Dow Retail Giant Guides Higher, Makes Surprise Profit Amid Inflation


Home deposit (HD) raised its full-year outlook on Tuesday after posting a surprise first-quarter profit as the home improvement giant weathers cost inflation. Lowe’s (LOW) follows Wednesday. Home Depot shares erased gains while Lowe’s reversed lower.




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Spring is generally the strongest season for home improvement retailers.


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Home Depot Profits

Home Depot earnings for the quarter ended May 1 rose 6% to $4.09 per share, beating FactSet consensus estimates for a decline of 5%. Revenue climbed 3.8% to $38.91 billion, also ahead of views for a 2% decline. Same-store sales rose 2.2%, versus an expected 3% decline, with US sales up 1.7%.

The home improvement giant continues to leverage physical sales while growing e-commerce sales. More than half of online orders in the first quarter were fulfilled through a store, he said. Additionally, professional sales growth outpaced DIY or consumer sales last quarter.

“The strong performance for the quarter is all the more impressive as we compare to last year’s historic growth and faced a slower start to spring this year,” Home’s new CEO said. Depot, Ted Decker, in an earnings release Tuesday morning.

Management said on an earnings call that it hasn’t seen buyers back down from rising prices and doesn’t expect them to start, according to CNBC.

“While we don’t know how inflation might affect consumer behavior going forward, we are watching closely … and remain encouraged by the underlying strength we see in the business,” Decker said.

For fiscal 2022, Home Depot guided mid-single-digit EPS growth with total sales and comps up about 3%. This improves on earlier guidance for low-digit EPS growth and “slightly positive” sales growth. Wall Street had seen Home Depot profits rise 3.6% and revenue 1.8% in 2023.

Home Depot Stock

Home Depot shares were down 0.1% at 295.59 trading today, after hitting a high of 310.94. Home Depot stock encountered resistance at a declining 50-day moving average and remains well below the 200-day average.

The relative strength line for Home Depot stocks is improving after declining since December 2021.

Lowe’s Earnings

Estimates: Wall Street expects Lowe’s earnings per share to rise a penny to $3.22 despite a 3% drop in revenue to $23.765 billion. Same-store sales are expected to fall 2.5% after a 5% gain in the prior holiday quarter.

Results: Come back early on Wednesday.

Outlook: Analysts forecast earnings per share of $13.39 and revenue of $98.106 billion for 2023, after Lowe’s guided the rise in February.

Lowe’s stock

Shares of Lowe’s fell 1.8% to 191.16 on Tuesday, after rising earlier in the session. Lowe’s stock also remains well below key support levels. Floor and decor (FND), which edged above earnings and sales views on May 6, gained 2.3% on Tuesday.

Inflation woes follow the pandemic boom

For Home Depot and Lowe’s, the pandemic boom in home renovations and spending has eased, while rising interest rates weigh on the housing sector as a whole.

Companies are also facing shortages of materials and conductors that drive up costs.

In 2020 and 2021, consumers stuck at home or moving have spent big on renovation projects.

After strong 2020 and 2021, this year has started strong for Home Depot and Lowe’s. Their store visits in January and February continued above pre-pandemic levels, according to data from Placer.ai.

But visits in April fell 1.6% for Home Depot and 9.5% for Lowe’s compared to April 2019. Visits increased month-over-month in March and April, according to the company. of data.

Find Aparna Narayanan on Twitter at @IBD_Aparna.

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