Home Depot, the U.S. home improvement chain, is set to release its latest earnings results on Tuesday. The company has been focused on attracting more sales from home professionals such as roofers and landscapers. Wall Street analysts are expecting earnings per share of $3.60 and revenue of $36.66 billion for the fiscal first quarter.
One of the challenges Home Depot faces is a tougher housing backdrop, which has impacted demand for do-it-yourself (DIY) projects. Approximately half of Home Depot’s sales come from DIY customers, while the other half comes from professionals. With high interest rates discouraging consumers from moving into new homes, the turnover that often sparks home projects has declined. Additionally, consumers have been purchasing fewer big-ticket items and opting for more modest projects, potentially due to inflationary pressures. As they spend more on essentials, discretionary income becomes limited, leading to trade-offs in spending.
Furthermore, Home Depot has seen a moderation in sales after experiencing explosive demand during the Covid-19 pandemic. In the year-ago first quarter, the company posted its worst revenue miss in nearly two decades and had to revise its forecast. Sales for the fiscal year ending in late January dropped 3% year over year, totaling $152.7 billion.
To overcome these challenges, Home Depot has been ramping up its efforts to attract professionals. This is because professionals tend to make larger quantity purchases and provide a more consistent source of sales. In late March, Home Depot announced its acquisition of SRS Distribution, a Texas-based specialty distributor of roofing, landscaping, and pool supplies, for $18.25 billion. This acquisition represents the largest in the company’s history and will allow Home Depot to leverage its growing network of distribution centers across the country to store and deliver supplies directly to job sites.
In addition to targeting professionals, Home Depot plans to drive growth by opening approximately twelve new stores this fiscal year and enhancing its online and in-store experience. The company aims to improve its overall customer experience and convenience to remain competitive in the market.
Looking ahead, Home Depot expects its total sales to grow about 1% in fiscal 2024, including an additional week. However, it anticipates a decline of approximately 1% in comparable sales, excluding the impact of store openings and closures.
Despite these efforts, Home Depot’s stock has seen a slight decline of about 2% so far this year, compared to the roughly 9% gains of the S&P 500. Investors will be closely watching the earnings report to assess the company’s performance and its ability to navigate the current housing environment.
In conclusion, Home Depot is facing challenges in the housing market that have impacted demand for DIY projects. To counter this, the company is focusing on attracting professionals, expanding its distribution capabilities, and improving the overall customer experience. The upcoming earnings report will provide insights into Home Depot’s performance and its strategies for growth in the face of ongoing challenges.
