Home Center (HD) Q3 2023

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Home depotQuarterly sales declined 3% from a year ago, but topped Wall Street expectations as buyers skimped on smaller projects and home repairs.

The company signaled caution about the coming months and lowered its full-year outlook. It said it now expects sales to fall 3% to 4% from a year earlier, compared with a previous forecast of a 2% to 5% decline. Home Depot expects earnings per share to slide 9% to 11%, compared with prior guidance of a 7% to 13% decline.

Shares closed the day at $303.63, up 5.4%, after Home Depot said many trends had begun to normalize after years of turmoil following the Covid pandemic. Prices have stabilized after a bumpy ride from inflation. Tools are in stock again, which helped to support sales. And promotion rates have returned to pre-pandemic levels, boosting profits.

However, Home Depot has not completely emerged from a difficult patch for its business. In an interview with CNBC, Chief Financial Officer Richard McPhail said that the company’s results indicate that this year “is a time of evaluation in home improvement.”

“A buyer who might have remodeled their entire home may choose to do a partial remodeling,” he said. “They may not redo the entire kitchen. They might just do the countertop and the backsplash. And so it’s just the reduction of the projects that we’ve seen.”

Here’s what the retailer said for the fiscal third quarter ended Oct. 29 compared to Wall Street expectations, based on a survey of analysts by LSEG, formerly Refinitiv:

  • Earnings per share: $3.81 vs. Expect $3.76
  • Revenue: $37.71 billion vs $37.6 billion expected

Home Depot reported net income of $3.81 billion, or $3.81 per share, down from $4.34 billion, or $4.24 per share, a year earlier. Revenue fell from $38.87 billion in the prior year.

Comparable sales declined 3.1% year over year, a fall that was not as deep as analysts expected of 3.6%, according to Factset. However, it marked the fourth straight quarter of falling comparable sales, an industry metric that takes out the impact of store openings, closings and renovations.

Home Depot has faced dual challenges over the past year: Rising mortgage rates have put pressure on potential homebuyers, and high inflation is making items tighter. big and big improvements like harder selling.

In recent quarters, buyers have pulled back on projects and more expensive items – a trend that continued in the last quarter, McPhail said.

The housing market has had a mixed effect on Home Depot sales, as mortgage rates are rising, home values ​​remain high and supply remains low, McPhail said. On the one hand, he said, buyers are not moving as much and are undertaking projects that usually come with a new home. But on the other hand, some have chosen to spruce up the house where they have a lower fixed rate mortgage.

“We don’t quite know how that balance is going to be measured,” he said. “And obviously that’s something we’ll look at as we go into next year.”

Customer transactions fell to 399.8 million from 409.8 million in the previous year. When shopping online and in person, customers’ average ticket was $89.36, about the same as a year earlier.

Even before these dynamics developed, Home Depot expected sales to be down, after so many homeowners put off kitchen remodels, painting projects and more due to the pandemic. spread Covid. McPhail has also noted a shift in budget priorities toward experiences, such as vacations and concerts.

Still, he said Home Depot customers are in good shape financially.

“The consumer – and especially the home buyer who is our customer – is healthy,” he said. “They’re employed. They have earned income and seen wealth gains in recent years. They have too much savings and are still involved in home improvement.”

— CNBC’s Robert Hum contributed to this report.

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