Amazon.com (symbol AMZN) is projected to account for one-half of all internet-based U.S. retail sales by 2021, according to brokerage firm Needham & Co., up from about one-third of sales in 2016. The threat to competitors in the retail space has become so dire that a "Death by Amazon” index that tracks the stock prices of 54 retailers sits near a four-year low, according to research firm Bespoke Investment Group, which compiles the index.
Yet, there are a few big retailers that are finding ways to thrive despite the Amazon onslaught. Home-improvement chain Home Depot (HD) is one of them. Here's why its stores and its stock should stand up to competition from Amazon. (Share prices, returns and other data are as of April 25.)
Selling everything from paint to countertops, Home Depot leads the market for home renovation. Amazon sells tools and other home-improvement products. But it’s not in the business of selling and shipping bulky items, such as drywall or lumber. If you want a granite countertop, you’ll probably want to see it in a showroom, such as Home Depot’s.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Nor is Amazon a player in renovation services, which Home Depot provides. About 40% of Home Depot’s sales now come from the company’s Pro Services, which offers bulk pricing, truck rentals and other benefits to professional contractors. Home Depot is expanding those services with speedier deliveries, new products and data analytics to help track and increase sales, says analyst Peter Benedict of brokerage firm Baird.
Overall sales should get a lift from other initiatives and industry trends, too. The firm is revitalizing about 500 stores to make them more customer-friendly. As retailers such as Sears (SHLD) falter, Home Depot should win some of their sales. And the company is ramping up its own online division, offering scores of products with free delivery to its stores. “While Amazon remains a persistent topic of conversation,” says Benedict, Home Depot’s business “should remain one of the more defendable in retail.”
Home Depot’s revenues hit $95 billion in the 12-month period that ended in January 2017, up from a low of $66.2 billion in its 2010 fiscal year. A housing slowdown would certainly curtail the company’s momentum. But as long as the economy and housing market keep percolating, Home Depot should be a winner.
Home Depot by the Numbers
- Share price: $153.03
- Market value: $183.8 billion
- Price-earnings ratio: 21
- Estimated 12-month profit growth: 11.3%
- Dividend yield: 2.3%
-
I'm 65, with $1.2 million saved and a paid-off $1.3 million rental property. Should I sell, or keep it for income?Should I be a landlord in retirement?
-
Do You Really Need That Wine Cellar?Home Features Wine cellars are a popular feature in high-end houses. Will installing one in your home increase its value, or would you be better off with a cheaper solution?
-
My Three-Day Rule for Investing: And If it Applies NowStock Market I've seen a lot in my career. Here's what I see now in the stock market.
-
Is It Time to Invest in Europe?Stock Market Europe is being shaken out of its lethargy, militarily and otherwise, by Donald Trump's changes in U.S. policy. Should investors start buying?
-
Stock Market Today: Markets Celebrate Trump's Tariff DétenteConsumer discretionary stocks led 10 of the 11 S&P 500 sector groups well into the green.
-
Home Depot's Winning Ways Fueled Its 100,000% ReturnHome Depot's wide moat leaves little room for competition – and shareholders have profited as a result.
-
How Do Tariffs Impact the Stock Market?Trump's tariff announcement sent shockwaves through the stock market, and there are still a lot of moving parts. Here, we look at what impact tariffs have on the stock market and your portfolio.
-
The Best Retail Stocks to Buy and HoldE-commerce is a growing trend, but most folks still prefer to shop in stores. That makes these dominant retail stocks worth a closer look.
-
Stock Market Today: Stocks Retreat on Renewed Inflation, Interest Rate QuestionsStocks were lower and yields were higher on Tuesday, with markets reflecting the uncertain transition from campaign promises to real-world policies.
-
Is Home Depot Stock Still a Buy After Its Beat-And-Raise Quarter?Home Depot stock is struggling for direction even after the retailer's strong earnings and full-year outlook, but Wall Street isn't worried. Here's what you need to know.
