The Home Depot Announces Fourth Quarter and Fiscal 2018 Results; Increases Quarterly Dividend by 32.0 Percent; Announces $15.0 Billion Share Repurchase Authorization; Provides Fiscal 2019 Guidance

ATLANTA, Feb. 26, 2019 /CNW/ -- The Home Depot^®, the world's largest home improvement retailer, today reported sales of $26.5 billion for the fourth quarter of fiscal 2018, a 10.9 percent increase from the fourth quarter of fiscal 2017. Comparable sales for the fourth quarter of fiscal 2018 were positive 3.2 percent, and comp sales in the U.S. were positive 3.7 percent.

The fourth quarter of fiscal 2018 consisted of 14 weeks compared with 13 weeks for the prior year. The 14^th week added approximately $1.7 billion in sales for the quarter and the year. The additional week is not included in comparable sales results for the quarter or the year.

Net earnings for the fourth quarter of fiscal 2018 were $2.3 billion, or $2.09 per diluted share, compared with net earnings of $1.8 billion, or $1.52 per diluted share, in the same period of fiscal 2017. The 14^th week added approximately $0.21 per diluted share for the quarter and year.

Net earnings for the fourth quarter and the year were negatively impacted by a nonrecurring, pre-tax charge of approximately $247 million, or $184 million after tax equaling $0.16 per diluted share, due to an impairment loss related to certain trade names at Interline Brands.

Fiscal 2018

Sales for fiscal 2018 were $108.2 billion, an increase of 7.2 percent from fiscal 2017. Total company comparable sales for fiscal 2018 increased 5.2 percent, and comp sales in the U.S. were positive 5.4 percent for the year.

Earnings per diluted share in fiscal 2018 were $9.73, compared to $7.29 per diluted share in fiscal 2017, an increase of 33.5 percent.

"We achieved record sales and net earnings in fiscal 2018, while making great progress on the strategic investments we laid out in December of 2017. We focused on enhancing the interconnected retail experience for our customers, providing localized and innovative product, and delivering best in class productivity," said Craig Menear, chairman, CEO and president. "Our view on the health of the economy and the consumer, as well as the momentum of our strategic investments, supports our belief that we can deliver comparable sales growth of 5.0 percent in fiscal 2019. I would like to thank our associates for their solid execution and exceptional work in service to our customers."

Dividend Declaration and Share Repurchase Authorization

The Company today announced that its board of directors declared a 32.0 percent increase in its quarterly dividend to $1.36 per share.

"As a testament to our commitment to create value for our shareholders and a demonstration of confidence in the business going forward, the board has increased the dividend for the tenth consecutive year," said Menear. The dividend is payable on March 28, 2019, to shareholders of record on the close of business on March 14, 2019. This is the 128^th consecutive quarter the Company has paid a cash dividend.

The board of directors also authorized a new $15 billion share repurchase program, replacing its previous authorization.

Fiscal 2019 Guidance

The Company provided the following guidance for fiscal 2019, a 52-week year compared to fiscal 2018, a 53-week year:

• Comparable sales growth of approximately 5.0 percent for the comparable 52-week period
• Sales growth of approximately 3.3 percent
• Five net new stores
• Gross margin of approximately 34.0 percent
• Operating margin of approximately 14.4 percent
• Net interest expense of approximately $1.2 billion
• Tax rate of approximately 25.5 percent
• Share repurchases of approximately $5.0 billion
• Diluted earnings-per-share growth of approximately 3.1 percent to $10.03
• Capital spending of approximately $2.7 billion
• Depreciation and amortization expense of approximately $2.3 billion
• Cash flow from the business of approximately $14.1 billion

Long-Term Financial Targets

Today the Company reaffirms its fiscal 2020 financial targets as follows:

• Total sales ranging from approximately $115 billion to approximately $120 billion  
• Operating margin ranging from approximately 14.4 percent to approximately 15.0 percent
• Return on invested capital of more than 40 percent

The Home Depot will conduct a conference call today at 9 a.m. ET to discuss information included in this news release and related matters. The conference call will be available in its entirety through a webcast and replay at ir.homedepot.com/events-and-presentations.

At the end of the fourth quarter, the Company operated a total of 2,287 retail stores in all 50 states, the District of Columbia, Puerto Rico, the U.S. Virgin Islands, Guam, 10 Canadian provinces and Mexico. The Company employs more than 400,000 associates. The Home Depot's stock is traded on the New York Stock Exchange (NYSE: HD) and is included in the Dow Jones industrial average and Standard & Poor's 500 index.

