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Shares of The Home Depot (HD Free Home Depot Stock Report) rose moderately after the world's largest home-improvement retailer announced solid fiscal third-quarter (ended November 1st) results. Sales rose 6.4% from a year earlier, to $21.819 billion, slightly ahead of our $21.730 billion forecast. Top-line strength was broad based across geographies and product categories for both professional and do-it-yourself customers. Some of the categories that performed particularly well were appliances, tools, plumbing, and décor. Also of note, big-ticket sales (those above $900) were up 7.8%, driven by appliances, roofing, and counter tops. Ongoing investments to integrate online, mobile, and in-store selling helped drive a 25% jump in online sales, which accounted for 5.1% of the top line. Only seven new stores were added in the past year (the retailer ended the October period with 2,273 versus 2,266 a year before), so comparable-store sales were the primary growth driver. Indeed, this metric climbed 5.1% in the recently completed interim, with domestic locations posting a 7.3% same-store sales advance. The number of customer transactions increased 4.4% on a year-over-year basis, while the average ticket experienced a 0.8% uptick, and sales per square foot advanced 5.3%.

Moving further down the income statement, the gross margin expanded 34 basis points, helped by lower shrinkage and supply-chain efficiencies (including depressed fuel prices). Depreciation and amortization declined slightly as a percentage of the top line, as did selling, general and administrative costs. Interest expenses ticked up marginally, but stock repurchases helped per-share comparisons. All told, earnings were $1.35 a share in the fiscal third quarter (including $0.01 of expenses related to the 2014 data breach), $0.03 higher than our forecast and up 23% from a year earlier. Unfavorable foreign currency movements weighed on the bottom line to the tune of $0.03.

Management will likely keep it humming in the near term. The retailer honed its fiscal 2015 guidance and expects most metrics to come in near the high ends of its previously communicated ranges. To wit, sales are apt to climb 5.7% (the prior range was 5.2%-6.0%), while comps are expected to rise 4.9% (up from 4.1%-4.9%). Stock repurchases should amount to $7 billion in fiscal 2015, with about $2 billion of that coming in the January term. GAAP earnings guidance was $5.36 a share ($5.31-$5.36 previously). All told, our fiscal fourth-quarter call remains $1.11 a share, which brings our full-year estimate to $5.28, slightly ahead of guidance.

A number of things, both macro and company specific, underpin our bullish outlook. Favorable trends in housing turnover and household formation augur well, as do declines in the unemployment rate, rising home prices, modest GDP growth, historically low interest rates, and easing lending standards. Specific to The Home Depot, its efforts to court professional customers and integrate online and mobile selling ought to support sales. Rising comps should in turn support profitability. Adding it all up, we continue to like this blue-chip for a wide variety of investors, especially conservative growth-oriented accounts with some taste for well-defined total returns.

About the Company:The Home Depot, Inc. operates a chain of 2,273 retail building supply/home improvement "warehouse" stores across the United States, Canada, and Mexico. The company's average store size is around 104,000 square feet indoor, plus 24,000 additional square feet in its garden centers. The Home Depot's product lines include building materials, lumber, floor/wall coverings, plumbing, heating, electrical, paint and furniture, seasonal and specialty items, and hardware and tools.

At the time of this article’s writing, the author did not have positions in any of the companies mentioned.