The economy is dying due to excessive debt, Joe Biden policies, higher interest rates, and no more stimmies.
Home Depot Plunges After Worst Revenue Miss In 20 Years, Slashes Guidance; Blames Weather, Lumber And Faltering Consumer
Ahead of this week’s earnings-season ending barrage of retail data, analysts and traders were asking if the strong consumer spending momentum from early in the season would carry through or if we would see an uglier side to the US consumer. The answer was delivered moments ago from Home Depot, is decisively the latter.
Home Depot reported its biggest revenue miss in more than 20 years and slashed its outlook for the year as consumers delay large projects and buy fewer big-ticket items like patio sets and grills, the latest sign consumers have maxed out their credit cards after splurging on Weber grills, hot tubs, and patio sets during the pandemic years.
The largest US home improvement chain said comparable sales are expected to decline between 2% and 5% this fiscal year compared with last year, both missing badly the consensus estimate of -0.73%. Home Depot previously forecasted sales would remain flat. It blamed lower lumber prices and bad weather on the rough start to the year.
For the first quarter, comparable sales fell 4.5%, far worse than the expected 1.4% drop, the latest indication that the housing market boom is cooling, which may be a symptom the Federal Reserve’s restrictive monetary policy is working.
“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,” said Ted Decker, chair, president and CEO.
“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,” said Decker.
Here are the earnings highlights (via Bloomberg):
Q1 Results:
- Net sales $37.26 billion, -4.2% y/y, estimate $38.34 billion
- EPS $3.82 vs. $4.09 y/y, estimate $3.80 * Customer transactions -4.8%, estimate -5.36%
- Comparable sales -4.5% vs. +2.2% y/y, estimate -1.42%
- US comparable sales -4.6% vs. +1.7% y/y, estimate -2.14%
- Average ticket sales $91.92, +0.2% y/y
- Average ticket +0.2%, estimate +2.63%
- Sales per square foot -4.7%
- Merchandise inventories $25.37 billion, estimate $26.16 billion
- Total location count 2,324, +0.3% y/y, estimate 2,323
- SG&A expense $6.36 billion, -3.9% y/y, estimate $6.84 billion
2024 Forecast:
- Sees comparable sales -2% to -5%, estimate -0.73%, saw approx. flat (Bloomberg Consensus)
- Sees sales -2% to -5%, saw approx. flat
- Sees EPS down 7% to 13%, saw down mid-single-digits
- Sees operating margin 14% to 14.3%, estimate 15.5%
Richard McPhail, executive vice president, and chief financial officer, warned about the “continued uncertainty regarding consumer demand.”
Home Depot was the first major retailer to report its first-quarter earnings. Target and TJX Cos. will release earnings on Wednesday. Walmart is on Thursday. On Monday, we shared the latest monthly Consumer Checkpoint report published by Bank of America which showed signs of a slowdown in consumer spending.
In kneejerk reaction, Home Depot shares tumbled as much as 5% before recovering some losses.
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Keep in mind that 4.2% drop in sales is in addition to the 3 or so percent inflation in the same quarter, suggesting an actual product turn contraction of closer to 7%. This is a very large number. Producers will have less pricing power as product turn decreases.
Remember kids, it’s not money what makes wealth, it’s ability to obtain product. Money’s referential to that until it’s not.
Housing is the most accurate indicator of the whole economy…
Housing is very expensive. More income/wealth inequality on the way?
An even better indicator — truck traffic — the number of 53′ trailers hauling goods. It still seems to be in pretty good shape, but I’ve noticed that it can be a leading indicator when it heads South …
As for housing … here in SW Washington houses are asking — and often getting — about $325-375/square foot. mexican framing crews on the semi-custom homes near where I live typically get about $5.75-6.00/square foot to frame them …
Rewinding the clock a bit — in LA County, specifically on the Palos Verdes Peninsula, in the mid-1980s 1,000-1,200 square foot fixers without an ocean view — that would need $60-80K in fixing — went for $375-425K … roughly $400/square foot. Framing crews for semi-custom homes at that time were getting paid $5.75-6.25/square foot to frame homes … and they were done with real wood products (not variations of wood chips and glue a la OSB) by real US Citizen carpenters. The exteriors were real stucco — not Hardie or vinyl or the fake stucco (EIFS) so ubiquitous in the PacNW since the ’90s …
Least expensive sale in PV in 2005 when I was in Redondo was $975k. And I think it needed rehab.
doubles as most accurate insanity indicator, too. unless “economy” is just a synonym for “insanity.”
