An Inside Look at Retail Earnings: Home Depot (HD)

Retail earnings kicked off with Home Depot announcing their results before todays open.

World’s largest home improvement retailer, Home Depot (HD) beat earnings consensus reporting Q4 EPS of $3.30 vs $3.28 while Q4 revenues missed consensus for the first time since 2019, $35.83B vs $35.97B. The company provided FY23 guidance that indicated sales growth and comparable sales to be approximately flat compared to FY22, operating margin rate of approximately 14.5%, which reflects approximately $1B in additional annual compensation for frontline, hourly associates, tax rate of approximately 24.5% and diluted earnings-per-share-percent-decline to be mid-single digits.

Home Depot echoed Walmart’s cautious economic outlook in its disappointing guidance while the Street digested the $1Bn additional wage spend for its hourly workers, shares sold off throughout the day.  Home improvement retailers had been pandemic winners and recently seen as defensive plays amid recession fears. The tides have begun to turn as inflation starts to chip away on consumers ability to spend on remodeling projects. “We expect this to be a year of moderation in demand for home improvement,” Chief Executive Ted Decker said on a post-earnings call.

Home Depot ended the day at $295.50. 7.1% lower from its opening price of $305.55.

US equities were lower in Tuesday trading. Some contributors to the overall market decline were continued discussion around stocks ability to remain resilient through a meaningful rate repricing while the earnings calendar proved to be another drag with a fairly disappointing start to retail announcements. The S&P 500 posted worst session since Dec 15th and ended below 4000 for the first time since Jan 20th.  US indices ended the day down – S&P 500 (2.00%), Dow (2.06%), Nasdaq (2.50%), and Russell 2000 (2.99%).

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An Inside Look at Retail Earnings: Home Depot (HD)

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