Home Depot Stock Drops as Comparable Sales Guidance Lowered

Home Depot (HD) shares fell despite an earnings beat Tuesday as the retailer projected a larger fiscal 2024 comparable store sales decrease than it had previously.

Home Depot reported $4.56 billion in net income on $43.17 billion in total sales, both better than consensus analysts’ estimates compiled by Visible Alpha. However, Home Depot’s revenue included $1.3 billion from six weeks of sales for SRS Distribution, whose $18.25 billion acquisition closed during the quarter, and comparable sales fell 3.3% globally in Q2.

Guidance Lowered Amid ‘Macro-Economic Uncertainty’

“The underlying long-term fundamentals supporting home improvement demand are strong,” Home Depot Chief Executive Officer (CEO) Ted Decker said. “During the quarter, higher interest rates and greater macro-economic uncertainty pressured consumer demand more broadly, resulting in weaker spend across home improvement projects.”

Home Depot and home-improvement competitor Lowe’s (LOW) have cited inflation and high interest rates as a factor pressuring sales in recent quarters as consumers put off “big ticket” projects to focus spending on essentials.

Home Depot also adjusted its fiscal 2024 guidance, with total revenue projected to rise 2.5% to 3.5% from fiscal 2023, up from 1% previously, with SRS expected to contribute roughly $6.4 billion in incremental sales. However, comparable sales are projected to decline 3% to 4%, worse than previous guidance of a 1% drop.

Shares of Home Depot fell more than 2% in premarket trading Tuesday to $337.69. In a note, JPMorgan analysts said they “would be buyers of any weakness” in the stock.