Home Depot 1Q14 Earnings Call Notes

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A digest of some of the top insights that I’ve gathered from this week’s earnings calls.  Full notes can be found here.

Cold weather impacted sales

“much of the U.S. and Canada had an even colder spring and this had a significant impact on our sales.”

Expect sales to pick up with weather

“In previous years, we’ve talked about the bathtub effect that weather can have on our spring seasonal business, where weak sales in the first quarter are counterbalanced by strength in the seasonal business in the second quarter. We expect the same effect to be true this year. As we look at the performance of our business in the first quarter, the strength in the areas of the country where more normal weather existed supports this outlook.”

Areas with better weather had twice the comps

“In the western and southern divisions we had solid positive comp performance, almost twice the U.S. average.”

May sales are robust, reaffirming guidance

“May sales are robust. So today we are reaffirming the sales guidance relayed out our fourth quarter earnings call and we expect fiscal 2014 sales to increase by approximately 4.8% with positive comps of approximately 4.6%.”

Like May even though it’s a difficult comp

“We are up against very tough comps, and our comp in May last year was double-digit, but we are very pleased with our results thus far and maybe Craig you want to give a little color.”

Kitchens were the sign of a robust housing market

” if you go back to 2005 and 2006, one of the categories that was really the hallmark of turns and sales were special order kitchens; people would buy home, they would invest in the kitchen, they do upgrades and then they turn the home. That’s actually the category for us that got hit the hardest over the housing crash.”

Don’t think we’re seeing that kind of work done, more touch up stuff

“Expect more the upgrades around — you got to make sure the infrastructure of your home is right, you may paint, you may do some gardening. So I think it’s going to be different as we go through this housing recovery than what we saw at the height of the housing market,”

Home price appreciation more important than turnover to get people to spend on their homes

“I’d agree of course, and also suggest that we should look at home price appreciation harder than we do turnover. We can turnover with only 4% of unit. Home price appreciation really impacts the way people spend money on their homes.”

Housing still very affordable

“for right now houses are very affordable, we are at really within the last 20 years this is probably one of the most affordable readings on housing you’re going to see. So supply and demand equation, what’s going to happen with household formation would be the real question to ask over the next several years. And we think it’s going to be a positive dynamic.”