Home Depot hit by soft U.S. home sales

Retailer failed to meet Wall Street result estimates

ATLANTA— Strains in the U.S. housing sector emerged in the aisles of Home Depot, a store with a reputation for consistently delivering surprises to the upside for its investors.

In the final quarter of the year, Home Depot fell short on profit, revenue and same-stores sales as rising real estate prices cast a chill over U.S. home sales.

The company projected that comparable-store sales growth, a key gauge of health in the retail industry, would not be as strong this year as it was in 2018.

The U.S. National Association of Realtors said last week that sales of existing homes dropped 1.2 per cent in January to their worst pace in more than three years. During the past 12 months, sales have tumbled 8.5 per cent. And on Tuesday the Commerce Department announced that the number of homes being built in December fell 11.2 per cent. That’s the lowest level in more than two years.

Would-be homebuyers are increasingly priced out of the market as years of climbing prices and slim housing inventories put ownership out of reach for many Americans.

Those declines can ripple out to companies that sell materials like Home Depot and its rival, Lowe’s, which slid in tandem with Home Depot in early trading Tuesday.

The latest numbers also show contracts to buy homes dipped to the lowest level since early 2014, and those declines were seen in every region of the country, including a 13.5 per cent plunge in the South, which is generally the nation’s fastest growing region for housing.

“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,” wrote Neil Saunders, managing director of GlobalData Retail. “In our view, this has likely affected the momentum of growth at Home Depot.”

For the three months ended Feb. 3, Home Depot earned $2.34 billion (U.S.), or $2.09 per share, for the three months ended Feb. 3. That’s far short of the per-share earnings of $2.22 Wall Street was looking for, according to a survey by FactSet, though an extra week in the period helped push profit and sales higher.

A year ago, the Atlanta home improvement retailer earned $1.78 billion, or $1.52 per share.