Yahoo Finance Home Depot (HD) Q1 Earnings Surpass, Sales Miss Estimates
The Home Depot Inc. HD has reported first-quarter fiscal 2024 results, wherein earnings surpassed the Zacks Consensus Estimate, while sales missed. Meanwhile, the company’s top and bottom lines declined year over year in the first quarter of fiscal 2024.
Results for the quarter have mainly been impacted by a delayed start to the spring season, as well as continued demand softness for certain larger discretionary projects. However, the company benefited from its store readiness and product assortments in stores and online.
Nonetheless, HD is confident about its initiatives to strengthen the business. It has been on track with its investments to craft the best interconnected experience for customers, improving the pro wallet through its unique ecosystem of capabilities and expanding stores. It is also optimistic about the future of the home improvement industry and its ability to expand market share in this space.
Despite the soft first-quarter fiscal 2024 performance, shares of Home Depot rallied nearly 3% in the pre-market trading session on May 14 probably due to the company’s reaffirmed fiscal 2024 forecast. The Zacks Rank #4 (Sell) company’s shares have lost 5.6% in the past three months compared with the industry's decline of 2.4%.
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Q1 Details
Home Depot's earnings of $3.63 per share declined 5% from $3.82 in the year-ago quarter. However, the bottom line beat the Zacks Consensus Estimate of $3.61.
Net sales declined 2.3% to $36,418 million from $37,257 million in the year-ago quarter. Also, sales missed the Zacks Consensus Estimate of $36,654 million.
Home Depot's comparable sales fell 2.8% in the reported quarter. The company’s comparable sales in the United States declined 3.2% in the fiscal first quarter. Comps were impacted by a decrease in customer transactions and average tickets. In the fiscal first quarter, customer transactions declined 1% year over year, whereas the average ticket was down 1.3%. Sales per retail square foot fell 3.4% in the reported quarter.
Our model predicted comps to decline 2.3% in first-quarter fiscal 2024 due to continued headwinds related to lumber and copper deflation. We expected the comps decline to be led by a 1.5% dip in the number of customer transactions and a 1.2% fall in average ticket.
In dollar terms, the gross profit decreased 1% year over year to $12,433 million in the fiscal first quarter. However, the gross margin of 34.1% expanded 40 basis points (bps) year over year in the reported quarter. The operating income fell 8.5% year over year to $5,079 million, while the operating margin of 13.9% contracted 100 bps year over year. The decline in the operating margin mainly resulted from higher SG&A expenses, as a percentage of sales, offset by an improved gross margin.
SG&A expenses of $6,667 million increased 4.9% from the $6,355 million reported in the year-ago quarter. SG&A expenses, as a percentage of sales, increased 120 bps year over year to 18.3%.
Our model predicted the SG&A expense rate to increase 50 bps year over year to 17.6%. Consequently, we anticipated the operating income to decline 6.3% year over year and the operating margin to contract 70 bps to 14.2% for the fiscal first quarter.
The Home Depot, Inc. Price, Consensus and EPS Surprise
The Home Depot, Inc. price-consensus-eps-surprise-chart | The Home Depot, Inc. Quote
Other Updates
Home Depot ended first-quarter fiscal 2024 with cash and cash equivalents of $4,264 million, a long-term debt (excluding current installments) of $42,060 million, and shareholders' equity of $1,820 million. In the first three months of fiscal 2024, the company generated $5,497 million of net cash from operations.
FY24 View
Management has retained its view for fiscal 2024. It notes that the company’s fiscal 2024 will include an additional 53rd week. Home Depot anticipates sales to increase 1% year over year for fiscal 2024, including $2.3 billion of sales contribution from the 53rd week. The company expects comparable sales to decline 1% for the 52-week period.
HD expects to open 12 stores for fiscal 2024. It estimates the gross margin for fiscal 2024 to be 33.9%, with an operating margin of 14.1%.
The company expects an effective tax rate of 24.5% for fiscal 2024. Interest expenses are likely to be $1.8 billion for fiscal 2024. HD estimates earnings per share to increase 1% year over year for fiscal 2024. It expects the 53rd week to contribute 30 cents per share to earnings in fiscal 2024.
Stocks to Consider
Some better-ranked stocks are Abercrombie & Fitch ANF, Lowe's Companies LOW and GMS Inc. GMS.
Abercrombie operates as a specialty retailer of premium, high-quality casual apparel for men, women, and kids. It has a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Abercrombie’s current fiscal-year earnings and sales indicates growth of 5.9% and 20.1%, respectively, from the previous year’s reported figures. ANF has a trailing four-quarter average earnings surprise of 715.6%.
Lowe's is one of the world’s leading home improvement retailers, offering services to homeowners, renters and commercial business customers. It currently carries a Zacks Rank #2.
The Zacks Consensus Estimate for Lowe's current financial-year sales and earnings suggests declines of 2.2% and 7.5%, respectively, from the year-ago period’s actuals. LOW has a trailing four-quarter earnings surprise of 3.2%, on average.
GMS, a distributor of wallboard and suspended ceiling systems, currently carries a Zacks Rank #2. GMS has a trailing four-quarter earnings surprise of 3.1%, on average.
The Zacks Consensus Estimate for GMS’s current financial-year sales indicates growth of 3.3%, from the year-ago reported number. The consensus mark for the current financial year’s earnings suggests a year-over-year decline of 10%.
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