Home Depot (HD 0.56%) reported fourth-quarter and full-year fiscal 2021 earnings on Feb. 22. The results showed this home improvement company continuing the momentum gained since the pandemic onset. 

The industry has been a surprising winner from the pandemic as millions of consumers spend more time at home. And in this most recent quarter ended Jan. 30, elevated inflation helped increase sales totals at Home Depot. 

People looking at lumber.

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Home Depot accelerates revenue growth

Overall, Home Depot's net sales in Q4 increased by 10.7% year over year to reach $35.7 billion. That's the second straight quarter of accelerating revenue growth. The home improvement retailer experienced a surge in sales at the pandemic onset that slowed down in the quarter ended July as it was going up against tough comparisons. But these latest figures show growth is moving higher again, despite the tough comparisons.

Home Depot said 2021 sales increased by 14.4% from 2020. That's on top of the nearly 20% growth it delivered in 2020 compared to 2019. To put these figures into better context, the retailing giant's compound annual growth rate (CAGR) for the last decade is 6.9%, which demonstrates the magnitude of the tailwind the retailer is currently benefiting from.

Craig Menear, chairman and CEO, attributed the company's performance to multiple factors:

Fiscal 2021 was another record year for The Home Depot. We achieved a milestone of over $150 billion in sales. Our ability to grow the business by over $40 billion in the last two years is a testament to investments we have made in the business, our ability to execute with agility, and our associates' relentless focus on our customers.

Home Depot's growth drivers

In Q4, the average customer purchase was 12.3% higher than the same quarter the previous year. The coronavirus pandemic has contributed to several supply and demand imbalances worldwide, which in turn has led to rising prices. Indeed, inflation was the primary reason for higher customer-purchase totals. Commodity categories alone accounted for 185 basis points of the increase.

Demand from do-it-yourself customers and professionals remained strong. Understandably, the latter are spending more at Home Depot as folks feel more comfortable allowing professionals in their homes again.

Underlying the increase in spending, homeowners feel good about their home and its value. The number of homes available for sale remains near record lows, and that is driving up home prices. Coupled with that trend, people are doing more things at home since the onset of the pandemic, like working, learning, and exercising. That's giving rise to more wear and tear, more expansion and repurposing, and altogether increased importance of the home.

Slowdown expected 

It's unlikely these boom times will last forever, and management has forecast revenue will stay relatively flat in 2022. The market was disappointed in these projections, and Home Depot's stock price has fallen 11% since the announcement.

Home Depot's stock has risen 60.5% over the previous three years. That highlights both the solid returns it has delivered investors in that time and the reasonable rate of increase considering the boom it experienced during the pandemic.

After all this, Home Depot is trading at a forward price to earnings of 19.75, down from the nearly 27 it was selling for at its recent peak. The stock is not expensive, but the most cautious investors can wait to observe how consumer behavior evolves over the next few quarters before adding shares of Home Depot.