A look at Home Depot's (HD) earnings will give you an idea of the current state of American consumers.
Wall Street expects another quarter's performance to slow as consumers seek fewer DIY projects than during the pandemic. However, increased spending by professional customers could offset some of that loss.
The home improvement chain is scheduled to report earnings Tuesday morning, with expected revenue of $36.66 billion and adjusted earnings per share of $3.61.
Expected sales are down 2% year over year, but better than the 3.5% decline seen in the fourth quarter.
Same-store sales growth is expected to decline by 1.09% and 1.50%, respectively, due to lower foot traffic and reduced ticket sizes.
“Home Depot faces tough comparisons over the past four years due to rising home values and housing spending during the pandemic,” Joe Feldman, managing director at Telsey Advisory Group, said in a note to clients. ” he said.
Consumers are also “strained” by inflation, interest rates and “a weak housing market,” Feldman wrote.
According to the latest Consumer Price Index (CPI), inflation rose 3.5% in March, but existing home sales fell 4.3% in the same month.
“Consumer demand trends in the home improvement retail industry remain challenged, with continued post-pandemic disruption, weakening fundamental confidence, and historically low housing activity,” said Oppenheimer analyst Brian Nagel. “As a result, the slump is likely to continue until at least 2024,” he said in a note. client.
Professionals such as contractors and roofers are expected to boost business. Professional consumers make up approximately 50% of Home Depot's customer base, while Lowe's (LOW) has a 25% customer base.
In March, Home Depot announced plans to acquire SRS Distribution, an independent U.S. roofing and building materials distributor network. The pending deal could add $50 billion to the total addressable market “by opening up opportunities with specialized trade professionals,” according to Bank of America analyst Robert Ormes. .
Ohms rates it a “buy,” but believes this audience and acquisition potential could lead to sales growth.
“Although macroeconomic conditions remain volatile and pressure on discretionary rights and high-ticket tickets is expected to continue in 2024, HD continues to gain market share by accelerating growth and complex professional capabilities,” he wrote in a statement to clients. I'm predicting that.”
He also expects improved inventory availability, a strong value proposition and strategic investments to contribute to quarterly results.
Following the fourth quarter results, CEO Ted Decker told investors: “After several years of unprecedented sales growth, we are carrying more inventory than we had hoped.'' “Now that we're in 2023…we have a very good feeling about the inventory situation heading into 2024.”
Here's what Wall Street expects from Home Depot, according to Bloomberg Consensus.
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Revenue: 36.66 billion dollars ($37.26 billion)
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Adjusted earnings per share: $3.61 compared to $2.82
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Same store sales growth: -2.16% (compared to -4.50%)
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Pedestrian traffic: -1.09% (compared to -4.80%)
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Average ticket size: -1.50% (compared to 0.20%)
As of the fourth quarter, the company expects to end fiscal 2024 with a 1% increase in total sales and a 1% decline in same-store sales compared to fiscal 2023.
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Brooke DiPalma is a senior reporter at Yahoo Finance. Follow her on Twitter @brooke di palma Or email bdipalma@yahoofinance.com.
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