Certain statements contained herein constitute "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements may relate to, among other things, the demand for our products and services; net sales growth; comparable sales; effects of competition; implementation of store, interconnected retail, supply chain and technology initiatives; inventory and in-stock positions; state of the economy; state of the residential construction, housing and home improvement markets; state of the credit markets, including mortgages, home equity loans and consumer credit; issues related to the payment methods we accept; demand for credit offerings; management of relationships with our associates, suppliers and vendors; continuation of share repurchase programs; net earnings performance; earnings per share; dividend targets; capital allocation and expenditures; liquidity; return on invested capital; expense leverage; stock-based compensation expense; commodity price inflation and deflation; the ability to issue debt on terms and at rates acceptable to us; the impact and expected outcome of investigations, inquiries, claims and litigation; the effect of accounting charges; the effect of adopting certain accounting standards; the impact of the Tax Cuts and Jobs Act of 2017 and other regulatory changes; store openings and closures; guidance for fiscal 2019 and beyond; financial outlook; and the integration of acquired companies into our organization and the ability to recognize the anticipated synergies and benefits of those acquisitions. Forward-looking statements are based on currently available information and our current assumptions, expectations and projections about future events. You should not rely on our forward-looking statements. These statements are not guarantees of future performance and are subject to future events, risks and uncertainties – many of which are beyond our control, dependent on the actions of third parties, or are currently unknown to us – as well as potentially inaccurate assumptions that could cause actual results to differ materially from our expectations and projections. These risks and uncertainties include, but are not limited to, those described in Item 1A, "Risk Factors," and elsewhere in our Annual Report on Form 10-K for our fiscal year ended January 28, 2018 and in our subsequent Quarterly Reports on Form 10-Q.

Forward-looking statements speak only as of the date they are made, and we do not undertake to update these statements other than as required by law. You are advised, however, to review any further disclosures we make on related subjects in our periodic filings with the Securities and Exchange Commission.

THE HOME DEPOT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
	Three Months Ended ^(1)											Fiscal Year Ended ^(2)
in millions, except per share data	February 3, 2019				January 28, 2018				% Change			February 3, 2019				January 28, 2018				% Change
Net sales	$	26,491			$	23,883			10.9	%		$	108,203			$	100,904			7.2	%
Cost of sales	17,464				15,790				10.6			71,043				66,548				6.8
Gross profit	9,027				8,093				11.5			37,160				34,356				8.2
Operating expenses:
Selling, general and administrative	4,922				4,440				10.9			19,513				17,864				9.2
Depreciation and amortization	480				464				3.4			1,870				1,811				3.3
Impairment loss	247				—							247				—
Total operating expenses	5,649				4,904				15.2			21,630				19,675				9.9
Operating income	3,378				3,189				5.9			15,530				14,681				5.8
Interest and other (income) expense:
Interest and investment income	(20)				(23)				(13.0)			(93)				(74)				25.7
Interest expense	269				269				—			1,051				1,057				(0.6)
Other	16				—							16				—
Interest and other, net	265				246				7.7			974				983				(0.9)
Earnings before provision for income       taxes	3,113				2,943				5.8			14,556				13,698				6.3
Provision for income taxes	769				1,164				(33.9)			3,435				5,068				(32.2)
Net earnings	$	2,344			$	1,779			31.8	%		$	11,121			$	8,630			28.9	%
Basic weighted average common shares	1,116				1,160				(3.8)	%		1,137				1,178				(3.5)	%
Basic earnings per share	$	2.10			$	1.53			37.3			$	9.78			$	7.33			33.4
Diluted weighted average common shares	1,121				1,167				(3.9)	%		1,143				1,184				(3.5)	%
Diluted earnings per share	$	2.09			$	1.52			37.5			$	9.73			$	7.29			33.5
	Three Months Ended ^(1)											Fiscal Year Ended ^(2)
Selected Sales Data ^(3)	February 3, 2019				January 28, 2018				% Change			February 3, 2019				January 28, 2018				% Change
Customer transactions (in millions)	394.8				366.5				7.7	%		1,620.8				1,578.6				2.7	%
Average ticket	$	65.59			$	64.00			2.5			$	65.74			$	63.06			4.2
Sales per square foot	$	414.17			$	394.87			4.9			$	446.86			$	417.02			7.2
—————

(1)	Three months ended February 3, 2019 include 14 weeks. Three months ended January 28, 2018 include 13 weeks.
(2)	Fiscal year ended February 3, 2019 includes 53 weeks. Fiscal year ended January 28, 2018 includes 52 weeks.
(3)	Selected Sales Data does not include results for Interline Brands, Inc., which was acquired in fiscal 2015.

