Home Depot Q2 tops estimates but cuts full-year comp sales, earnings outlook
The Home Depot reported earnings and sales in the second quarter that beat expectations, but sounded a cautionary note about the rest of the year as consumers put off big projects amid high interest rates.
The home improvement giant said it now expects full-year comparable sales to decline by 3% to 4% compared with the prior fiscal year, down from its previous estimate of about 1%.
On the earnings call, Home Depot CEO Ted Decker told analysts that the retailer saw continued softness in spring projects, which were also affected by the extreme weather changes in some areas during the quarter. He also said that many consumers were waiting for interest rates to fall before starting larger projects, which are often funded by consumers with financing.
"The underlying long-term fundamentals supporting home improvement demand are strong," stated Decker in the earnings release. "During the quarter, higher interest rates and greater macro-economic uncertainty pressured consumer demand more broadly, resulting in weaker spend across home improvement projects.”
Net income fell to $4.56 billion, or $4.60 a share, in the quarter ended July 28, from $4.66 billion, or $4.65 a share, in the year-ago quarter. Adjusted earnings came to $4.67 per share, topping analysts estimates of $4.53 per share.
Net sales inched up 0.6% to $43.18 billion from $42.92 billion, also more than expected. The results include $1.3 billion in sales SRS Distributions, which represented approximately six weeks of sales in the quarter. Home Depot completed the $18 billion acquisition of SRS — the largest in its history — in June.
Comparable sales for the quarter were down 3.3%. Comparable U.S. sales fell 3.6%. The number of transactions fell about 2% and average ticket was 1.3% lower. Big-ticket comparable transactions, or those of over $1,000, fell 5.8%.
Although Home Depot expects comp sales to decline for the full year, it forecast total sales to increase 2.5% to 3.5%, including an extra 53rd week on the calendar which is projected to provide $2.3 billion to total sales. The SRS acquisition is expected to contribute $6.4 billion. The company expects diluted earnings per share to fall between 2% and 4%, compared with a previous forecast of a rise of about 1%.
Home Depot expects to add 12 stores in fiscal 2024. At the end of the second quarter, the company operated a total of 2,340 stores and over 760 branches across all 50 states, the District of Columbia, Puerto Rico, the U.S. Virgin Islands, Guam, 10 Canadian provinces and Mexico.
