For the first time in 17 years, the unemployment rate hit a low rate of 3.9%. Although analysts can't predict the long-term stability of job market, retail dynamo Home Depot (NYSE: HD) is projected to do well. Earlier this year, the company announced that its sales rose approximately 4.2% last quarter over the same period last year. Despite the gradual downturn of the retail market, Home Depot has managed to remain at the top.
One potential reason for this is that Home Depot has unique offerings. Online retail powerhouse Amazon (NASDAQ: AMZN) has managed to sweep the market, but it has not made noticeable dent in the home improvement sector.
Unlike clothing and electronics stores, Home Depot has managed to offer its customers a service both in and outside of its traditional brick-and-mortar stores. According to market researchers, 90% of Americans live within 10 miles of a Home Depot store. Rather than increasing its physical presence across the nation, the hardware store has placed an intense focus on its online presence. One immediate benefit of its many locations is its fulfillment of customers' online orders for pick-up. In the past few years, the company has offered more brand options on its website, and improved the layout of its existing stores to optimize the customer shopping experience. Likewise, Home Depot has made efforts to target contractors, or "pro" customers, by tailoring the in-house shopping experience to them. In order to please such customers, the company has also made picking up online orders easier, and currently offers more brands that are geared towards contractor, rather than independent, use.
Overall, it is truly the booming job market that is actively making Home Depot reach the top of the retail chain. Low unemployment rates have spurred homeowner desires to begin more home improvement projects. The strong overall economy, including a prosperous housing market, has also fueled this desire. Federal tax reform will allow Home Depot to pay less, with a overall decrease to 26% from 35.2% during the first quarter of 2017.
Recently, the company announced that it hopes to reach an annual revenue of $115 to $120 billion in the fiscal year 2020. Given its strong sales growth through 28 quarters straight, such a goal seems achievable for the home improvement chain.
But home improvement competitor Lowe's (NYSE: LOW) may prove to be an obstacle. Lowe's announced recently its search for a new successor to fill the role of the current CEO Robert Niblock, who has his eyes currently set on retirement. If Lowe's can find an original strategy to improve its online and physical presence as Home Depot has, the home improvement sector may have some true rivalry in the near future.