Home Depot reports biggest sales miss in 20 years

Home Depot (HD.US) launched today's cash session on Wall Street lower after reporting earnings for fiscal-Q1 2024 (calendar February-April 2023). Report turned out to be a disappointment with the company missing sales significantly. While a weaker year-over-year performance was expected, scope of this weakness surprised analysts. A $1.08 billion miss in net sales was the largest revenue miss the company has reported in over 20 years!

Home Depot blamed the weak quarter on economic uncertainty that causes customers to delay home-improvement spending. Company also said that poor weather contributed to lower-than-expected home-improvement spending while lumber deflation negatively impacted the value of sales. 

Home Depot benefitted from a housing market boom in recent years while pandemic-related stimulus checks were often spent on home-improvements. However, the housing market is no longer booming and customers are also more reluctant to spend due to high inflation and rising interest rates. As demand is softening quicker than company expected, forecasts for full fiscal-2024 (February 2023 - January 2024) have been lowered. Sales as well as comparable sales are now expected to be 2-5% lower in the full fiscal year, while the previous forecast pointed to a flat growth. EPS is seen declining 7-13% while earlier the company expected it to drop in 'mid-single-digits'.

Fiscal-Q1 2024 results

• Net sales: $37.26 billion vs $38.34 billion expected (-4.2% YoY)
• Comparable sales: -4.5% YoY vs -1.4% YoY expected
• US comparable sales: -4.6% YoY vs -2.1% YoY expected
• EPS: $3.82 vs $3.80 expected (-6.6% YoY)
• Customer transactions: -4.8% YoY vs -5.4% YoY expected
• Average ticket: +0.2% YoY vs +2.6% YoY expected
• Sales per square foot: -4.7% YoY
• Total location count: 2 324 vs 2 323 expected (+0.3% YoY)
• Merchandise inventories: $25.37 billion vs $26.16 billion expected

Full fiscal-2024 outlook

• Comparable sales growth: -2% - -5% vs around 0% in previous forecast
• Sales growth: -2% - -5% vs around 0% in previous forecast
• EPS growth: -7% -  -13%
• Operating margin: 14.0 - 14.3%

Home Depot (HD.US) launched today's trading with a bearish price gap. Stock attempted to break below the mid-term support zone in $280.00 area at the beginning of today's cash session but bulls managed to defend the area. Losses started to be recovered but stock continues to trade almost 2% lower on the day. Should we see buyers regain control over the market, the first near-term resistance zone to watch can be found in the $300 area.

Source: xStation5