Home Depot's sales fall short of estimates as spring selling season sees delayed start
By Ciara Linnane
Softness in large discretionary projects also weighed in the first quarter
Home Depot Inc.'s stock was down 0.9% Tuesday, after the home-improvement retailer beat profit estimates for the first quarter but saw sales fall slightly short as the spring selling season got off to a delayed start.
Atlanta-based Home Depot (HD) posted net income of $3.6 billion, or $3.63 a share, for the quarter, down from $3.9 billion, or $3.82 a share, in the year-earlier period. Sales fell 2.3% year over year to $36.4 billion.
The FactSet analyst consensus was for EPS of $3.60 and sales of $36.6 billion.
Same-store sales fell 2.8%, while FactSet analysts were expecting a 4.5% decline.
"While the quarter was impacted by a delayed start to spring and continued softness in certain larger discretionary projects, we feel great about our store readiness, our product assortment in stores and online, and our associate engagement," Home Depot Chief Executive Ted Decker said in prepared remarks.
On a call with analysts, William Bastek, the company's executive vice president of merchandising, said regions where weather was favorable "saw good customer engagement and strength in outdoor projects."
Bastek outlined some merchandising changes made to better align with customer interest. Home Depot now has 16 departments, up from 14 previously, he noted, with the chain having separated electrical and lighting products from kitchen and bath ones.
"Additionally, we have renamed our tools department to 'power,' and included outdoor power equipment to capture synergies and maximize the strength of our battery-powered platforms," he said, according to a FactSet transcript.
Home Depot's building materials and power departments posted positive same-store sales in the quarter, while outdoor garden, paint, lumber, plumbing and hardware were all above the company average, Bastek said.
The company backed its full-year guidance, which includes 53 weeks of operating results. Home Depot still expects sales growth of about 1%, with the 53rd week expected to add about $2.3 billion to the total. Same-store sales are expected to decline about 1% for the 52-week period.
EPS is expected to grow about 1% over the 53-week period, with the extra week contributing about 30 cents.
The company said its March agreement to acquire SRS Distribution is not included in the guidance, as the deal has not yet closed. The $18.25 billion deal is the company's biggest ever.
Read: Home Depot seals biggest-ever deal by buying building-products provider SRS for $18.25 billion
Home Depot is expecting full-year gross margin of about 33.9% and an operating margin of 14.1%. It expects to open about 12 new stores in the period.
D.A. Davidson analysts Michael Banker and Keegan Cox said in a note that the guidance implies a recovery in the back half of the year and, "to us, is as much dependent on macro factors as it is on Home Depot's own execution."
The analysts have a neutral rating on the stock.
Home Depot shares have fallen 2.5% in the year to date, while the S&P 500 SPX has gained 9.5%.
-Ciara Linnane
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05-14-24 1301ET
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