There will be no apocalypse.
but your regularly scheduled caponing capo/calypse will continue.
thanks be to founding godfathers & irrefusable offers.
Got some old beat up solid oak dining chairs for free on the side of the road. Decided to sand and restain them.
Sandpaper, stain and varnish at Home Depot: $65. More expensive than I thought, but will still be beautiful bargain chairs once I put the elbow grease in. The place was hopping. I was barely able to get a parking spot on a Saturday. People buying plants, mulch, paint, lumber, toilets. You name it, it was flying off the shelves.
Is it the increased cost of labor (cashiers, shelf stockers) that leads to bad numbers in profit?
No slowdown here in Mordor.
Not too long ago a quart can of stain was $7.95 or so, now a smaller 1/2 quart can is $6.95. They have reduced quantities and can sizes to try to make a sale.
Check the lumber prices or check electrical equipment. They buy the same crap from the same vendor from China and Jack up the prices at least five time. Compare tie wraps at HD and at Harbor Freight, same Chinese crap but 4-5 times more expensive.
Don’t even go near the tools.
Lumber prices too low? Too bad. Makes up for when they were gouging us at $13-$15 for one 2×4, and you can bet not all of that ridiculous price was due to their costs, or they would not have enjoyed “a three-year period of unprecedented growth”.
It’d be interesting to see HomeDepot’s line item for ‘shrinkage’ … large-scale theft by organized gangs of thieves.
I’ve talked with numerous security personnel who rotate through the HomeDepot stores in Vancouver, WA/Portland, OR, and they uniformly report that theft in those stores is rampant … folks walking out with shopping carts full of copper wire, tools, etc. — mostly high-value stuff — and the security guards are forbidden from even saying anything to them about it.
I keep wondering why they’re even there … they’re just one more unnecessary expense that has a negative ROI …
No compunction (“we are an essential business”) meet no compunction (“I am a crook, too”).
Die kanarien vogel is tot.
I prefer Menards.
I like home depot because they have ridgid tools because of the quality and lifetime, and ridgid tools are a hometown company. They also have pretty good free delivery.
Menards are pretty good too, but they are the furthest away. They have good prices and selection on some things and that are hard to find also.
Lowes is closest, and I like their tool selection better if it isn’t battery powered, so they are usually first on the list. I think their hardware selection is better, but none of them are great (we do still have a few real hardware stores about).
If I need bulk nuts and bolts rural king is king, and tractor supply is next.
If you are going to menards, you are probably not to far away.
I see Lowe’s had a much smaller drop of 1.16%. Good thing that Arthur Blank owns the Falcons. Wonder if his ex-wife, Stephanie Howard Wray Blank, is liquidating her HD stock.
Lies, damn lies, and charts.
That chart makes it look like HD dropped 95%.
IT ONLY DROPPED 2%
I have owned Home Depot for more than 10 years. It has performed very well. Bought after the last housing crisis and kept buying.
BTFD
Tough Schiff, lower your g.d. Prices.
You’ve got too many people doing nothing in your stores and you want us to pay the higher prices to support the dumbasses.
The pro-bros are the ones who pay any price HD asks for the material, they don’t give a Schiff, the homeowner pays for it in one lump sum. But the average diy people, we’re not lazy, we shop, check the prices and yes, we don’t buy if the price is too high.
Screw HD, Lowe’s, Ace and all the rest of the price gougers. We have to worry about our own finances.
Nobody else is spending all their $$$ at the gas station?
why didn’t it blame “climate change?” or white racist homophobic males who never appear in its ads anyway?
if it wants to get closer to the truth, it would acknowledge the massive spike in deaths and disabilities from the bioweapon marketed as a “vaccine.”