Is Home Depot a Buy?

Very few retailers escaped the so-called retail apocalypse without making major changes. That's not the case for home improvement giant Home Depot (NYSE: HD). The retailer has, of course, added omnichannel features like in-store pickup for online purchases, but the nature of its goods protects its brick-and-mortar business.

Customers might order a known home improvement item online, but whether it's a paint color or a light fixture, most items sold by the chain are the types of things people like to see in person. That's a pretty good moat when it comes to retail disruption, and Home Depot has generally benefited from it.

How is Home Depot doing?

In its most recent quarter, for example, the chain posted a 3.2% year-over-year increase in same-store sales globally and 3.7% in the United States. Fourth-quarter revenue rose to $26.5 billion, a 10.9% gain, but that was aided by an extra week over the prior-year quarter, which accounted for about $1.7 billion in sales (which was not factored into the comps increase).

The company delivered Q4 earnings of $2.3 billion, or $2.09 per diluted share. That's a major jump from $1.8 billion and $1.52 per share in the same period in 2017, but the extra week accounted for $0.21 of the gain.

Sales for the full year came in at $108.2 billion, up 7.2% from the previous year, while comps were up 5.2% (and 5.4% in the U.S.). The retailer delivered EPS of $9.73, again a nice increase from $7.29 in 2017.

"We achieved record sales and net earnings in fiscal 2018 while making great progress on the strategic investments we laid out in December of 2017," CEO Craig Menear said in the Q4 earnings report. "We focused on enhancing the interconnected retail experience for our customers, providing localized and innovative product, and delivering best-in-class productivity."

Is Home Depot a buy?

It's important to note that just because a stock has the right metrics does not mean you should buy it. Home Depot is a safe port amid the retail storm that has forecast 5% in comps growth in 2019. That's a very strong number in the current retail environment, and for many investors, this would be a smart way to invest in retail, housing, and construction while reaping a dividend that has steadily increased since 2001.

I'm not on board personally because I won't buy shares in a retailer where I don't feel comfortable or welcome. Home Depot is a good business, but I'm not handy, and the store does very little to help my demographic. That's only slightly less true of its chief rival, Lowe's, but my personal experience has been that there's at least a chance someone will patiently help me at that chain, while Home Depot offers precious little in the way of customer service.

My anecdotal experience does not change the fact that Home Depot has a very solid business. In fact, what I suggest is a problem may not actually be one because most shoppers at the chain likely have more knowledge than I do, and those as helpless in this area as I am might be likely to contract out their home improvement work.

Home Depot has a huge network of stand-alone stores that serve as destinations for customers. It has built a reasonable digital ecosystem around that, positioning the company to remain a solid player with more growth ahead even if other retail chains falter.

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Daniel B. Kline has no position in any of the stocks mentioned. The Motley Fool recommends Home Depot and Lowe's. The Motley Fool has a disclosure policy.