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Home Improvement Retailer Home Depot $HD was in a position to take advantage of last quarters natural disasters, with a 7.9% increase in comparable-store sales and revenue of $25.03 billion, up 8% from the same period last year did just that.

Home Depot Hurricane

Earnings: Net income rose to $2.17Bil or $1.84 per share from $1.97Bil or $1.60 per share last year. Net sales grew 8.1% to $25.03Bil from $23,154 million in the year-ago quarter beating the consensus estimate of $24,523 million.  Operating income increased 10.8% to $3,680 million, which included a $51-million negative impact from recent hurricanes. Furthermore, operating margin expanded 40 bps from the year-ago quarter to 14.7%.

Comparable-store sales (comps) increased 7.9%, while comps in the United States grew 7.7%.

Reaction: The Home Depot Inc NYSE: HD Pre Market $165.35 ▲ 1.24 (0.76%)

"Though this quarter was marked by an unprecedented number of natural disasters, the underlying health of our core business remains solid."said CEO Craig Menear in a statement.

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The fiscal third quarter saw numerous natural disasters, including hurricanes, Harvey and Irma. There were also wildfires in the West, and earthquakes in Mexico. Home Depot believes hurricane-related activities aided comps by nearly $282 million. However gross margins on such sales were significantly below the company average. Gross profit margin contracted 10 basis points (bps) to 34.6% in Q317. In dollar terms, gross profit improved 7.5% to $8,648 million from $8,042 million in the year-ago quarter, primarily driven by higher sales.

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Outlook

$HD raised its fiscal 2017 guidance with comp sales growth of 6.5% and earnings per share of $7.36 (reflecting its $8 billion buyback program this year). Earlier, the company projected net sales growth of 5.3% and comps increase of 5.5%. 

"First-time home buyers have come back. It was the largest increase in first-time home buyer since 2005. And some of those homes are being bought by millennials. It's what we thought would happen. People were saying millennials would never buy a home. Yet, we had done all this research on it and thought it would happen." Home Depot Chief Financial Officer Carol Tome said

Balance Sheet and Cash Flow

Home Depot ended the fiscal third quarter with cash and cash equivalents of $3,549 million, long-term debt (excluding current maturities) of $24,266 million and shareholders' equity of $2,543 million. In the first nine months of fiscal 2017, the company generated $9,741 million of net cash from operations.

At the end of 3Q17, $HD operated a total of 2,283 retail stores in all 50 states, the District of Columbia, Puerto Rico, U.S. Virgin Islands, Guam, 10 Canadian provinces and Mexico. The number of customer transaction rose 2.5% to 389.5MM and average ticket increased 5.1% to $62.84. Sales per square foot grew 7.9% to $412.49.

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