Big sales gains at Home Depot amid COVID-19 pandemic

Professional contractor division also sees a jump in sales.


  • By Mark Basch
  • | 5:20 a.m. August 27, 2020
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Home Depot Inc.’s second-quarter sales and earnings jumped substantially, as expected, with homeowners locked in during the COVID-19 pandemic taking on do-it-yourself projects.

However, Home Depot also said its professional contractor division, consisting largely of a Jacksonville-based company it acquired five years ago, also saw a big jump in sales.

Atlanta-based Home Depot said total sales rose 23.4% to $38.1 billion, with earnings per share growing by 26.8% to $4.02.

The biggest gains came in sales to DIY customers but it also saw strong sales growth in its Home Depot Pro division, said Executive Vice President of Merchandising Ted Decker, according to a transcript of its quarterly conference call posted by the company.

Home Depot Pro was created in 2018 and grew out of the former business of Interline Brands, which Home Depot acquired for $1.625 billion in 2015.

Jacksonville-based Interline sold products to maintenance, repair and operations professionals.

“Sales to our Pro customers accelerated meaningfully compared to the first quarter, and grew double-digits compared to the second quarter of last year,” Decker said.

Much of that strength came from smaller contractors, he said. But Bill Lennie, executive vice president for outside sales and service, said the company also increased sales to larger contractors.

“The high-spend Pro also continued to rebound, and I would see that as being an outcome of permitting and job inspections coming back online,” Lennie said.

“There are areas where homeowners are becoming more comfortable with having Pros and service providers in their homes,” he said.

The Home Depot executives said the company would not break out specific data on sales to DIY or Pro customers.

Regency Centers downgraded

Compass Point analyst Floris van Dijkum last week downgraded his rating on Jacksonville-based Regency Centers Corp. from “buy” to “neutral” while upgrading another company that operates shopping centers, Kite Realty Group Trust.

“Our rating change is a tactical valuation call as we expect some level of mean reversion between these two strip owners,” van Dijkum said in his research note.

He said Regency’s stock was down 32% for the year, but that has outperformed the overall strip shopping center sector, which has lost 41%.

“We believe Regency deserves to trade at a relative premium to sector peers due to its strong balance sheet, high quality grocery anchored focus, and deep management bench. Yet its current 19% relative historical net asset value spread to Kite is abnormally wide,” van Dijkum said.

He lowered his price target for Regency from $50 to $45, with the stock trading in the low $40s recently.

Sports schedule boosts advertising outlook for Tegna

Big spending on political advertising will be a boost for televisions stations, which have been dealing with reduced demand for general ads during COVID-19 lockdowns.

Besides the windfall in political dollars, Tegna Inc. expects to benefit from another post-lockdown trend: the resumption of major sports programming.

“As live sports return this fall, we’re going to benefit from a large number of unusual events that we would not normally see in the back half of the year that have been rescheduled from the second quarter,” CEO David Lougee said in Tegna’s quarterly conference call, according to a transcript posted by the company.

Tegna operates 63 stations in 51 markets, including Jacksonville NBC affiliate WTLV TV-12 and ABC affiliate WJXX TV-25.

“Our strong and large portfolio of NBC stations will now benefit, for instance, from the Indianapolis 500 family,” Lougee said.

“We’ll have the U.S. Open Golf Tournament and the Kentucky Derby taking place in August and September. And then the Stanley Cup playoffs in September and possibly into early October.”

Tegna’s ABC stations are benefiting from the NBA playoffs, Lougee said.

“Considering these events would not typically take place in the second half of the year when we will also experience extraordinary political advertising demand, we will benefit from having this additional high-value content and inventory in the coming months.”

Tegna reported adjusted earnings of 12 cents a share in the second quarter, down from 35 cents the previous year.

The other publicly traded company operating Jacksonville television stations, Graham Holdings Co., also had an earnings drop in the second quarter.

Operating income in Graham’s television division dropped 47% to $23.6 million and the diversified holding company’s total second-quarter net income dropped to $3.60 a share, from $10.65 the previous year.

Graham operates seven television stations, including independent station WJXT TV-4 and CW network affiliate WCWJ TV-17 in Jacksonville.

Graham does not hold quarterly conference calls to discuss its results.

Smith & Wesson spinoff complete

Four years after acquiring a Jacksonville company to expand beyond firearms, Smith & Wesson Brands Inc. is a gun company again.

Smith & Wesson on Aug. 24 completed the spinoff of its outdoor products accessories business into a separate public company called American Outdoor Brands Inc.

Four years ago, the iconic gun manufacturer acquired Jacksonville-based Ultimate Survival Technologies as part of its plan to diversify its business. 

It also changed its name to American Outdoor Brands.

The company last year closed the former UST facility in Jacksonville and later in 2019, it announced plans to split up the businesses.

In the spinoff, each Smith & Wesson stockholder received one share of American Outdoor for every four shares of Smith & Wesson they held.

Smith & Wesson trades under the ticker “SWBI” while American Outdoor trades under “AOUT.”

Jay Stein sells stake in bankrupt Stein Mart

In the days after Stein Mart Inc. filed for Chapter 11 bankruptcy, Jay Stein sold off his entire 35.7% stake in the Jacksonville-based fashion retailer, according to a Securities and Exchange Commission filing last week.

Stein and his family had about 17.3 million Stein Mart shares, which were sold in the open market at prices between 11 cents and 18 cents each from Aug. 14 to Aug. 18, according to the filing.

Stein Mart filed its Chapter 11 petition Aug. 12 in U.S. Bankruptcy Court for the Middle District of Florida Jacksonville Division.

The company intends to close its 281 stores and go out of business and said its stock likely will have no value, but the stock continued to trade on the Nasdaq Capital Market last week.

Nasdaq said it would delist the stock Aug. 24, but the stock was listed on the Pink OTC Markets this week under the ticker “SMRTQ.”

Stein, grandson of the company’s founder, had maintained a significant percentage of the company’s stock since Stein Mart’s initial public offering in 1992.

Stein retired as CEO of the company for the second time in 2016 and retired as chairman of the board in June, but he remained on the board of directors when the company filed its Chapter 11 petition.

The SEC filing did not say why Stein sold off his shares, but investors in bankrupt companies commonly sell off stock to recognize capital losses on their holdings.

Other Stein Mart insiders also sold off shares after the Chapter 11 filing, according to SEC documents.

CEO Hunt Hawkins sold about 385,000 shares, leaving him with 66,667 restricted shares, SEC filings show.

Stein Mart’s most recent proxy statement showed Hawkins with more than 1 million shares, or 2.1% of the stock. But that included unexercised options to buy 631,631 shares.

 

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