Home Depot on Tuesday reported first quarter sales rose 4.4% year over year to $24.9 billion, as company-wide same-store sales rose 4.2% and U.S. same-store sales rose 3.9%. In spite of the increase, the results missed expectations as a slow, cold spring hit the retailer’s all-important home improvement season. Thomson Reuters analysts had forecast revenue of $25.15 billion, according to CNBC. Retail Metrics had forecast a 4.7% same-store sales gain, according to an email to Retail Dive.
Net earnings for the quarter were $2.4 billion, up from $2.0 billion in the same period last year. That beat forecasts.
Customer transactions in the quarter fell 1.3% but average spend rose 5.9% year over year to $66, the company said.
Home Depot executives sounded clearly relieved that the weather has finally turned, noting that customers are now digging into their gardens and shopping for supplies.
"[Home] Depot’s 4.2% comp gain would be the envy of many retailers struggling to generate same store sales above LSD levels, but it was the Atlanta-based chain’s weakest comp increase since [the second quarter of 2015]," noted Retail Metrics President Ken Perkins in comments emailed to Retail Dive. "The nation’s leading home improvement chain did guide FY18 earnings a bit below the current consensus estimate, with same store sales for the year projected to be up 5%."
The good news is that the weather that kept so many shoppers inside has given way to outdoor-friendly days that could provide a lot of catch up in seasonal sales. The majority of that business will be recovered in fact, executives told analysts on a conference call Tuesday morning.
They also took care to emphasize that garden sales feature a lot of lower-ticket items, and that less seasonally dependent sales continued to fare well in the period. In fact, pro sales outpaced retail sales, executives said. And May same-store sales so far are "double-digit positive," CFO Carol Tomé said on the call.
But with rising home prices and mortgage rates, the home improvement retailer — along with rival Lowe’s — could feel the pinch, considering that a red hot housing sector has fueled much of their sales in recent years. Although she agreed this makes teasing out the impact on consumers "complicated," Tomé said the company isn’t perturbed by rising costs as increasing home prices are a reflection of a robust economy. "There’s definitely pressure coming in the back half of the year," she said, "but we’ll manage it."
Tomé also called out Baby Boomers’ inclination to "age out in their homes" as an opportunity for home improvement as walk-in tubs, home security, flooring and lighting become important items to make environments safe and comfortable for older people living at home.