Home Depot (HD)’s strong showing in 2012 has been seen as an effect of a housing market that is climbing its way back to health, as a combination of lowered mortgage rates, rising home prices, and an increase in construction throughout the last year have been leading to regular talk of a recovery. Of course, houses need fixing-up whether they have just been purchased or are in the process of being sold, and Home Depot is one of the most ubiquitous and widely-recognized outlets to serve this purpose.
The company’s stock increased just over 40 percent last year, while it has gained 3.35 percent so far in 2013. While the rebound in the housing market certainly has much to do with this, credit has to be given to Home Depot itself, as they expended serious efforts on cost-reduction throughout 2012, which has been accomplished through a variety of measures such as simplifying supply and distribution chains and localizing marketing and merchandising.
The effectiveness of these measures can be seen in the decrease in Home Depot’s selling, general, and administrative expenses (otherwise known as SG&A), from its 2011 figure of 22.3 percent down to 21.8 percent in 2012. This has translated to an increase of its operating margin over the first three quarters of 2012 to 10.65 percent (up from 9.8 percent the previous year).
After closing Monday down just over 2.5 percent to $63.92 per share, Home Depot recovered almost a whole percentage point in after-hours trading, climbing back up to $64.52.
According to Thomson Reuters, consensus estimates for Home Depot’s Q4 results expect a profit of 64 cents a share, with revenue up 10 percent to $17.7 billion.