Home Depot Impacted By Higher Interest Rate Environment, Raises Dividend

Image: Home Depot’s shares have done well since the beginning of 2023.

By Brian Nelson, CFA

Home Depot (HD) recently reported fourth quarter fiscal 2024 results that came in better than expected on both the top and bottom lines. Thanks in part to an extra week of sales in the most recently reported fourth quarter, sales for the fourth quarter increased 14.1% from the fourth quarter of fiscal 2023. Comparable sales for the fourth quarter of fiscal 2024 increased 0.8%, while comparable sales advanced 1.3% in the U.S. Net earnings for the fourth quarter came in at $3.0 billion, or $3.02 per share, compared with net earnings of $2.8 billion, or $2.82 per diluted share in the same period of fiscal 2023. Adjusted diluted earnings per share for the fourth quarter were $3.13 compared with adjusted diluted earnings per share of $2.86 in last year’s quarter.

Management had the following to say about the quarter:

Our fourth quarter results exceeded our expectations as we saw greater engagement in home improvement spend, despite ongoing pressure on large remodeling projects. Throughout the year, we remained steadfast in our investments across our strategic initiatives to position ourselves for continued success, despite uncertain macroeconomic conditions and a higher interest rate environment that impacted home improvement demand. I (Ted Decker, chair, president and CEO) would like to thank our associates for all that they do to serve our customers and communities.

ESG Matters

Management had the following to say about ESG efforts in its CEO Letter:      

…In alignment with our values, we organize our approach to ESG around three key pillars: Focus on Our People, Operate Sustainably and Strengthen Our Communities.

We continue to focus on helping associates grow their careers with The Home Depot, and more than 90% of our store leaders started as hourly associates. Being recognized again as Fortune Magazine’s #1 Most Admired Specialty Retailer is a recognition of our exceptional associates.

This year, we’ve made significant strides toward achieving our sustainability goals. The Science Based Targets initiative (SBTi) validated our updated greenhouse gas emissions reduction targets, determining that our Scope 1 and Scope 2 emissions reduction target is in line with a 1.5-degree Celsius trajectory. By the end of Fiscal 2030, we aim to reduce our combined absolute Scope 1 and Scope 2 emissions 42% from a Fiscal 2020 base year. The Home Depot commits to reduce absolute Scope 3 emissions from the use of sold products within the same timeframe.

We’re also excited to announce that starting in January 2025, we’ll partner with Georgia Power’s Customer Renewable Supply Procurement program. Through this partnership, we expect to secure the equivalent of about 70% of the annual electricity needed for our largest office building. This step represents progress on our renewable energy initiatives and our commitment to enhancing value by reducing our carbon footprint.

Giving back is one of The Home Depot’s core values and an important part of how we help strengthen our communities. In 2023, The Home Depot Foundation granted more than $86 million to serve veterans, support communities impacted by natural disasters and educate more people in the skilled trades. We also increased our commitment to serving veterans to $750 million after surpassing our goal of $500 million two years earlier than our 2025 goal. This additional funding will continue to help veterans access affordable housing and stay in their homes.

Concluding Thoughts

Home Depot expects total sales growth of roughly 2.8% for fiscal 2025, which has one less week than fiscal 2024. For fiscal 2025, comparable sales growth is targeted at approximately 1% for the comparable 52-week period. Management expects to open 13 new stores, while diluted earnings per share is expected to decline approximately 3% from $14.91 in fiscal 2024. Adjusted diluted earnings per share is targeted to decline roughly 2% from $15.24 in fiscal 2024. Home Depot announced it approved a 2.2% increase in its quarterly dividend to $2.30 per share, which equates to an annual dividend of $9.20 per share and marks the 152nd consecutive quarter the company has paid a dividend. Shares yield 2.3% at the time of this writing and remain an idea in the Dividend Growth Newsletter portfolio.

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