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The Home Depot (HD Free Home Depot Stock Report) delivered another quarter of stellar results, as the world's largest home-improvement retailer continued to buck trends in the broader retail space. Many of these operators are struggling to increase same-store sales, but The Home Depot is benefiting from both its own internal initiatives to drive growth and a favorable macroeconomic backdrop in which consumers are willing, even eager, to invest in their homes. The end result was record high quarterly sales and earnings for The Home Depot.

Looking at the fiscal second quarter (ended July 30th) in detail, the top line rose 6.2% on a year-over-year basis, to $28.108 billion, nicely ahead of our $27.863 billion forecast. Importantly, comparable-store sales were up 6.3%, while the metric rose 6.6% for stores in the United States. The number of customer transactions was up 2.8%; the average ticket increased 3.6%; and sales per square foot rose 5.9%. Demand was broad based across categories and geographies, and growth in sales to professionals outpaced those to do-it-yourself (DIY) customers. Big ticket sales (those over $900) were up 12.4% thanks to strong demand for appliances and flooring.

In terms of profitability, the gross margin slipped slightly from a year earlier (down six basis points) due to higher shrink and a change in the product mix. However, total operating expenses as a function of the top line were down 44 basis points. A lower tax rate and ongoing stock repurchases also helped earnings per share, which jumped 14%, to $2.25. Our call was $2.20.

Looking ahead, we think that the good times will continue for The Home Depot. Recent economic data have been somewhat mixed, and we believe that this uneven pattern suggests that current-half GDP growth will be in line with the 2.6% gain notched in the second quarter. That said, housing (home price appreciation, household formation, housing turnover, etc.) has been a bright spot in the U.S. economy, a trend we expect to continue. The labor market has also been making strides, as the nation added 209,000 jobs in July; the jobless rate eased from 4.4% to 4.3%; and the labor force participation rate edged up to 62.9%. This favorable backdrop, combined with management's efforts to court professional customers and bolster the store's digital presence and interconnected retail capabilities, should also support sales and earnings. In fact, leadership increased its full-year 2017 sales and earnings guidance and now looks for sales and comps to rise 5.3% and 5.5%, respectively. Share net is forecast to increase 13%, to $7.29 a share. We've raised our call to be in line with management's estimate, though we think that there is more upside than downside to this figure.

Despite the impressive July-period results and increased guidance, HD stock was little changed on the news. The stock was trading near its all-time high going into the report, so investors' expectations were high. Too, given the July quarter's outperformance relative to estimates, Wall Street was likely hoping for a bigger increase in share-net guidance. Regardless, we still view Home Depot stock in a favorable light. Conservative accounts looking to gain exposure to the housing market, along with some income, will likely want to take a closer look here.

About the CompanyThe Home Depot, Inc. operates a chain of 2,275 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.