THE HOME DEPOT, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
in millions	February 3, 2019				January 28, 2018
Assets
Cash and cash equivalents	$	1,778			$	3,595
Receivables, net	1,936				1,952
Merchandise inventories	13,925				12,748
Other current assets	890				638
Total current assets	18,529				18,933
Net property and equipment	22,375				22,075
Goodwill	2,252				2,275
Other assets	847				1,246
Total assets	$	44,003			$	44,529
Liabilities and Stockholders' Equity
Short-term debt	$	1,339			$	1,559
Accounts payable	7,755				7,244
Accrued salaries and related expenses	1,506				1,640
Current installments of long-term debt	1,056				1,202
Other current liabilities	5,060				4,549
Total current liabilities	16,716				16,194
Long-term debt, excluding current installments	26,807				24,267
Other liabilities	2,358				2,614
Total liabilities	45,881				43,075
Total stockholders' (deficit) equity	(1,878)				1,454
Total liabilities and stockholders' (deficit) equity	$	44,003			$	44,529

THE HOME DEPOT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
	Fiscal Year Ended ^(1)
in millions	February 3, 2019				January 28, 2018
Cash Flows from Operating Activities:
Net earnings	$	11,121			$	8,630
Reconciliation of net earnings to net cash provided by operating activities:
Depreciation and amortization	2,152				2,062
Stock-based compensation expense	282				273
Impairment loss	247				—
Changes in working capital, net of acquisition effects	(687)				554
Changes in deferred income taxes	26				92
Other operating activities	(103)				420
Net cash provided by operating activities	13,038				12,031
Cash Flows from Investing Activities:
Capital expenditures, net of non-cash capital expenditures	(2,442)				(1,897)
Payments for business acquired, net	(21)				(374)
Proceeds from sales of property and equipment	33				47
Other investing activities	14				(4)
Net cash used in investing activities	(2,416)				(2,228)
Cash Flows from Financing Activities:
(Repayments of) proceeds from short-term debt, net	(220)				850
Proceeds from long-term debt, net of discounts	3,466				2,991
Repayments of long-term debt	(1,209)				(543)
Repurchases of common stock	(9,963)				(8,000)
Proceeds from sales of common stock	236				255
Cash dividends	(4,704)				(4,212)
Other financing activities	(26)				(211)
Net cash used in financing activities	(12,420)				(8,870)
Change in cash and cash equivalents	(1,798)				933
Effect of exchange rate changes on cash and cash equivalents	(19)				124
Cash and cash equivalents at beginning of period	3,595				2,538
Cash and cash equivalents at end of period	$	1,778			$	3,595

—————
(1)	Fiscal year ended February 3, 2019 includes 53 weeks. Fiscal year ended January 28, 2018 includes 52 weeks.

THE HOME DEPOT, INC.
ASU NO. 2014-09 IMPACT OF ADOPTION
(Unaudited)
The Company adopted ASU No. 2014-09, which pertains to revenue recognition, in the first quarter of fiscal 2018. The following table shows the impact of adopting ASU No. 2014-09 on the consolidated statements of earnings for the three and twelve month periods ended February 3, 2019. The implementation of this accounting standard resulted in an increase in net sales, gross profit, selling, general and administrative, and total operating expenses and a decrease in cost of sales. There was no impact on operating income, net earnings, or earnings per share.
	Three Months Ended February 03, 2019 ^(1)
in millions	As Reported				% of Net Sales			ASU No. 2014- 09 Impact				Excluding ASU No. 2014- 09 Impact				% of Net Sales
Net sales	$	26,491			100.0	%		$	86			$	26,405			100.0	%
Cost of sales	17,464				65.9			(82)				17,546				66.4
Gross profit	9,027				34.1			168				8,859				33.6
Selling, general and administrative	4,922				18.6			168				4,754				18.0
Total operating expenses	5,649				21.3			168				5,481				20.8
	Fiscal Year Ended February 03, 2019 ^(2)
in millions	As Reported				% of Net Sales			ASU No. 2014- 09 Impact				Excluding ASU No. 2014- 09 Impact				% of Net Sales
Net sales	$	108,203			100.0	%		$	216			$	107,987			100.0	%
Cost of sales	71,043				65.7			(382)				71,425				66.1
Gross profit	37,160				34.3			598				36,562				33.9
Selling, general and administrative	19,513				18.0			598				18,915				17.5
Total operating expenses	21,630				20.0			598				21,032				19.5
—————
(1)   Three months ended February 3, 2019 include 14 weeks.
(2)   Fiscal year ended February 3, 2019 includes 53 weeks.

