The Home Deport is expecting its first annual sales decline in more than a decade.
The home improvement giant missed Wall Street estimates for the second consecutive quarter as consumers pulled back on big-ticket home improvement spending after the pandemic-fueled spending spree of the past few years. Cold weather and falling lumber prices also hurt sales.
In a statement, Home Depot president and CEO Ted Decker, said that Home Depot expected 2023 would be a year of “moderation” for the home improvement sector after a three-year period of “unprecedented” growth during which it grew sales by more than $47 billion. Decker took the reins of the company in March 2022.
The company reported net income of $3.87 billion, or $3.82 per share, for the first quarter (ended April 30), down 8.5% from $4.23 billion, or $4.09 per share, in the year-ago period. Analysts had expected earnings of $3.80 per share.
Revenue fell 4.2% to $37.26 billion, missing estimates of $38.28 billion. Comparable sales decreased 4.5%, with U.S. comps falling 4.6%. Lumber deflation accounted for more than 2 percentage points of the decrease.
“Our sales for the quarter were below our expectations primarily driven by lumber deflation and unfavorable weather, particularly in our Western division as extreme weather in California disproportionately impacted our results," said Decker, who took the reins of the company in March 2022. “We also observed more broad-based pressure across the business compared to when we reported fourth quarter results a few months ago.”
Home Depot said it now expects sales and comparable sales to decline between 2% and 5% for the fiscal year compared to its previous forecast of roughly flat sales for the period. Its operating margin rate is expected to come in lower for the year, in a range of between 14% and 14.3% compared with a previously expected 14.5%, which includes the impact of the $1 billion investment in employee wages it announced in February.
At the end of the first quarter, the Home Depot operated a total of 2,324 retail stores in all 50 states, the District of Columbia, Puerto Rico, the U.S. Virgin Islands, Guam, 10 Canadian provinces and Mexico. The Company employs approximately 475,000 associates.