Earnings

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Customers wearing protective masks wait to check out at a Home Depot store in Pleasanton, California, U.S., on Monday, Feb. 22, 2021.
David Paul Morris | Bloomberg | Getty Images

Home Depot shares tumbled nearly 4% in premarket trading Tuesday after the company said fewer customers visited its stores during the fiscal second quarter as pandemic-fueled do-it-yourself projects tapered off.

The home improvement retailer also didn’t provide a full-year outlook in its earnings release.

While Home Depot’s quarterly profit and revenue beat Wall Street estimates, same-store sales came in slightly below expectations as the company lapped a period a year earlier when customers flocked to its stores to buy paint, wood, gardening supplies and other materials for home remodeling projects.

U.S. same-store sales were up just 3.4% in the latest quarter, compared with a 25% jump in the year-ago period.

Here’s how the company did for its fiscal second quarter compared with what Wall Street was expecting, according to a survey of analysts by Refinitiv:

  • Earnings per share: $4.53 vs. $4.44 expected
  • Revenue: $41.12 billion vs. $40.79 billion expected

For the three months ended Aug. 1, net income grew to $4.81 billion, or $4.53 per share, from $4.33 billion, or $4.02 per share, a year earlier. Analysts had been looking for $4.44 per share, according to a Refinitiv survey.

Revenue climbed 8.1% to $41.12 billion from $38.05 billion a year earlier. That topped expectations for $40.79 billion.

Total same-store sales rose 4.5%. That was short of the more than 5% growth anticipated from analysts polled by StreetAccount.

The company reported a 5.8% drop in customer transactions compared with a year earlier, but the average ticket was 11.3% larger. Sales per retail square foot grew 5.3% year over year to $663.05.

Inflation could be one factor boosting sales. Analysts say lumber prices peaked during the latest quarter.

“Home improvement was a big Covid winner, and Home Depot performed masterfully through the crisis,” Oppenheimer Senior Analyst Brian Nagel told CNBC. “But I’ve got to believe that as the economy opens up, as people start to move around again, there’s going to be less of a focus on spending on the home. And that’s what we’re seeing in these numbers now.”

Shares Lowe’s fell more than 2% in Tuesday’s premarket, a day before the Home Depot rival reports earnings.

Wells Fargo retail analyst Zachary Fadem noted that Home Depot shares have outperformed both Lowe’s and the S&P 500 index in the past two months. Although Home Depot’s second-quarter same-store sales disappointed, Fadem said he still expects the chain’s profits for the year to move higher.

A strong housing market, with increasing home prices and low mortgage rates, has aided home improvement chains Home Depot and Lowe’s. But analysts are watching to see how long this trend continues, with the delta variant forming the latest headwind for retail businesses. Unease about the rising number of Covid cases could curtail consumer spending.

Home Depot faces tough comparisons with a year earlier, when its brick-and-mortar stores remained open during the pandemic, and many Americans invested in remodeling projects. Home Depot’s revenue growth is expected to slow in 2021.

In the coming quarters, Home Depot and Lowe’s are vying for the business of home professionals, such as electricians — who typically place orders in bulk. Home Depot recently added to its pro business with the acquisition of HD Supply, a large distributor of appliances, plumbing and electrical equipment.

Home Depot shares are up about 26% year to date as of Monday’s market close.

Find the full earnings press release from Home Depot here.

Correction: An earlier version had the wrong date for the end of Home Depot’s fiscal second quarter. It was Aug. 1.

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