Careful consumers have put the brakes on Home Depot Inc's (NYSE:HD) revenue for the second quarter as they await the Federal Reserve's expected rate cut in mid-September while navigating a shaky economy, an analyst says.
The retail giant posted $43.1 billion in revenue for the three-month period, down 0.6% from a year ago and missing the Wall Street consensus of $43.3 billion.
"The soft sales reflect pressure from the tough home improvement and soft housing market trends, with higher interest rates and macroeconomic uncertainty," Telsey Advisory Group analyst Joseph Feldman said in a note.
"Furthermore, CFO Richard McPhail spoke in a CNBC interview this morning about how the consumer has become increasingly cautious in the current environment, while also deferring projects with expected interest-rate cuts creating lower financing costs three to six months from now," the analyst added.
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Tesley maintained a Market Perform rating and a $360 price target on Home Depot.
Home Depot realized $1.3 billion in revenue over six weeks during the quarter as a result of acquiring building products provider SRS Distribution Inc. earlier this year.
Customer transactions for the second quarter fell 1.8%. Same-store sales worldwide decreased 3.3%, while same-store sales in the U.S. dropped 3.6%.
Second-quarter gross profit rose 1.8% from the same period last year to $14.4 billion to post a gross margin of 33.4% that is up 40 basis points from a year ago.
Price Action: Home Depot rose 1.52% to $351.12 by Tuesday's mid-afternoon trading, while exchange-traded funds that track the stock gave mixed reactions to Tuesday's earnings report.
- IShares U.S. Consumer Focused ETF (BATS:IEDI) ticked up 0.23%
- Consumer Discretionary Select Sector SPDR Fund (NYSE:XLY) gained 2.28%
- VanEck Retail ETF (NASDAQ:RTH) slipped 0.18%
- ProShares Ultra Consumer Discretionary (NYSE:UCC) slid 1.06%
- Fidelity MSCI Consumer Discretionary Index ETF (NYSE:FDIS) rose 2.14%
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