THE HOME DEPOT, INC.
ASU NO. 2014-09 IMPACT OF ADOPTION
(Unaudited)
The Company adopted ASU No. 2014-09, which pertains to revenue recognition, in the first quarter of fiscal 2018. The following table shows the impact of adopting ASU No. 2014-09 on the consolidated balance sheet as of February 3, 2019.
	February 3, 2019
in millions	As Reported				ASU No. 2014- 09 Impact				Excluding ASU No. 2014- 09 Impact
Assets
Receivables, net	$	1,936			$	(40)			$	1,976
Other current assets	890				256				634
Total current assets	18,529				216				18,313
Total assets	44,003				216				43,787
Liabilities and Stockholders' Equity
Other current liabilities	$	5,060			$	117			$	4,943
Total current liabilities	16,716				117				16,599
Other liabilities	2,358				24				2,334
Total liabilities	45,881				141				45,740
Total stockholders' deficit	(1,878)				75				(1,953)
Total liabilities and stockholders' deficit	44,003				216				43,787

THE HOME DEPOT, INC.
PRO FORMA EFFECT OF ASU NO. 2014-09
(Unaudited)
The Company adopted ASU No. 2014-09, which pertains to revenue recognition, in the first quarter of fiscal 2018 using the modified retrospective method. In accordance therewith, financial information prior to fiscal 2018 will not be recast as the modified retrospective method does not permit recasting pre-adoption financial information. The following tables present selected as-reported financial results and the pro forma effect of ASU No. 2014-09 as if the recognition and presentation guidance in the accounting standard had been applied in fiscal 2017. There was no impact on operating income, net earnings, or earnings per share. The fiscal 2017 pro forma financial information included in the tables below is presented for informational purposes only.
	Three Months Ended April 30, 2017
in millions	As Reported				% of Net Sales			ASU No. 2014- 09 Effect				Including ASU No. 2014- 09 Effect				% of Net Sales
Net sales	$	23,887			100.0	%		$	48			$	23,935			100.0	%
Cost of sales	15,733				65.9			(90)				15,643				65.4
Gross profit	8,154				34.1			138				8,292				34.6
Selling, general and administrative	4,361				18.3			138				4,499				18.8
Total operating expenses	4,805				20.1			138				4,943				20.7
	Three Months Ended July 30, 2017
in millions	As Reported				% of Net Sales			ASU No. 2014- 09 Effect				Including ASU No. 2014- 09 Effect				% of Net Sales
Net sales	$	28,108			100.0	%		$	33			$	28,141			100.0	%
Cost of sales	18,647				66.3			(114)				18,533				65.9
Gross profit	9,461				33.7			147				9,608				34.1
Selling, general and administrative	4,549				16.2			147				4,696				16.7
Total operating expenses	4,998				17.8			147				5,145				18.3
	Three Months Ended October 29, 2017
in millions	As Reported				% of Net Sales			ASU No. 2014- 09 Effect				Including ASU No. 2014- 09 Effect				% of Net Sales
Net sales	$	25,026			100.0	%		$	44			$	25,070			100.0	%
Cost of sales	16,378				65.4			(85)				16,293				65.0
Gross profit	8,648				34.6			129				8,777				35.0
Selling, general and administrative	4,514				18.0			129				4,643				18.5
Total operating expenses	4,968				19.9			129				5,097				20.3
	Three Months Ended January 28, 2018
in millions	As Reported				% of Net Sales			ASU No. 2014- 09 Effect				Including ASU No. 2014- 09 Effect				% of Net Sales
Net sales	$	23,883			100.0	%		$	41			$	23,924			100.0	%
Cost of sales	15,790				66.1			(85)				15,705				65.6
Gross profit	8,093				33.9			126				8,219				34.4
Selling, general and administrative	4,440				18.6			126				4,566				19.1
Total operating expenses	4,904				20.5			126				5,030				21.0
	Fiscal Year Ended January 28, 2018
in millions	As Reported				% of Net Sales			ASU No. 2014- 09 Effect				Including ASU No. 2014- 09 Effect				% of Net Sales
Net sales	$	100,904			100.0	%		$	166			$	101,070			100.0	%
Cost of sales	66,548				66.0			(374)				66,174				65.5
Gross profit	34,356				34.0			540				34,896				34.5
Selling, general and administrative	17,864				17.7			540				18,404				18.2
Total operating expenses	19,675				19.5			540				20,215				20.0

SOURCE The Home Depot

Financial Community - Isabel Janci, Vice President of Investor Relations and Treasurer, 770-384-2666, [email protected]; News Media - Stephen Holmes, Senior Director of Corporate Communications, 770-384-5075, [email protected], http://www.homedepot.com

Related Links

http://www.homedepot.com