Home Depot's earnings beat estimates, but the CEO notes "continued pressure" on consumers

Home Depot stock fell in pre-market trading after its second-quarter earnings as investors looked forward to a more optimistic note from the usually solid retailer.

Home Depot (HD) posted a slight edge in its second-quarter earnings report on Tuesday before the market opened up as consumers spent less On expensive discretionary items and they weren’t as interested in home renovation as they once were.

“While there has been strength in categories associated with smaller projects, we have seen continued pressure in some of the big-ticket discretionary categories,” Home Depot CEO Ted Decker said in the release.

Home Depot reported revenue of $42.92 billion, slightly higher than analyst estimates. This is the third consecutive quarter of declining same-store sales for the Georgia-based retailer.

The retailer also reiterated its guidance for the full year. The company expects full-year sales to decline between 2% and 5% compared to fiscal 2022. Operating margin is expected to be between 14.3% and 14.0%. Diluted earnings per share is expected to decline between 7% and 13% compared to last year.

Home Depot stock was relatively flat Tuesday in premarket trading after the results, with shares initially up slightly before reversing, down 0.29%.

Earnings summary:

  • Net sales: 42.92 billion dollars, compared to the expected 42.12 billion dollars

  • Diluted EPS: $4.46 vs. $4.45 expected

  • Same store sales: -2.0% vs -4.09% expected

  • Customer transaction growth: -1.8% vs -3.62% expected

  • Average ticket growth: Up by 0.1% vs. the expected rise of 0.56%.

  • Selling, general and administrative expenses: $6.92 billion. $6.86 billion expected

Last quarter, Home Depot sales were down 2% year-over-year, driven by lower transaction growth and lower average ticket growth.

People shop at a lumberyard at a Home Depot store in Alhambra, California.

People shop for lumber at a Home Depot store in Alhambra, Calif., May 4, 2022. (FREDERIC J. BROWN / AFP via Getty Images)

What else we’re watching: Home spending and a $15 billion stock repurchase program

Home Improvement is struggling to regain the appeal it once had during the COVID-19 era when everyone was home. Competitor Lowe’s (LOW), which is expected to report earnings next Tuesday, was relatively flat Tuesday in premarket trading after Home Depot’s results.

Home Depot’s board of directors also approved a $15 billion stock repurchase program, effective August 15th.

What analysts said about the advance earnings:

“We maintain our (minus 2%) forecast for HD (sales) … This is an improvement from 1Q (loss of) 4.6% due to the ‘bathtub effect’ of changing weather in the spring into the second quarter, anomalies in the first quarter that were Also not recurring (eg, SVB, very unusual weather in California), headwind 2 points less than wood shrinkage.

We estimated that HD was down 2-3% sequentially at the time of its May call with June and early July benefiting from last year’s small consumer shock when gas and food prices rose as well as increased event-based shopping behavior by consumers ( For example, July 4), and a spurt of AC sales due to the onset of extreme heat in the U.S. Combined, this suggests that July may be one of the strongest months of the quarter, and it may be holding.” Christopher Horvers, JPMorgan

“Sawn lumber prices rose sequentially during the quarter — partly due to seasonal trends and likely also partly due to Canadian wildfires putting pressure on supply. … HD improved web traffic trends and we believe DIY may have seen some headwinds during the quarter the second.

“One additional consideration to note – 1Q demonstrated a significant legal dispute to settle (unknown amount) that benefited both HD & LOW sales and G&A expenses, and this one-time factor may superficially indicate an acceleration of operating expenses in the second quarter.” – Greg Mellish, Evercore ISI

This story is broken. . Please check back for updates

Brooke DiPalma is a correspondent at Yahoo Finance. Follow her on Twitter at @BrookeDiPalma Or email her at bdipalma@yahoofinance.com.

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