two years, the company has completed the repurchase of 141.3 million shares, totaling approximately $4.5 billion under its $5 billion share repurchase program.
Based on its first quarter performance, the company announced that it has raised fiscal 2004 sales growth guidance to 10% to 12%. The company also raised its fiscal 2004 EPS growth guidance from 7% to 11% to 10% to 14%. Excluding the impact of EITF 02-16, the company expects EPS growth of 13% to 16% for fiscal 2004.
Brand leadership, distinctive and innovative merchandise at great values and knowledgeable associates continue to attract customers to The Home Depot. "In the first quarter, average ticket increased 7.4%, or $3.82, to $55.11, a new company record. We saw ticket increases in every category," said John Costello, executive vice president, merchandising and marketing. "Our appliance business delivered strong double digit comparable store sales performance in the quarter, with increases in both units and average ticket." According to an independent third-party research company, The Home Depot has grown appliance market share, year over year, faster than any other retailer.
"We also experienced the third quarter of sequential improvement in sales per square foot, which increased 3.9% to $376.80," added Carol Tome, executive vice president, chief financial officer. "This key productivity metric demonstrates solid progress in the transformation of our business."
The company's technology initiatives continue to make it easier and faster for customers to check out of a store. These initiatives include the conversion of all registers onto a new single point of sale platform, cordless scan guns and self checkout registers, which are now in place in 822 stores. Thirty-four percent of transactions in these stores go through self-checkout registers.
Customer satisfaction surveys of over 130,000 customers confirm significant progress in meeting customer aspirational needs, including an enhanced shopping experience.
During the quarter, the company opened 33 new stores across Canada, Mexico and the United States, bringing the total store count to 1,740.
"In the first quarter, our services revenue grew 42% to approximately $800 million," said Frank Blake, executive vice president, business development. "We continue to see great growth opportunities in this business given the changing demographics and consumer trends."
The company currently offers 23 national installation programs and is seeing sustained double-digit growth in categories such as countertops, HVAC, kitchens, windows, roofing and siding.
"In addition to the momentum in the stores, we are building momentum throughout our enterprise, providing us with new vehicles for growth," said Nardelli. The company is expanding its market opportunities through The Home Depot Supply businesses. The Home Depot Supply posted strong double-digit sales growth during the first quarter, and two weeks ago, the company announced its intent to acquire White Cap Construction Supply, Inc. This transaction is part of The Home Depot's strategy to expand its professional customer base with value-added products and services and capture additional share of a $410 billion market opportunity.
The company continues to build upon its leadership position and broaden its geographic reach in Mexico. Last week, the company announced its intent to acquire Home Mart, a home improvement retailer in Mexico. Following the close of this acquisition, The Home Depot will operate 39 stores in this approximately $15 billion market.
"As we prepare to celebrate our 25th anniversary this summer, we take great pride in the performance of our store associates. Through the power of our passionate associates, our sales have grown from $7 million in 1979 to more than $7 million each hour and our square footage has grown from 80,000 in our first store to 186 million today," Nardelli added.
