Categories Analysis, Retail

Home Depot (HD): A look at how the home improvement retailer fared in Q1 2024

Comparable sales are expected to decline approx. 1% in FY2024

Shares of Home Depot (NYSE: HD) rose over 2% on Wednesday. The stock has gained 19% over the past 12 months. The company delivered mixed results for the first quarter of 2024, with earnings exceeding expectations and revenue falling short. It also reaffirmed its guidance for the full year. Here’s a look at how the home improvement retailer performed in Q1:

Mixed results

Home Depot reported net sales of $36.4 billion for the first quarter of 2024, which decreased 2.3% year-over-year and fell short of market estimates. The company delivered EPS of $3.63, which declined 5% from last year but surpassed projections.

Business performance

In Q1, Home Depot saw comparable sales decrease 2.8%, and comparable sales in the US decline 3.2%. On its quarterly conference call, the company said its results were impacted by a delayed start to spring and continued softness in certain larger discretionary projects. On the other hand, it saw strong customer engagement and strength in outdoor projects in regions where the weather remained favorable.

Comp transactions decreased 1.5% and comp average ticket decreased 1.3% during the first quarter. Big-ticket comp transactions, or those over $1,000 dollars, declined 6.5% YoY, due to softness in larger discretionary projects like kitchen and bath remodels.

Home Depot saw both its DIY and Pro customer segments deliver a negative performance during the first quarter. On its call, the company said that while Pro backlogs remain relatively stable, homeowners continue to take on smaller projects.

One of Home Depot’s key focus areas is driving sales growth in the Pro customer segment. As mentioned on its call, the company serves a highly fragmented addressable market of approx. $1 trillion.

Within this total addressable market (TAM), HD sees vast opportunity with the residential Pro customer, who shops across many categories of home improvement products. The company estimates this specific opportunity represents a total addressable market of approx. $250 billion, of which it currently holds a relatively small share. In order to serve this TAM, Home Depot is developing a set of capabilities and services that it refers to as the Pro Ecosystem.

Home Depot’s proposed acquisition of SRS Distributors is expected to be complementary to the Pro Ecosystem as it will give the company the opportunity to expand into specialty trade verticals like roofing and landscaping.

Outlook

Home Depot reaffirmed its outlook for fiscal year 2024. The company expects total sales growth of approx. 1% over a 53-week period. The 53rd week is projected to add around $2.3 billion to total sales. Comparable sales are expected to decline approx. 1% for the 52-week period. EPS is expected to grow approx. 1% over the 53-week period, with the 53rd week expected to contribute around $0.30.

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