Home Depot Beats Earnings Expectations — But Revenue Is Down as DIY Boom Passes
Key Takeaways
- Home Depot beat earnings estimates this quarter, though revenue still fell 2%
- The company remains cautious in its outlook for the year
- Home Depot shares were up on Tuesday following the earnings call
Ted Decker, Home Depot’s CEO, didn’t sound overly confident on the company’s earnings call this week, but he didn’t sound disappointed either. His message was a cautious one: “We were pleased in the second quarter, [but] uncertainties remain.”
Home Depot expects full-year sales to drop between 2% to 5% compared to 2022. We’ll take a closer look at what that means for Home Depot and what it might signal about spending in general below.
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What’s happening at Home Depot?
In 2020, everyone was sprucing up at-home offices or finally getting around to retiling the bathroom at home as the pandemic necessitated a lot of time within our four walls. We also weren’t spending our money on vacations or live entertainment. The unexpected, collective DIY kick gave Home Depot a boost.
But for several quarters now, people have spent more on things like travel and entertainment — Taylor Swift Tickets, anyone? As a result, analysts were not expecting anything spectacular from Home Depot’s quarterly earnings.
What was the earnings update?
The good news: Home Depot beat expectations for the quarter. Less good: Revenue still fell 2% in the second quarter. A survey by Refinitiv gives the expected versus actual breakdown: Earnings per share were $4.65 vs. the $4.45 expected, while revenue hit $42.92 billion vs. $42.23 billion expected. Revenue fell year over year from $43.79 billion.
Home Depot’s Chief Financial Officer, Richard McPhail, said they’ve seen “continued caution on the part of consumers when it comes to larger-ticket, more discretionary spending.”
McPhail went on to cite the the two main reasons for this: 1. Folks already having spent considerable home improvement money during the pandemic and 2. Interest rates are still sky high.
Home Depot shares were still up slightly on Tuesday.
The bottom line
High interest rates might negatively impact Home Depot in the coming months as people defer larger projects and big-ticket items, but people will probably still make small updates to their homes — especially everyone who is staying put longer than intended due to high mortgage rates.
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