Home Depot Cuts FY24 Earnings, Comps View, Lifts Sales Forecast; Stock Down

(RTTNews) - Shares of Home Depot, Inc. were losing more than 5 percent in the pre-market activity on the NYSE after the home improvement retailer on Tuesday reported weak earnings in its second quarter amid lower comparable sales, despite a slight growth in total sales. However, adjusted earnings beat the Street estimates.

Further, the company revised down its fiscal 2024 earnings view, to now expect a decline, compared to previously expected growth, and also trimmed comparable sales view, but lifted total sales growth forecast to reflect the recent SRS Distribution Inc. acquisition.

Ted Decker, chair, president and CEO, said, "The underlying long-term fundamentals supporting home improvement demand are strong. During the quarter, higher interest rates and greater macro-economic uncertainty pressured consumer demand more broadly, resulting in weaker spend across home improvement projects. However, the team continued to navigate this unique environment while executing at a high level."

Home Depot's revised fiscal 2024 guidance includes 53 weeks of operating results as well as recently acquired SRS Distribution Inc. Meanwhile, the previous outlook did not reflect any impacts from the SRS acquisition.

For the year, the company now expects earnings per share, on a 53-week basis, to decline between 2 percent and 4 percent, and adjusted earnings per share to decline between 1 percent and 3 percent

Home Depot previously expected 53-week earnings per share growth of approximately 1 percent.

The 53rd week is expected to contribute approximately $0.30 each in earnings per share and adjusted earnings per share compared to fiscal 2023.

Further, total sales are now expected to increase between 2.5 percent and 3.5 percent including the 53rd week. Earlier, total sales growth was anticipated at approximately 1 percent, including the 53rd week.

The 53rd week is projected to add approximately $2.3 billion to total sales, and SRS is expected to contribute around $6.4 billion in incremental sales.

Comparable sales are now expected to decline between 3 percent and 4 percent for the 52-week period compared to fiscal 2023. The company previously expected comparable sales to decline around 1 percent.

While comparable sales for the company are not currently on the trajectory for the low end of the range, a 4 percent decline implies incremental pressure on consumer demand, the firm noted.

Home Depot further projects gross margin to be around 33.5 percent, operating margin rate between 13.5 percent to 13.6 percent, and adjusted operating margin rate between 13.8 percent to 13.9 percent.

Previously, gross margin was expected at around 33.9 percent and operating margin at around 14.1 percent.

In its second quarter, net earnings came in at $4.561 billion or $4.60 per share, lower than last year's $4.659 billion or $4.65 per share.

Adjusted earnings were $4.67 per share for the period, compared to $4.68 per share a year ago.

Analysts on average had expected the company to earn $4.49 per share, according to figures compiled by Thomson Reuters. Analysts' estimates typically exclude special items.

Adjusted operating income was $6.6 billion and adjusted operating margin was 15.3 percent, compared to last year's $6.6 billion and 15.5 percent, respectively.

The company's sales for the quarter edged up 0.6 percent to $43.175 billion from $42.916 billion last year. The Srteet was looking for sales of $43.06 billion for the quarter.

Total sales included $1.3 billion from the acquisition of SRS, which represents approximately six weeks of sales in the quarter.

Comparable sales for the second quarter decreased 3.3 percent, and comparable sales in the U.S. decreased 3.6 percent.

In pre-market activity on the NYSE, Home Depot shares were losing around 5.1 percent to trade at $328.26.

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