Home Depot reported their fiscal Q1 earnings before market open today. Revenue was $37.3B vs. $38.34B expected. Adjusted EPS was $3.82 vs. $3.8 expected. Same-store sales was -4.5% vs. -1.42% expected. U.S. Same-store sales was -4.6% vs. -2.14% expected. HD 0.00 stock was down -2.15% during today’s trading session.
In the press release, Home Depot CEO said:
After a three-year period of unprecedented growth for our sector, during which we grew sales by over $47 billion, we expected that fiscal 2023 would be a year of moderation for the home improvement market. Our sales for the quarter were below our expectations primarily driven by lumber deflation and unfavorable weather, particularly in our Western division as extreme weather in California disproportionately impacted our results.
We also observed more broad-based pressure across the business compared to when we reported fourth quarter results a few months ago. Despite a more challenging environment, our associates maintained their relentless focus on our customers, and I would like to thank them and our many partners for their hard work and dedication. While the near-term environment is uncertain, we remain very positive on the medium-to-long term outlook for home improvement and our ability to grow share in a large and fragmented market
Given the negative impact to first quarter sales from lumber deflation and weather, further softening of demand relative to our expectations, and continued uncertainty regarding consumer demand, we are updating our guidance to reflect a range of potential outcomes.
Home Depot has revised their FY2023 forecast, shifting from the previously projected flat revenue to a top line decrease of 2-5% compared to the FY2022. This slowdown is exactly what the Fed wants to see so I suppose the tightening is working its magic. I have been meaning to do some home improvements and I have noticed that vendors start to respond to my inquiries recently compared to a year ago when I was being ghosted most of the time. We are going to see more earnings reports like Home Depot and hopefully the decreased demand will help stabilize prices and squash inflation. Once that happens, the Fed tightening cycle could finally be over. The 5% rate will probably still be around for a couple more quarters though as Q1 corporate earnings are mostly good and the unemployment rate is still quite low at 3.5%.