HOME DEPOT’S SALES, EARNINGS DECLINE
Retailer tops quarter’s expectations despite housing market’s effect
Home Depot sales continue to slide as Americans wrestle with persistent inflation and the company narrowed its outlook for the year. But the nation’s biggest home improvement retailer still topped expectations for the quarter and shares jumped more than 5 percent Tuesday.
Home Depot now expects an earnings per share to decline between 9 percent and 11 percent in 2023 and same-store sales to fall 3 percent to 4 percent. The company previously anticipated an earnings per share drop between 7 percent and 13 percent and a same-store sales decline of 2 percent to 5 percent.
It’s the first time that Home Depot has projected a decline in annual sales since 2009, when the U.S. economy was decimated by a massive housing bubble.
Inflation is hitting Home Depot on a number of fronts.
Americans are more closely watching where they spend money as costs rise. The average receipt at Home Depot declined 0.3 percent from last year during the same period, and customer transactions are down 2.4 percent. It is also getting more expensive to put big-ticket items on credit cards or to take out a loan to buy them, a result of the fight by the U.S. Federal Reserve against inflation.
Secondly, as the Fed has raised interest rates to cool the economy and inflation, it has fractured the real estate market, the health of which is a big deterShares
minant in Home Depot’s fortunes.
Few people are moving from their homes after locking in ultralow mortgages at or below 3 percent. The average rate on the benchmark 30-year home loan is more than twice that now.
Sales of previously occupied U.S. homes in September fell for the fourth month in a row, grinding to their slowest pace in more than a decade. Sales of new homes are falling, too, but for much different reasons.
The lack of existing homes for sale has forced more people into the new home market, or out of the housing market completely as prices skyrocket. Both can impact a company like Home Depot negatively.
The impact of inflation and monetary policy on a company like Home Depot played out in real time Tuesday after the U.S. released the latest data on inflation, which eased in October.
of Home Depot that had been trading flat jumped in early trading.
Third-quarter revenue slipped 3 percent to $37.71 billion, Home Depot said Tuesday, which is better than the $37.52 billion that Wall Street was expecting, according to a survey of analysts by Zacks Investment Research.
Sales at stores open at least a year, a key gauge of a retailer’s health, dropped 3.1 percent. In the U.S., they declined 3.5 percent.
Home Depot earned $3.81 billion, or $3.81 per share, topping the $3.76 per share that industry analysts had expected, but it’s down from last year when the Atlanta company earned $4.34 billion, or $4.24 per share.
Its shares ended Tuesday up $15.56 at $303.63. Shares of competitor Lowe’s, which releases quarterly earnings next week, rose $8.40, or 4.3 percent, to $202.24.