Home Depot Q2 Earnings: Customer Transactions Decline, Cites Weaker Home Improvement Spending But Raises Annual Revenue Outlook

Home Depot Inc HD stock is trading lower after the home improvement retailer missed second-quarter 2024 revenue expectations.

HD reported second-quarter 2024 sales growth of 0.6% year-over-year to $43.175 billion, marginally missing the consensus estimate of $43.376 billion.

The company stated that the total sales include $1.3 billion from the recent acquisition of SRS Distribution Inc. (SRS), reflecting roughly six weeks of sales within the quarter.

Customer transactions for the quarter fell 1.8%. Comparable sales decreased 3.3%, and comparable sales in the U.S. dropped 3.6%.

Gross profit rose 1.8% YoY to $14.416 billion, with a margin of 33.4%, up 40 bps YoY.

The operating margin was 15.1%, down 22 bps YoY, and operating income for the quarter dropped 0.83% to $6.534 billion. The adjusted operating margin was 15.3%, down from 15.5% a year ago.

Operating expenses increased 4.1% year over year to $7.882 billion. Adjusted EPS was $4.67 (-0.2% year over year), beating the consensus of $4.50.

The average ticket in the second quarter was $88.90, a 1.3% decrease, and sales per retail square foot declined 3.6% to $660.17.

As of July 28, 2024, the company held $1.613 billion in cash and equivalents. It generated an operating cash flow of $10.906 billion for six months, compared to $12.205 billion a year ago.

At the end of the quarter, HD operated 2,340 retail stores and over 760 branches across the U.S., Canada, and Mexico.

“The underlying long-term fundamentals supporting home improvement demand are strong. During the quarter, higher interest rates and greater macro-economic uncertainty pressured consumer demand more broadly, resulting in weaker spend across home improvement projects,” commented Ted Decker, chair, president, and CEO.

Also Read: Home Depot Q2 Earnings Preview: Will More Home Repairs, Housing Market Benefit Stock? Analyst Says ‘Weather Headwinds’ Playing Out

2024 Outlook, updated: Home Depot raised its Sales guidance from $154.20 billion to $156.49 billion – $158.01 billion versus the consensus of $158.88 billion. It expects Comparable sales to decline between 3% and 4% (prior ~1%).

HD expects Adjusted EPS of $14.66-$14.96 versus the consensus of $15.14. The company sees a gross margin of ~33.5% (prior 33.9%) and an Adjusted operating margin rate between 13.8% and 13.9%.

Price Action: At the last check on Tuesday, HD shares were trading lower by 2.36% at $337.65 in the premarket.

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