Home Depot's Q1 Performance: Lumber Deflation, Inclement Weather Hits Revenue, Lowers FY23 Outlook

Home improvement retailer Home Depot Inc HD reported a first-quarter FY23 sales decline of 4.2% year-on-year to $37.26 billion, missing the analyst consensus estimate of $38.31 billion.

Customer transactions for the quarter fell by 4.8%. Comparable sales decreased by 4.5%, and comparable sales in the U.S. dropped 4.61%.

Gross profit declined 4.5% Y/Y to $12.6 billion. The operating margin was 14.9%, and operating income for the quarter fell 6.4% to $5.5 billion. Operating expenses fell 2.9% Y/Y to $7 billion.

EPS of $3.82 beat the analyst consensus of $3.80. The average ticket in Q1 was $91.92, a 0.2% growth, and sales per square foot declined 4.7% to $592.94.

The company held $1.26 billion in cash and equivalents as of April 30, 2023. Operating cash flow totaled $5.6 billion, up from $3.79 billion in the prior year’s quarter.

“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 chair, president, and CEO Ted Decker.

Outlook FY23: Home Depot sees sales and comparable sales decline of 2% - 5% vs. the $156.56 billion estimate. The outlook was lowered from the flat revenue growth anticipated in Q4.

It forecasts an EPS decline of 7% - 13% versus last year compared to analyst consensus of $15.74. The EPS outlook was lowered from a mid-single-digit percentage decline provided in Q4

It anticipates an operating margin of 14.3% - 14%.

Price Action: HD shares are trading lower by 3.49% at $278.48 in premarket on the last check Tuesday.

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