Business

Home Depot profits show signs of consumer pushback

Home Depot’s (HD) results show shoppers are putting their HGTV dreams on hold.

This was another quarter of poor results as consumers sought fewer DIY projects compared to the pandemic. CEO Ted Decker said the quarter was “impacted by a delayed start to spring and continued weakness in certain larger discretionary projects.”

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

Adjusted earnings per share were better than expected, at $3.63, up from $3.60.

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

Before the report was released, investors were expecting weaker results, with pandemic-era growth in the rearview mirror.

“Home Depot has faced difficult comparisons over the past four years, fueled by higher home values ​​and real estate-related spending during the pandemic,” Telsey Advisory Group Managing Director Joe Feldman wrote. in a note to customers.

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

The latest Consumer Price Index (CPI) showed inflation rose 3.5% in March while existing home sales fell 4.3% that month.

Brian Nagel, an analyst at Oppenheimer, wrote in a note to clients: “Consumer demand trends in the home improvement sector remain challenging and are expected to remain sluggish, at least through 2024, due to post-consumer upheaval. -ongoing pandemics, weaker underlying confidence and historically subdued real estate activity. “.

Home Depot profits show signs of consumer pushbackHome Depot profits show signs of consumer pushback

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

Professionals like contractors and roofers likely provide some boost to the business. The professional consumer represents about 50% of Home Depot’s customer base, compared to 25% for Lowe’s (LOW).

In March, Home Depot announced plans to acquire SRS Distribution, a network of independent roofing and building materials distributors in the United States. The pending deal could increase its total addressable market by $50 billion, “as it would open up opportunities with specialty trade professionals,” according to Bank of America analyst Robert Ohmes.

Ohmes, who has a buy rating, believes this audience and potential acquisition could help drive sales growth.

“While the macroeconomic situation remains volatile and we expect continued pressure in 2024 on discretionary and headline products, we expect HD to continue to gain market share as it accelerates its growth and its abilities with complex professionals,” he wrote to clients.

He also expects on-shelf availability improvements, a strong value proposition and strategic investments to improve quarterly results.

Following the fourth quarter results, CEO Ted Decker said: “After several years of unprecedented sales growth, we entered 2023 with more inventory than we would have liked. … We are very pleased with our inventory situation as we approach 2024.”

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

  • Income: $36.42 billion versus $36.66 billion

  • Adjusted earnings per share: $3.63 vs. $3.60

  • Same-store sales growth: -2.80% versus -2.19%

  • Pedestrian traffic: -1.00% versus -1.09%

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

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

This story is breaking and is being updated.

Brooke DiPalma is a senior reporter for Yahoo Finance. Follow her on Twitter at @BrookeDiPalma or email him at bdipalma@yahoofinance.com.

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News Source : finance.yahoo.com
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