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Home Depot's Record-Breaking Year Was Powered by Big-Ticket Items

By Daniel B. Kline - Feb 28, 2020 at 10:55AM

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The home improvement chain continues to thrive.

Home Depot (HD -0.02%) set a record for annual sales in 2019, growing its revenues by 3.5% to $110.2 billion and delivering earnings per share (EPS) of $10.25.

The company also finished the year strong with fourth-quarter comparable-store sales increases of 5.3% globally and 5.2% in the United States. Total sales for the quarter came in at $25.8 billion, with earnings of $2.28 per share.

Those numbers were driven partly by an increase from one customer segment: big-ticket items.

A worker interacts with a customer at Home Depot.

Home Depot had a very strong year. Image source: Home Depot.

Home Depot goes big

"During the fourth quarter, big-ticket comp transactions -- or those over $1,000 -- which represent approximately 20% of U.S. sales were up double digits," said Merchandising Executive Vice President Ted Decker during the conference call. "The strength in our big-ticket sales was driven in part by the shift in our event timing, as well as strong performance in a number of other big-ticket categories."

In Q4, big-ticket categories including appliances, vinyl plank flooring, and the chain's installation services business all posted comps growth above the company average.

What does this mean for the home improvement giant?

Big-ticket sales are likely to slump if the U.S. economy enters a prolonged downturn. People tend to reduce their spending on big optional projects like home improvements when they grow more worried about their personal financial outlook.

Those, however, are short-term fears, and there may be an upswing in people taking on smaller do-it-yourself projects if the economy stumbles. In the long term, however, Home Depot has clearly established itself as the first-choice chain for homeowners and contractors alike. That's an incredibly strong position to be in, because home repairs can sometimes be delayed but, in most cases, they'll eventually need to be completed.

Daniel B. Kline has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Home Depot and recommends the following options: long January 2021 $120 calls on Home Depot and short January 2021 $210 calls on Home Depot. The Motley Fool has a disclosure policy.

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