Home Depot’s earnings show signs of consumer decline

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

It was another quarter of weak results, with consumers looking for fewer DIY projects than during the pandemic. CEO Ted Decker said the quarter was “impacted by a delayed start to the spring and continued weakness in some larger discretionary projects.”

On Tuesday morning, the home improvement retailer reported revenue of $36.42 billion, compared to the $36.66 billion Wall Street had expected. This represents a decline of 2.3% year-on-year; The company reported revenue of $37.26 billion a year ago.

Adjusted earnings per share were higher than expected at $3.63, compared to $3.60.

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

Before the report, investors expected worse results, with the pandemic era growing in the rearview mirror.

“Home Depot faces tough comparisons from the past four years fueled by higher home values ​​and home-related spending during the pandemic,” Joe Feldman, managing director of Telsey Advisory Group, wrote in a note to clients.

Consumers are also “stressed” by inflation, interest rates and a “sluggish housing market,” Feldman wrote.

The latest Consumer Price Index (CPI) showed that inflation rose 3.5% in March Existing Home Sales It fell 4.3% that month.

“Consumer demand trends in home improvement retail remain challenging and are likely to remain sluggish, at least through 2024, due to ongoing post-pandemic disruptions, weak fundamental confidence, and historically weak housing activity,” Oppenheimer analyst Brian Nagel wrote in a note to clients. “. “.

The Home Depot logo is seen in the Florida Keys, United States, on May 7, 2024. (Photo by Jakub Purzycki/Noor Photo via Getty Images)

The Home Depot logo is seen in the Florida Keys, United States, on May 7, 2024. (Photo by Jakub Purzycki/Noor Photo via Getty Images) (Nour Photo via Getty Images)

Professionals such as contractors and roofers will likely provide some support to the business. The professional consumer makes up nearly 50% of Home Depot’s customer base, compared to 25% at Lowe’s (low).

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In March, Home Depot announced plans to acquire SRS Distribution, a network of independent distributors of roofing and building supplies in the United States. The pending deal could increase the total addressable market by $50 billion, “because it will open up opportunities with niche trading professionals,” according to Bank of America analyst Robert Ohms.

Ohms, who has a buy rating, believes this audience and potential acquisition could help sales grow.

“While the macro economy remains volatile, and we expect continued pressure in 2024 on discretionary and large ticket, we expect HD to see continued equity gains as growth and capacity accelerate with complex professionals,” he wrote to clients.

He also expects improvements in shelf availability, a strong value proposition, and strategic investments to help deliver quarterly results.

After the fourth-quarter results, CEO Ted Decker said: “After several years of unprecedented sales growth, we enter 2023 with more inventory than we would have preferred. … We feel good about our inventory position through 2024.”

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

  • he won: $36.42 billion compared to $36.66 billion

  • Adjusted earnings per share: $3.63 vs $3.60

  • Same store sales growth: -2.80% vs. -2.19%

  • On foot: -1.00% vs -1.09%

  • Average ticket size: -1.30% vs -1.50%

In the first quarter, the company reaffirmed its fiscal 2024 guidance, with total sales growing 1% and same-store sales declining 1%, compared to fiscal 2023.

This story is broken and is being updated.

Brooke DiPalma is a senior reporter at Yahoo Finance. Follow her on Twitter at @Brooke De Palma Or email her at [email protected].

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