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For Home Depot's Online Business, It Was Black Friday Nearly Every Day in April

By Demitri Kalogeropoulos – May 27, 2020 at 8:04AM

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Soaring e-commerce demand offset the chain's deliberate efforts to reduce traffic at its stores.

Home Depot (HD -1.37%) recently announced surprisingly strong first-quarter results that cemented its status as an essential retailer through the pandemic. The home-improvement giant doubled its growth rate from the prior quarter despite having canceled its spring selling promotion to limit customer traffic for social distancing reasons.

That scrapped promotion removed the "Spring Black Friday" event that is consistently one of the retailer's biggest annual sales draws. Yet its online business picked up the slack in the quarter and delivered even bigger traffic figures through the entire month of April. 

A woman holds a smartphone in one hand and a credit card in the other

Image source: Getty Images.

Record growth

Home Depot didn't release details about its e-commerce performance in the earnings announcement, but management talked up the segment in a subsequent conference call with Wall Street analysts.

The digital business accelerated in each month of the quarter, executives revealed, expanding from a 30% increase in early March to triple-digit growth by late April. "Daily traffic to [the website] reached new records toward the end of the quarter," Executive VP Ted Decker said, "consistently above Black Friday levels ... during the last three weeks."

Home Depot had to get a lot of things right to deliver strong service quality at those volumes. Its multichannel selling posture paid off just as it did for peers such as Walmart and Target, with most shoppers opting for in-store pick up.

Dealing with challenges

The chain effectively navigated what management called "the most fluid operating environment we've ever experienced." Home Depot's tech team kept the website running while quickly scaling up availability for in-demand categories like cleaning and security. As a result, not only did traffic surge, but Home Depot converted a higher rate of browsers into buyers in the first quarter. Surging digital fulfillment played the biggest role in the chain's acceleration to 7.5% sales growth from below 4% last quarter.

That result was still below the double-digit increase that rival Lowe's reported. But Home Depot's metric was held back by management's aggressive early response to shelter-in-place orders. The reduced store hours and canceled promotions limited customer traffic and pushed sales lower in most departments in late March. Yet the following weeks were much better, including spiking sales in the last few weeks of April.

Looking ahead to late 2020

Management said this double-digit comp spike has continued into the first two weeks of May, yet they still saw no reason to try to extrapolate that good news into a firm 2020 outlook. Consumer demand is changing significantly from week to week, they said, and there's lots of uncertainty around the path of the virus. It's not helpful to try to guess how economic growth trends might look over the short term, either.

The early stages of the COVID-19 pandemic tested Home Depot's online business, one of the biggest e-commerce hubs in the country. Investors should be happy with how well the segment held up through those challenges. Its digital segment will be a major asset whether or not the housing industry goes through a significant slump following the initial coronavirus threat.

Demitrios Kalogeropoulos owns shares of Home Depot. The Motley Fool owns shares of and recommends Home Depot. The Motley Fool recommends Lowe's 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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