The Home Depot logo. (PRNewsFoto/The Home Depot)
The Home Depot logo. (PRNewsFoto/The Home Depot)

For the fourth quarter (ending February 2, 2020), Home Depot reported net income rose 5.8% to $2.48 billion from $2.34 billion a year earlier.

Revenue for the quarter fell 2.7% to $25.78 billion from $26.49 billion a year earlier, but outpaced analyst estimates of $25.76 billion. Fiscal 2019 was a week shorter than fiscal 2018. Excluding the extra week of 2018, total sales would have increased nearly 4% for the quarter, the company said.

As Home Depot continues to home in on the pro customer, the home improvement retailer took further steps toward developing a pro “ecosystem” in the final quarter of 2019. The company’s B2B website, which initially launched in fourth quarter of 2018, has onboarded more than 1 million pro customers to date, Home Depot president and CEO Craig Menear said on the company’s fourth quarter earnings call.

The pro-focused, B2B online experience is part of the retailer’s plan to enhance digital offerings and offer an interconnected shopping experience for all customers. Since its launch, the platform has added several elements, including the ability for customers to link purchases to QuickBooks and upload purchase history.

The company completed the integration of its third-part CRM system for Home Depot’s pro sales and services team in the fourth quarter, which Menear said will help the company increase visibility and better serve pro customers.

In addition to the digital investments, Home Depot launched a flatbed distribution center in Dallas, Texas in fiscal fourth quarter. The center is one of several new types of delivery centers part of Home Depot’s $1.2 billion investment to build around 150 new facilities in the U.S. to reach 90% of the population with next-day delivery. Menear said the company has opened a dozen market delivery operations that have enabled Home Depot to transition 20% of its clients’ deliveries from an outsource model to one controlled by the retailer.

“[The controlled customer experience] is translated to meaningful improvements in our customer satisfaction scores for clients' deliveries,” Menear said on the earnings call. “Our supply chain build out will continue to ramp from here with the largest number of new facilities coming online in 2021 and 2022.”

Another major initiative for the company in 2019, the creation of the One Home Depot experience, has begun to realize benefits in its early stages, according to Menear. Two years into the multi-year investment, Home Depot has grown sales by over $9 billion. Investments in the first two years of the initiative include store enhancements, e-commerce solutions, delivery options, and a comprehensive pro customer ecosystem.

“We're actually building an ecosystem for our Pro customers that encompasses product and brands, delivery, credit services, digital capabilities with B2B tool rental, and a whole lot more,” Ted Decker, executive vice president of merchandising, said on the earnings call. “When we look at the Pro business, we think we are in 15% to 17% range [of market penetration], and we'd love to see that be much more in line with consumer concentration of share that we have, as we go forward, which is why we're making these investments.”

Home Depot’s definition of pro includes remodelers and builders, as well as maintenance, repair, and operating supply workers. The company said comp sales and transactions grew in the fourth quarter and Home Depot experienced growth in both the DIY and pro customer markets. Decker said the average ticket increased 4.4% and big-ticket sales—transactions of $1,000 or greater—represent 20% of U.S. sales and were up double digits during the fourth quarter. Decker said the increase in big-ticket transactions was related to strong performance in big-ticket categories, including vinyl plank flooring, appliances, and installation services. The pro customer market was driven by strength in pneumatics, concrete, and hand tools during the quarter.

Online sales for Home Depot grew by 20.8% in the final quarter and 21.4% for the full year, with over 50% of online purchases picked up in store locations. Richard McPhail, executive vice president and CFO of Home Depot, said the company is excited about the growth potential of e-commerce as it believes the job site is where most customers’ shopping actually begins in the digital world.