The Home Depot reported a strong 14.4% increase in net earnings in 2021 that exceeded analysts’ expectations amid the DIY boom. The retailer managed to earn $14.6 billion last year which was up from just $12.9 billion in 2020. All of this is even more impressive as The Home Depot had reportedly been struggling with the supply chain issues that have dogged many other industries.
With over $150 billion in sales, it was another record year for the brand and showed that The Home Depot has somehow managed to expand its business by more than $40 billion in the last two years. Much of this success came from an especially busy fourth-quarter where the retailer enjoyed sales of $36.7 billion which was up over 10% the previous year.
However, it wasn’t all good news as the brand said that it expected its profit margins to be put under pressure due to the ongoing supply chain issues. These supply problems have already had a negative impact on how the brand is able to stock its shelves with the necessary building tools and materials. Such was the impact of this admission that it caused stocks in The Home Depot to tumble over 8% to reach the lowest point in half a year.
The Home Depot has attempted to counter these supply chain bottlenecks in a number of unique ways such as having its own cargo ships and using costly air freight solutions. Such expense has ultimately had the impact of dramatically raising costs in things like labor and fuel to the point where gross margins are starting to look less than impressive.
Can The Home Depot carry its success into 2022?
The Home Depot is forecasting that it will continue to enjoy growth into 2022. This follows on from a prevailing trend of success that has seen the home improvement brand’s stock price soar by as much as 50% since February 2020.
Much of this success was put down to the fact that most Americans have experienced some kind of lockdown over the past couple of years, and being housebound meant more opportunity to tackle DIY projects.
However, with flat margins expected for The Home Depot in 2022 and the worrying trend of rising inflation, it remains to be seen whether the retailer can extend its successes any further. This is especially so as the Federal Reserve is widely expected to implement the first of many interest rate hikes in March.
It will be done in a bid to counter the overheating economy, but will have the side-effect of raising mortgage rates. This will have the knock-on effect of giving home-owners less money to spend on the kind of products and services that have helped The Home Depot enjoy such impressive earnings figures. All of which suggests that it could be a tricky few months ahead for the home improvement retailer.