Home Depot Sees Softness in Some Larger Discretionary Projects

Image Source: Home Depot continues to experience some softness in sales of big ticket items.

By Brian Nelson, CFA

On May 14, Home Depot (HD) reported mixed first quarter results that showed revenue and earnings pressure, but the firm’s bottom line continued to hold up well relative to expectations. Total reported sales fell 2.3% in the quarter, while comparable store sales declined 2.8%, with comps declining 3.2% in the U.S. in the period. Net earnings for the first quarter dropped to $3.63 per share compared to $3.82 per share in the same period a year ago. Management noted some softness in its business to start the spring:

The team executed at a high level in the quarter, and we continued to grow market share. And while the quarter was impacted by a delayed start to spring and continued softness in certain larger discretionary projects, we feel great about our store readiness, our product assortment in stores and online, and our associate engagement. Our associates are energized and ready to serve our customers as spring breaks across the country. I would like to thank them for their continued hard work and dedication to serving our customers and communities.

Management reaffirmed its outlook for fiscal 2024, which does not consider any impacts from its recently announced acquisition of SRS Distribution. For the fiscal year, Home Depot expects total sales growth of ~1% with comparable store sales expected to decline ~1%. The company is looking to add 12 new stores and is targeting a gross margin of ~33.9% and operating margin of ~14.1% for the year. Though Home Depot noted a delayed start to spring and softness in big ticket items, we like the company’s resilience through thick and thin, and it remains a key idea in the Dividend Growth Newsletter portfolio.

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