Home Depot's 1Q profit overshadowed by same-store sales

Home Depot reported strong first-quarter profits, though sales at comparable stores were dampened by inclement weather and revenue was weaker than expected.
Sales at all Home Depot stores open at least a year, a key gauge of a retailer's health, rose 4.2 per cent. Analysts polled by FactSet were looking for a 5.5 per cent increase. (Steven Senne/Associated Press)

Home Depot reported strong first-quarter profits, though sales at comparable stores were dampened by inclement weather and revenue was weaker than expected.

Shares of the Home Depot fell almost 1.7 per cent on the New York Stock Exchange, sliding $3.19 US to close at $187.98 US.

The Atlanta company earned $2.4 billion US, or $2.08 per share, for the three months ended April 29. A year earlier the home improvement retailer earned $2.01 billion US, or $1.67 per share.

The results were two cents better than Wall Street expected, according to a survey by Zacks Investment Research.

Revenue climbed to $24.95 billion US from $23.89 billion US, just short of analyst projections for $25.2 billion US in revenue.

Sales at all Home Depot stores open at least a year, a key gauge of a retailer's health, rose 4.2 per cent. Analysts polled by FactSet were looking for a 5.5 per cent increase.

Sales at established stores climbed 3.9 per cent in the U.S.

Slower growth

The quarterly same-store sales performance was the lowest rate of growth since the second quarter of 2015, Kate McShane of Citi Investment Research wrote on Tuesday, due in part to bad weather.

McShane called the revenue number concerning, but told clients to focus on the broad-based sales trends outside of goods for which sales can hinge on the weather.

Chairman and CEO Craig Menear said in a written statement that the chain had a slow start to the spring selling season, but that it's been building momentum during May.

"These trends, as well as a favourable housing and macroeconomic backdrop, give us confidence to reaffirm our sales and earnings guidance for fiscal 2018," Menear said.

The Commerce Department will report on newly started residential construction Wednesday and there are signs that buyers have not been deterred by soaring home prices and rising mortgage rates.

Builders have become a little more tentative.

In April, homebuilder confidence slid for the fourth consecutive month as the cost of home ownership slides out of reach for more Americans.

Home Depot can still benefit even if home sales flatten. A large number of Americans are choosing to stay put and plow money into the homes they already own.

The Home Depot Inc. still anticipates fiscal 2018 earnings to grow about 28 per cent from fiscal 2017's $9.31 per share and sales to rise approximately 6.7 per cent.