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Home Depot’s Q2 Majap Sales Soar

Updated! Atlanta — The Home Depot’s major appliance business continued to climb in its second fiscal quarter, ended Aug. 3.

On an earnings call this morning, U.S. retail president Craig Menear said majaps enjoyed “another quarter of outperformance, posting double-digit comps.”

Comps for appliance replacement parts also rose by the double digits.

The comp gains were achieved on top of strong year-ago numbers, when majap retailers benefited from brisk replacement sales in the wake of Superstorm Sandy.

The increases also came despite the cooler summer weather that led to “some lost sales” of ACs, fans and dehumidifiers, Menear said. But the company “more than made up for the loss” in its sell-through of grills and other outdoor seasonal categories, he noted.

Also buoying the business, said Menear, is an expanded assortment that now includes the Samsung, Whirlpool, Electrolux and Frigidaire brands, as well as the expansion of Home Depot’s “Jumbo” majap departments, from 250 stores last year to 800 locations currently. The format, which was introduced in 2012 and features an expanded 2,400-square-foot display area, is being rolled out to an additional 183 stores, said chief financial officer Carol Tomé.

Menear said the chain will also introduce new products for the connected home, including garage door openers, thermostats, water heaters and light bulbs, in the current quarter.

Net earnings rose 14 percent to $2.1 billion for the quarter, while total sales rose 5.7 percent to $23.8 billion. Comps increased 6.4 percent at U.S. stores, and online revenue, which comprises about 4 percent of total sales, shot up 38 percent, with about a third of web-based orders retrieved in-store.

Tansactions were up 4.1 percent for the three months, and comp ticket increased 1.7 percent, Menear reported.

Looking ahead, Home Depot is projecting a 4.8 percent increase in total 2014 fiscal year sales, and an increase in diluted earnings per share of about 20.2 percent. 

In a research note, Janney retail analyst David Strasser lauded the company’s second-quarter performance but believes its full-year forecast is overly optimistic given the still ailing housing market.

“These guys are running the business as well as could be hoped for,” he observed. But “the challenge for the stock is that housing really took a turn for the worse last fall, with turnover going negative in November.”

Strasser added that as the world’s largest seller of GE appliances, Home Depot will more than likely have a say in any sale of the business, which has long provided the chain with majap fulfillment and logistical support.

“We have to believe that Home Depot will have a seat at the table in any transaction,” he wrote, “and we have to imagine it would have the right to terminate a contract upon sale.”