Home Depot shares take a hit
Share decline indicates Home Depot may be a victim of its own success. Retailer sees drop amid lower hurricane spending
NEW YORK— Home Depot Inc. once again surpassed Wall Street projections in its latest quarter. But the retailer’s shares dropped amid lower hurricane spending and signs that the U.S. housing market is cooling.
Home Depot fell as much as 3.6 per cent to $173.01 (U.S.) after an initial jump in pre-market trading that followed the release of third-quarter results. Despite slowing home sales in some parts of the country, company executives said Home Depot hasn’t seen a corresponding slowdown in any of its regions. They also said it was a tough comparison with last year, when destructive hurricanes in Florida and Texas helped generate about $380 million in extra sales.
The share decline shows that Home Depot, which beat profit estimates for an 18th consecutive quarter, may be a victim of its own success, with investors holding the company to increasingly higher standards. The Atlanta-based retailer also outpaced market projections for sales and same-store sales. Chief financial officer Carol Tome said that slowing home sales in some markets hasn’t affected the company.
“Housing-related metrics are moderating, but the drivers of home improvement spend are supportive of our outlook,” Tome said. “Home prices continue to appreciate, the housing stock is aging, households are being formed and housing continues to turn over.”
Home Depot cares most about home prices increasing because that convinces people to see their properties as an appreciating asset worthy of investment. And the company expects prices to keep rising through next year.