Home Depot Rental: House Depot’s quarterly sales fell 3% year on year, but above Wall Street’s estimates as customers worked on smaller projects and house repairs.
- IMPORTANT NOTES
- Home Depot reported third-quarter earnings and revenue that were higher than expected.
- The home improvement retailer’s sales fell 3% from the previous year.
- Home Depot’s full-year forecast signaled caution.
The company expressed concern about the next months as it reduced its full-year outlook. It now expects revenues to dip 3% to 4% from the previous year, up from a 2% to 5% drop previously predicted. Home Depot anticipates a 9% to 11% reduction in profits per share, compared to previous forecast of a 7% to 13% drop. Chief Financial Officer Richard McPhail stated in an interview that the company’s results and forecast indicate that the year “is a period of moderation in home improvement.”
“A customer who might have remodeled their entire home may be opting for a partial remodel,” he told me. “Perhaps they will not redo their entire kitchen.” Perhaps they will only do the countertop and backsplash. So it’s basically simply project downscaling that we’ve witnessed.” Here’s how the retailer’s fiscal third quarter ending Oct. 29 compares to what Wall Street expected, according to an LSEG, formerly known as Refinitiv, survey of analysts:
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Home Depot’s net income was $3.81 billion, or $3.81 per share, down from $4.34 billion, or $4.24 per share, the previous year. Revenue declined from $38.87 billion the previous year. According to Factset, comparable sales fell 3.1% year on year, which was less than the 3.6% reduction predicted by analysts. However, it was the fourth consecutive quarter of declining comparable sales, an industry indicator that excludes the impact of store openings, closures, and renovations.
Over the last year, Home Depot has faced two challenges: high mortgage rates have limited potential homebuyers, and strong inflation makes big-ticket items and large improvements more difficult to market. Customers have cut back on more expensive projects and big-ticket products in recent quarters, according to McPhail, and this tendency has continued in the most recent quarter.
According to McPhail, the housing market has had a mixed effect on Home Depot’s sales as mortgage rates rise, home values remain high, and supply remains limited. On the one hand, he claims, clients aren’t moving as frequently and aren’t undertaking the tasks that come with a new home. On the other hand, some people have chosen to renovate the home where they have a lower fixed-rate mortgage.
“We don’t quite know how to quantify that balance,” he told reporters. “And obviously that’s something we’ll watch as we progress into next year.” Customer transactions decreased to 399.8 million from 409.8 million the previous year. Customers’ average ticket when purchasing online and in person was $89.36, nearly the same as a year ago.
Even before those dynamics were more pronounced, Home Depot predicted a drop in sales after so many homeowners completed kitchen remodels, painting jobs, and other tasks during the Covid epidemic. McPhail has also observed a shift in budget priorities toward experiences like holidays and concerts. Nonetheless, he stated that Home Depot’s customers are financially secure.
“The consumer — and particularly the homeowning consumer who is our customer — is healthy,” he went on to say. “They’re working. They’ve witnessed increases in income and wealth in recent years. They have extra money and continue to work on their house.”
The company has failed quarterly sales projections twice in the last year, causing its shares to fall. Home Depot shares have declined about 9% this year, underperforming the S&P 500’s nearly 15% increase during the same period. Home Depot’s stock closed Monday at $288.07, raising the company’s market worth to almost $288 billion.
Frequently asked questions
How is Home Depot doing financially?
Net earnings were $4.7 billion, or $4.65 per diluted share, in the second quarter of fiscal 2023, compared to net earnings of $5.2 billion, or $5.05 per diluted share, in the same period of fiscal 2022. “We were pleased with our performance in the second quarter,” Ted Decker, chairman, president, and CEO, stated.
What is the record sales for Home Depot?
In 2022, total fiscal year revenues will increase by $6 billion to a record $157 billion.
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