Home Depot Cites Unexpectedly Weak Demand for Its Huge Earnings Miss

 US consumers threw in the towel on home improvements.

Please consider Home Depot's First Quarter Fiscal 2023 Results and 2023 Guidance.

Key Points

• Sales were $37.3 billion for the first quarter of fiscal 2023, a decrease of 4.2% from the first quarter of fiscal 2022. 
• Comparable sales for the first quarter of fiscal 2023 decreased 4.5%, and comparable sales in the U.S. decreased 4.6%. 
• Net earnings for the first quarter of fiscal 2023 were $3.9 billion, or $3.82 per diluted share, compared with net earnings of $4.2 billion, or $4.09 per diluted share, in the same period of fiscal 2022.

"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. 

Guidance Was Even Worse

“Given the negative impact to first quarter sales from lumber deflation and weather, further softening of demand relative to our expectations, and continued uncertainty regarding consumer demand, we are updating our guidance to reflect a range of potential outcomes,” said Richard McPhail, executive vice president and chief financial officer. 

Home Depot Fiscal 2023 Guidance

• Sales and comparable sales to decline between 2% and 5% compared to fiscal 2022
• Operating margin rate to be between 14.3% and 14.0%
• Tax rate of approximately 24.5%
• Interest expense of approximately $1.8 billion
• Diluted earnings-per-share-percent-decline between 7% and 13% compared to fiscal 2022 

That would be the first annual decline since the Great Recession in 2009. 

Weekly Chart

Home Depot weekly chart courtesy of StockCharts.Com, annotations by Mish

The daily chart shows dip buyers are out today. The weekly chart is more interesting with unfilled gaps above and below. 

Ultimately, I expect that lower gap to fill. 

Support levels are at 260, 230, and other areas marked by dotted lines. 

The key point for now is that US consumers threw in the towel on home improvements. 

Inflation, consumer sentiment, and Fed rate hikes are starting to bite. 

Retail Sales Rise in April but Price Inflation Accounts for All of the Increase

Advance retail sales from Commerce Department, real (inflation-adjusted) calculation by Mish

Earlier today I noted Retail Sales Rise in April but Price Inflation Accounts for All of the Increase

Inflation Adjusted Retail Sales Last Six Months

• November: -1.5 Percent
• December: -0.8 Percent
• January: +2.3 Percent
• February: -1.1 Percent
• March: -0.8 Percent
• April: + 0.0 Percent

Consumers have to spend more money just to buy the same amount of goods and services as last month.

Real retail sales peaked a year ago, and that's what drives GDP. 

Widespread talk of a robust consumer is nonsense. And they just threw in the towel on home upgrades. 

https://mishtalk.com/economics/home-depot-cites-unexpectedly-weak-demand-for-its-huge-earnings-miss