Home Depot opened just one store last quarter – and the lack of expansion is actually good for profits.
With 2,285 retail locations, Atlanta-based Home Depot now has 90 percent of the U.S. population within 10 miles of a store, which means it does not need to spend money and resources to the costly process of finding, planning, building and staffing new outlets.
"During the downturn – the housing downturn – we decided our economic engine would be no longer driven by store growth," Carol Tome, the company's chief financial officer, told The Atlanta Journal-Constitution on Tuesday. "It would be driven by productivity and efficiency."
The money, attention and people that had been devoted to new stores could be better used, she said. "It makes us more efficient and as you are more efficient, you become more profitable."
Tome spoke to the AJC after the company released its earnings: Home Depot reported sales of $24.9 billion for the first quarter of the fiscal year, up 4.4 percent from the same quarter a year ago. Profits for this year's first quarter were $2.4 billion, 20 percent higher than the same quarter of 2017, some of which the company said was boosted by lower taxes.
Housing – the wave on which Home Depot surfs – continues to look strong into the foreseeable future, at least as long as the economy keeps growing, Tome said.
“There will be a recession at some point, of course there will be,” she said.
A Middle East crisis, for example, could mean the kind of a spike in oil prices that has in the past flipped the economy into the ditch.
“There can always be an event-driven recession,” Tome said. “What would we do in that case? We would react. If we didn’t have as much in sales in our stores, we wouldn’t have as many hours in our stories.”
The company’s earnings announcement was encouraging, said analyst Victor Ahluwalia of CFRA Research in Rockville, Md.
During the three months of the quarter, Home Depot’s sales had been weakest in April, a deceleration due to weather, he said. “We expect strong sales performance in the [next quarter] as Home Depot should recover some of the weather-related lost sales from May.”
He has the company stock rated a “buy.”
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