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02/26/2019

Home Depot Q4 sales, earnings disappoint

Home Depot’s sales cooled a bit in the fourth quarter as the home improvement giant reported sales and earnings that missed expectations amid volatility in the housing market.

Home Depot reported net income for the quarter ended Feb. 3 of $2.34 billion, or $2.09 per share, compared with $1.78 billion, or $1.52 a share, in the year-ago period. The results included a pretax impairment charge of roughly $247 million, or 16 cents per share, tied to Home Depot’s wholesale business. Analysts were expecting earnings of $2.16 a share.

Revenue rose 10.9% from a year earlier, to $26.49 billion, short of analysts expectations for $26.57 billion. Same-store sales rose 3.2%, less than expected. Customer transactions were up 7.7%, while the average shopper’s ticket increased 2.5%. (The fourth quarter of fiscal 2018 consisted of 14 weeks compared with 13 weeks for the prior year.)

Analyst Neil Saunders, managing director of GlobalData Retail, commented that a material slowdown in the housing market – where both sales and prices have been under pressure for some time – has stymied demand for home improvement products, which has affected the momentum of growth at Home Depot.

“However, we also believe that, in light of this, Home Depot’s comparable sales increases actually look even more respectable – in essence, they show the company is able to pull other levers to secure growth, even as economic fundamentals weaken,” he noted.

For the full year, Home Depot’s sales rose 7.2% to $108.2 billion. Total company comparable sales increased 5.2%. Earnings per diluted share in fiscal 2018 were $9.73, compared to $7.29 per diluted share in fiscal 2017.

“We achieved record sales and net earnings in fiscal 2018, while making great progress on the strategic investments we laid out in December of 2017,” stated Craig Menear, chairman, CEO and president. “We focused on enhancing the interconnected retail experience for our customers, providing localized and innovative product, and delivering best in class productivity.”

For fiscal 2019, which includes 52 weeks compared with 53 in 2018, the company said it expects to earn $10.03 per share, 23 cents short of analysts’ forecast. Same-store sales are expected to rise 5%.