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HD Reports slides 3% in pre-market after posting first annual revenue decline since 2009

AInvestTuesday, Feb 20, 2024 7:53 am ET
2min read

Home Depot, a leading home improvement retailer, reported its Q4 (Jan) earnings for fiscal 2023. The stock is down 3% in pre-market trade as it posted its first annual decline since 2009. HD forecast this decline as it went through a year of "moderation" following three years of pandemic-induced home maintenance by customers. The company"s outlook for 2024 was conservative, which also weighs on shares. 

Shares slipped below the 20-sma ($357) and are lining up for an important test of support at the 50-sma ($351). 

The company's net earnings for the quarter were $2.8 billion, or $2.82 per diluted share, surpassing the consensus estimate of $2.77 per share. the results compared to $3.4 billion, or $3.30 per diluted share in the same period of fiscal 2022. This represents a 14.5% decrease in diluted earnings per share from the same period in the prior year.

The company's sales for the quarter were $34.8 billion, a decrease of 2.9% from the same period in the previous year. Comparable sales for the fourth quarter of fiscal 2023 decreased 3.5%, and comparable sales in the U.S. decreased 4.0%. The decline in comparable sales was primarily due to a decrease in customer transactions of 1.7%. 

The average ticket sales for the quarter were $88.87, a decrease of 1.3% from the same period in the previous year. This decrease was primarily due to lower average ticket per transaction, which was down 1.3% from the same period in the previous year.

The company's gross margin for the quarter was approximately 33.9%, down from 34.3% in the same period in the previous year. This decrease was primarily due to lower sales volume, increased promotional activity, and higher inventory obsolescence charges.

Operating expenses for the quarter were $6.68 billion, a 2% increase from the same period in the previous year. This increase was primarily due to increased compensation costs, including incentive compensation, and increased marketing expenses.

Looking ahead to the fiscal year 2024, Home Depot provided guidance for its performance. The company anticipates a 1.0% growth in diluted earnings per share for the 53-week period, driven in part by the additional week. The 53rd week is projected to contribute approximately $0.30 of earnings per share.

Total sales growth for fiscal year 2024 is expected to be approximately 1.0%, including the impact of the additional week. This 53rd week is anticipated to add around $2.3 billion to total sales. However, comparable sales are projected to decline by approximately 1.0% for the 52-week period, indicating ongoing challenges in the market. Analysts expected to see an increase of approximately +0.2%. 

The company also provided financial targets for the upcoming fiscal year, including a gross margin of around 33.9% and an operating margin of approximately 14.1%, which was light of expectations. The tax rate is expected to be approximately 24.5%, while net interest expense is projected to be around $1.8 billion.

Additionally, Home Depot's board of directors approved a 7.7% increase in its quarterly dividend to $2.25 per share. This translates to an annual dividend of $9.00 per share. The dividend will be payable on March 21, 2024, to shareholders of record on March 7, 2024.

Despite the decline in comparable sales and revenues for the fourth quarter of fiscal year 2023, Home Depot remains optimistic about its future performance. The company's fiscal year 2024 guidance demonstrates its commitment to growth and its ability to navigate challenging market conditions. With strategic initiatives, new store openings, and an increased dividend, Home Depot aims to generate value for its shareholders and solidify its position in the home improvement industry.


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