After years of explosive growth during the pandemic, Home Depot’s revenue during the first quarter fell short of expectations and the company cut its profit and sales outlook for the year, sending shares skidding before the opening bell Tuesday.
It was a rough start to a busy week of retail earnings and the numbers from the nation’s biggest home improvement chain dragged down retails stocks as well as the Dow.
For the three months ended April 30, revenue dropped to $37.26 billion from last year’s $38.91 billion, and it was short of the $38.45 billion projected by analysts polled by Zacks Investment Research.
Sales at stores open at least a year, a key indicator of a retailer’s health, dropped 4.5%, and it dropped 4.6% for stores in the U.S.
“After a three-year period of unprecedented growth for our sector, during which we grew sales by over $47 billion, we expected that fiscal 2023 would be a year of moderation for the home improvement market,” said CEO Ted Decker.
Decker said weak sales were mostly due to lumber deflation and bad weather, particularly in its Western division which had to contend with extreme weather in California.
But the Atlanta company cut its expectations for the year, with a clear shift in spending as the economy slows and costs rising for builders and homeowners.
Home Depot cautioned in February that it expected profits to slip this year. The chain saw remarkable growth over the past three years, as many people hunkered down at home or were searching for a new home during the pandemic. Americans spent heavily on home renovations and other projects.
With the easing of the pandemic, Americans began to spend on things that had faded in recent years, like dinners out and vacations.
Home Depot earned $3.87 billion, or $3.82 per share, in the quarter. A year earlier it earned $4.23 billion, or $4.09 per share. That was better than the per-s$3.80 that industry analysts were expecting.
Home Depot Inc. now foresees fiscal 2023 sales and same-store sales to decline between 2% and 5%. Its prior outlook was for sales growth and same-store sales growth to be approximately flat compared with fiscal 2022.
The chain now expects full-year earnings to fall 7% to 13%. Previously, Home Depot predicted its earnings-per-share-percent-decline to be mid-single digits.