Home Depot Inc. (HD) shares are trading lower in premarket trading after the home improvement retailer missed second-quarter 2024 revenue expectations. The company reported a 0.6% year-over-year increase in sales, reaching $43.175 billion, slightly below the consensus estimate of $43.376 billion. This shortfall can be attributed to a decrease in customer transactions and comparable sales, which fell by 1.8% and 3.3%, respectively. The decline in comparable sales in the U.S. was even more pronounced, dropping by 3.6%.
Home Depot attributed the weaker sales performance to a challenging economic environment. The company’s CEO, Ted Decker, stated that higher interest rates and increased economic uncertainty have put pressure on consumer spending, leading to a reduction in spending on home improvement projects. However, the company remains optimistic about the long-term fundamentals supporting the home improvement market.
Despite the revenue miss, Home Depot’s gross profit rose by 1.8% year-over-year to $14.416 billion, with a margin of 33.4%, up 40 basis points (bps) year-over-year. The company’s operating margin, however, declined by 22 bps to 15.1%. While operating income fell by 0.83% to $6.534 billion, the adjusted operating margin remained relatively stable at 15.3%, down slightly from 15.5% a year ago.
Looking ahead, Home Depot has raised its full-year sales guidance, now expecting sales to range from $156.49 billion to $158.01 billion. This revised guidance surpasses the previous estimate of $154.20 billion and is slightly below the consensus of $158.88 billion. The company anticipates a decline in comparable sales between 3% and 4% (previously estimated at ~1%). Home Depot expects adjusted earnings per share to fall between $14.66 and $14.96, compared to the consensus estimate of $15.14. The company also projects a gross margin of around 33.5% (previously 33.9%) and an adjusted operating margin rate between 13.8% and 13.9%.
As of July 28, 2024, Home Depot held $1.613 billion in cash and equivalents. The company generated an operating cash flow of $10.906 billion for the first six months of the year, a slight decline from the $12.205 billion generated during the same period last year. Home Depot currently operates 2,340 retail stores and over 760 branches across the United States, Canada, and Mexico.
