Home Depot Reports Q3 Improved Sales, Cloudy Consumer Outlook and Raises Guidance On Hurricane Related Demand

In its third quarter financial release, Home Depot (HD) reported total sales of $40.2Bn, an increase of 6.6% from the same period last year. However, comparable sales declined 1.3% from the same period last year, and U.S. stores had negative comps of 1.2%. Adjusted diluted earnings per share were $3.78 in the third quarter, compared to $3.85 in the third quarter last year.

The company’s performance was better than expected, with storms and more favorable weather throughout the quarter driving a higher degree of variability in the performance across its divisions. Four of its 19 U.S. regions delivered positive comps while Mexico and Canada posted comps above the company average, in addition Mexico’s comps were also positive.

Looking ahead, the company updated its fiscal 2024 guidance primarily as a result of the better-than-expected performance in Q3 as well as expected hurricane-related demand in Q4. For FY2024, the company now expects its sales to grow approximately 4%, comps to decline approximately 2.5%, and adjusted diluted earnings per share to decline approximately 1%. The company remains focused on creating the best interconnected experience, growing pro wallet share through a differentiated set of capabilities, and building new stores.

On the conference call, management indicate that they continue to see pressure on larger discretionary projects due to the higher interest rate environment but are seeing strength in needs-based and smaller projects. Additionally, the company is making progress in cross-selling between Home Depot and the recently acquired SRS Distribution, with early signs of success. To further enhance its pro customer in-store experience, Home Depot intends to implement initiatives such as dedicated pro customer experience managers. On the contrary management did indicate its difficulty in parsing out the exact impact of weather on the company’s performance which has set a cautious tone around extrapolating the strong Q3 performance into Q4, given additional uncertainty around the macroeconomic environment and interest rates. These macro uncertainties also cloud the outlook on when the housing market and larger remodeling projects can be expected to recover.