Thursday, July 25, 2024

Home Depot’s earnings show signs of consumer pullback

Home Depot ( HD ) earnings show shoppers put their HGTV dreams on hold.

It’s another quarter of lower results as consumers look for fewer DIY projects compared to during the pandemic. CEO Ted Decker said, “The quarter was impacted by a delayed start to spring and continued softness in certain large preferred projects.”

On Tuesday morning, the home improvement retailer posted revenue of $36.42 billion, compared with the $36.66 billion expected by Wall Street. This is a fall of 2.3% per year; The company posted revenue of $37.26 billion a year ago.

Adjusted earnings per share came in at a better-than-expected $3.63, compared to $3.60.

Lower foot traffic and smaller ticket sizes contributed to a 2.8% drop in same-store sales, down 1% and 1.3%, respectively.

Ahead of the report, investors were expecting poor results, with pandemic-era growth in the rearview mirror.

“Home Depot has faced tough comparisons over the past four years, driven by higher home values ​​and home-related costs during the pandemic,” Delsey Advisory Group Managing Director Joe Feldman wrote in a note to clients.

Feldman wrote that consumers are “frustrated” by inflation, interest rates and a “slow housing market.”

The latest Consumer Price Index (CPI) showed inflation rose 3.5% in March. Existing home sales It fell 4.3% in the month.

Oppenheimer analyst Brian Nagel wrote in a note to clients, “Consumer demand trends in home improvement retail sales remain challenging and will remain subdued through at least 2024 due to post-pandemic displacements, weak underlying confidence and historically subdued housing activity.”

The Home Depot logo is seen on May 7, 2024 in the Florida Keys, USA.  (Image by Jakub Borzicki/NurPhoto via Getty Images)

The Home Depot logo is seen on May 7, 2024 in the Florida Keys, USA. (Image by Jakub Borzicki/NurPhoto via Getty Images) (NurPhoto via Getty Images)

Professionals like contractors and roofers can provide some boost to the business. Pro-consumers make up approximately 50% of Home Depot’s customer base and Lowe’s (minimum) 25%.

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In March, Home Depot announced plans to acquire SRS Distribution. According to Bank of America analyst Robert Ohms, the pending deal could increase its total addressable market to $50 billion.

Ohms, which has a buy rating, believes this audience and potential acquisition will help drive sales growth.

“While macro remains disruptive, we expect continued pressure on discretionary and big-ticket in 2024, and we expect HD to continue to see share gains as growth and capabilities accelerate with complex pro,” he wrote to clients.

He expects shelf availability improvements, a strong value proposition and strategic investments to help the quarter’s results.

Following its Q4 results, CEO Ted Decker said, “After several years of unprecedented sales growth, we entered 2023 with more inventory than we wanted. … We feel very good about our inventory position in 2024.”

Here’s what Home Depot reported, compared to Wall Street estimates, according to the Bloomberg consensus:

  • Revenue: $36.42 billion and $36.66 billion

  • Adjusted earnings per share: $3.63 and $3.60

  • Same Store Sales Growth: -2.80% vs -2.19%

  • Foot traffic: -1.00% vs. -1.09%

  • Average Ticket Size: -1.30% vs -1.50%

In Q1, the company reaffirmed its fiscal 2024 guidance of 1% total sales growth and a 1% decline in same-store sales compared to fiscal 2023.

This story is broken and updated.

Brooke DePalma is a senior reporter at Yahoo Finance. Follow her on Twitter at @Brooke DePalma Or send an email to [email protected].

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