For Home Depot, 1Q miss hits its shares

Shares of Home Depot Inc. fell as the cost of covid-19 measures offset higher sales, tempering financial gains from renewed consumer interest in home-improvement projects.

A pretax expense of $850 million to support workers reduced diluted earnings by 60 cents a share in the first quarter, Home Depot said Tuesday in a statement. Despite a gain in sales, total profit trailed Wall Street estimates, the chain’s first earnings miss since 2014.

The results underwhelmed as investors anticipated robust growth for the company, whose stores were deemed essential and have stayed open during the pandemic. The stock has soared in recent weeks as quarantined Americans spend more fixing up their homes.

The company left a lot of sales on the table by cutting back on promotions and operating hours during the quarter. That reduction in discounting showed up in transactions, which fell 3.9%. Still, the size of each purchase rose 11% on average, pushing total sales growth to the highest level in more than a year.

For the three months that ended May 3, Home Depot Inc. earned $2.25 billion, or $2.08 per share. Industry analysts had expected $2.26 per share., according to a survey by Zacks Investment Research.

In the same quarter last year, the Atlanta-based company earned $2.51 billion, or $2.27 per share.

Revenue increased to $28.26 billion from $26.38 billion, beating Wall Street’s estimate of $27.61 billion.

Home Depot fell 3% to $238.10 a share Tuesday in New York.

There were promising signs. Same-store sales growth accelerated to a double-digit gain in April, and that rate has continued through the first two weeks of its second quarter, the company said. The metric increased 6.4% in the first quarter.

“Early second-quarter sales are strong,” Chief Executive Officer Craig Menear said on a call with analysts. “We see that across geographies. Everything is lifting.”