Home Depot Reports

Home Depot ^®, the world's largest home improvement retailer, today reported sales of $19.2 billion for the fourth quarter of fiscal 2014, an 8.3 percent increase from the fourth quarter of fiscal 2013. Comparable store sales for the fourth quarter of fiscal 2014 were positive 7.9 percent, and comp sales for U.S. stores were positive 8.9 percent.
Net earnings for the fourth quarter of fiscal 2014 were $1.4 billion, or $1.05 per diluted share, compared with net earnings of $1.0 billion, or $0.73 per diluted share, in the same period of fiscal 2013. For the fourth quarter of fiscal 2014, diluted earnings per share increased 43.8 percent from the same period in the prior year.
Fourth quarter of fiscal 2014 results reflect a pretax gain on sale of $111 million, or $0.05 per diluted share, related to the sale of a portion of the Company's equity ownership in HD Supply Holdings, Inc. Adjusting for the gain on sale, diluted earnings per share were $1.00 for the fourth quarter of fiscal 2014, up 37.0 percent from the same period in the prior year.
Fiscal 2014

Sales for fiscal year 2014 were $83.2 billion, an increase of 5.5 percent from fiscal year 2013. Total company comparable store sales for fiscal year 2014 increased 5.3 percent, and comp sales for U.S. stores were positive 6.1 percent for the year.
Earnings per diluted share in fiscal year 2014 were $4.71, compared to $3.76 per diluted share in fiscal year 2013, an increase of 25.3 percent.
Fiscal 2014 results reflect a pretax gain on sale of $323 million, or $0.15 per diluted share, related to the sale of a portion of the Company's equity ownership in HD Supply Holdings, Inc. Fiscal 2014 results also reflect a pretax net expense of $33 million, or $0.02 per diluted share, related to the Company's 2014 data breach, of which $5 million was recognized in the fourth quarter.
"We had a strong finish to the year, as strength across the store, the recovering U.S. housing market and solid execution aided our business in 2014," said Craig Menear, chairman, CEO and president. "I'd like to thank our associates for their hard work and commitment to our customers."
Capital Allocation Strategy
The Company today announced that its board of directors declared a 26 percent increase in its quarterly dividend to $0.59 cents per share. "The board increased the dividend for the sixth time in as many years, representing our commitment to create value for our shareholders," said Menear. The dividend is payable on March 26, 2015, to shareholders of record on the close of business on March 12, 2015. This is the 112th consecutive quarter the Company has paid a cash dividend.
The board of directors also authorized an $18.0 billion share repurchase program, replacing its previous authorization. Since 2002 and through February 1, 2015, the Company has returned more than $53 billion of cash to shareholders through repurchases, repurchasing approximately 1.2 billion shares.
Combined with today's announcements, the Company reiterated its capital allocation principles:

• Dividend Principle: Targeting a dividend payout ratio of approximately 50 percent.
• Share Repurchase Principle: After meeting the needs of the business, will use excess cash to repurchase shares, with the intent of completing $18.0 billion of share repurchases by the end of fiscal 2017.
• Return on Invested Capital Principle: Maintain a high return on invested capital, with a goal of reaching 27 percent by the end of fiscal 2015.

Fiscal 2015 Guidance
Given the significant strengthening of the U.S. dollar, the Company provided a range of sales, comp sales and diluted earnings-per-share growth to reflect the difference between 2014 average exchange rates and current exchange rates. If currency exchange rates remain where they are today, this would cause a negative impact to fiscal 2015 net sales growth of approximately $1 billion, as well as a negative impact on diluted earnings per share of approximately $0.06 per share. The low-end of the Company's sales and diluted earnings-per-share growth guidance reflects this currency impact.

• Sales growth of approximately 3.5 to 4.7 percent
• Comparable store sales growth of approximately 3.3 to 4.5 percent
• Six new stores
• Flat gross margin
• Operating margin expansion of approximately 60 basis points
• Tax rate of approximately 37 percent
• Share repurchases of approximately $4.5 billion
• Diluted earnings-per-share growth after anticipated share repurchases of approximately 8.5 percent to 10 percent, or $5.11 to $5.17
• Capital spending of approximately $1.6 billion
• Depreciation and amortization of approximately $1.8 billion
• Cash flow from the business of approximately $9.0 billion

The Company's fiscal 2015 diluted earnings-per-share guidance does not include an accrual for other reasonably possible losses related to the data breach. Other than the breach-related costs contained in the Company's fiscal 2014 earnings, at this time the Company is not able to estimate the costs, or a range of costs, related to the breach. Costs related to the breach may include liabilities to payment card networks for reimbursements of credit card fraud and card reissuance costs; liabilities related to the Company's private label credit card fraud and card reissuance; liabilities from current and future civil litigation, governmental investigations and enforcement proceedings; future expenses for legal, investigative and consulting fees; and incremental expenses and capital investments for remediation activities. Those costs may have a material adverse effect on the Company's financial results in fiscal 2015 and/or future periods.