Home Depot's Online Sales Sizzle

NEW YORK ( TheStreet) -- Home Depot's ( HD) second-quarter earnings report was solid as the home-improvement retailer benefited from resurgent demand and price appreciation in the existing home market. But another factor also propelled the company's results -- buying from mobile devices.

The world's largest home improvement retailer, which my firm Belus Capital Advisors rates a buy, reported second-quarter earnings of $1.52 a share, higher than the Wall Street consensus forecast of $1.45. It represented the fourth time in the last five quarters in which Home Depot beat consensus earnings estimates. Net sales tallied $23.8 billion vs. the $23.61 billion expected by analysts. U.S. same-store sales rose 6.4%, supported by increases in all merchandise categories and geographic regions. 

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Home Depot also marked up its fiscal-year earnings guidance for the second consecutive time. Home Depot now anticipates earnings growth in 2014 to be 20.2%, above its prior outlook for appreciation of 17.6%. Home Depot had originally guided Wall Street to earnings growth of 16.5% when it announced its fourth-quarter figures in February.

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While Home Depot's financials were driven primarily by trends in the existing U.S. home market, where sales rose for the third straight month in June, the consistent earnings outperformance relative to guidance highlights the company's improving online presence and a willingness on the part of consumers to buy remodeling and repair goods via mobile devices. At the Goldman Sachs Dotcommerce conference in June, Home Depot's senior vice president-online, Kevin Hofmann, said Home Depot "grew the online business by over $900 million last year, about 53% growth last year in the first quarter."

The company offers roughly 700,000 items online compared to 35,000 to 40,000 in its physical stores.

In the second quarter, Home Depot's online sales increased 38%, and were "well ahead of expectations," CEO Frank Blake said on the earnings all. The company completed the rollout of its "buy online, pickup in store" capability in the quarter.  

In the first quarter, Home Depot's online sales increased a heady 40% year over year, following 50% growth rates in both the third and fourth quarters of 2013.

The apparent financial benefit of people buying home improvement goods through an online channel may be poised to be even greater for Home Depot going into the second half of the year.

"Later this year we'll offer a much-much more improved capability to have buy online and deliver from the store, won't be same day, but it'll be pretty accurate and within a couple hour window next day or scheduled delivery to your home,' Hofmann said at the conference in June.

At the time of this publication, the author's firm rated Home Depot shares a buy. This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

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