E-commerce sales rose
Home Depot (HD) clocked e-commerce sales of $4.7 billion in fiscal 2016, a rise of ~25%, or nearly $1 billion, year-over-year (or YoY). That’s about 5.3% of sales, up from about 4.5% in the previous year. In fiscal 4Q16, Home Depot’s web sales (XLY) (XRT) came in at $230 million, up 23% YoY.
While digital remains the company’s fastest-growing business, about 40% of digital sales are fulfilled via its store network. Home Depot employs an interconnected retail strategy, one that combines elements of both digital and brick-and-mortar channels, to drive sales growth.
Currently, Home Depot offers the buy-online-pickup-in-store (or BOPIS), the buy-online-return-to-store (or BORIS), and the buy-online-ship-to-store omni-channel fulfillment options. In the current fiscal year, HD plans to roll out another option: buy-online-deliver-from-store (or BODFS). This will enable the retailer to fulfill online orders from stores. This will also enable the retailer to offer next day delivery within a two-hour window.
While the retailer is looking to add stores in Canada and Mexico in the future, it isn’t looking to enhance its store footprint in the United States (SPY), nor is it looking to roll out smaller stores as rivals Lowe’s (LOW) and IKEA are doing.
IKEA has tested its small-format store in a number of markets including Canada. Companies such as Lowe’s (LOW), Restoration Hardware (RH), and Williams-Sonoma (WSM) operate several store banners for attracting different market and demographic segments.
That being said, HD has invested in more fulfillment centers to enhance shipping speeds. The company has opened three direct fulfillment centers, which would enable the retailer to provide two-day parcel shipping to 90% of the US population. It’s also looking to invest more in digital enhancements.
In the next three years, Home Depot expects to open between five and seven new stores per year, with compounded annual sales growth projected at 4.7%.
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