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Why Home Depot Stock Gained 13% in May

By Demitri Kalogeropoulos – Jun 2, 2020 at 8:37AM

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Solid growth during the COVID-19 pandemic outweighed investors' concerns over spiking costs.

What happened

Home Depot (HD 0.48%) shareholders outperformed a booming market last month. The stock gained 11% in May compared to a 4.5% increase in the S&P 500, according to data provided by S&P Global Market Intelligence.

The rally added to a good year for shareholders so far, with the stock up 13% in 2020 through May while the broader market was down 5%.

A couple shopping for appliances.

Image source: Getty Images.

So what

Last month's rally was supported by the home-improvement giant's strong first-quarter earnings report, which on May 19 showed that sales growth doubled its pace from the prior quarter. That success came despite Home Depot canceling its spring promotions, which traditionally produce some of its strongest customer traffic of the year.

The retailer scrubbed that plan and reduced operating hours in order to maintain adherence to social distancing guidelines.

Now what

Home Depot's comparable-store sales growth was still below the double-digit boost that rival Lowe's (LOW 0.59%) reported, and so investors will be watching that metric for signs of a shift in the market share dynamic between the two consumer discretionary giants. Meanwhile, look for Home Depot to do its best to capitalize on the surging interest in its digital selling platform over the next few quarters.

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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Stocks Mentioned

The Home Depot, Inc. Stock Quote
The Home Depot, Inc.
$267.86 (0.48%) $1.28
Lowe's Companies, Inc. Stock Quote
Lowe's Companies, Inc.
$187.12 (0.59%) $1.10

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