Home Depot’s Digital Transformation Investments Not Delivering Expected Improvement
Home Depot's Third Quarter 2019
- Sales of $27.2 billion, an increase of 3.5% compared to the third quarter of fiscal 2018.
- Comparable sales were up 3.6%, and comparable sales in the U.S. were up 3.8%.
- Net earnings for the third quarter of fiscal 2019 were $2.8 billion, or $2.53 per diluted share, compared with net earnings of $2.9 billion, or $2.51 per diluted share, in the same period of fiscal 2018.
- For the third quarter of fiscal 2019, diluted earnings per share increased 0.8 percent from the same period in the prior year.
The Home Depot cut its 2019 sales forecast again this year saying it needs more time for its digital transformation investments to pay off.
The home improvement retailer expects to invest nearly $11.1 billion over three fiscal years, and SVP of Finance Richard McPhail has noted in the past that it expected to deliver return on invested capital of above 40% by 2020. Now, as it approached the end of the second year of investment geared at achieving its One Home Depot vision, CEO Craig Menear said the company has realized its initial assumptions were off.
"Our third quarter results reflected broad-based growth across our business, yet sales were below our expectations driven by the timing of certain benefits associated with our One Home Depot strategic investments," said Menear. "We are largely on track with these investments and have seen positive results, but some of the benefits anticipated for fiscal 2019 will take longer to realize than our initial assumptions.”
Home Depot now said it expects full-year sales to rise 1.8%, down from a prior forecast of 2.3%.
Menear noted the retailer is seeing some wins from its initiatives and the company is investing for “long-term health.”
Home Depot’s B2B website experience is one example. Much of the retailer’s IT work and investment requires unwinding its legacy systems, which has proven to be more complex than originally anticipated, according to Menear.