The Home Depot, Inc. (HD): New Analyst Report from Zacks Equity Research - Zacks Equity Research Report

Summary:
Home Depot posted sturdy results for second quarter fiscal 2014 driven by recovery in its spring season sales as well as strength in its core store activities and in all geographies. Following the strong performance, management raised its earnings forecast for fiscal 2014 but reiterated its sales guidance. We expect Home Depot’s focus on developing merchandising tools and increasing investment in e-Commerce to boost its top line and increase market share. Moreover, we believe that the company is on track to achieve its long-term dividend payout, share repurchase and return on investment targets. However, we remain slightly cautious about the stock due to a soft economic recovery impacting discretionary spending, and intense competition from specialty stores and mass retailers. Thus, we retain our long-term Neutral recommendation on the stock.

Overview:

Based on net sales, Home Depot Inc. is the world’s largest home improvement specialty retailer with over 2,200 retail stores across the globe, offering a diverse range of branded and proprietary home improvement items, building materials, lawn and garden products, and related services. With the help of its stores, the company operates throughout the United States (including the territories of Puerto Rico and the Virgin Islands), Canada and Mexico and employs more than 300,000 associates. The company’s average store area is almost 105,000 square feet with approximately 23,000 square feet of additional outside garden area. The company typically serves three primary customer groups: Do-It-Yourself (D-I-Y), Do-It-For-Me (D-I-F-M), and Professional Customers.

D-I-Y Customers: These customers are usually home owners, who prefer purchasing products and completing installations on their own.

D-I-F-M Customers: These customers are usually home owners, who purchase products on their own and employ third-parties to complete the projects and installations.

Professional Customers: This customer segment mostly comprises professional remodelers, general contractors, repairmen, small business owners, and tradesmen.

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