Home Depot shares fell Tuesday after the company’s first-quarter revenue was indicative of softening demand.
The hardware retailer’s revenue for the first quarter declined 4.2% from the same period last year. Same-store sales growth also disappointed, with a 4.5% decrease, significantly lower than the estimated 1.42% decline.
Analysts at Barclays opted to reiterate their 'Equal Weight' rating and $310 price target following the report. Home Depot stock was down 1.5% to $284.14 Tuesday afternoon.
“The miss seemed largely anticipated, and the reset was needed,” analysts said in a note published Tuesday. “The key now will be gaining comfort that this is the floor and that comps can revert to positive in 2024. It still seems early for that.”
The macroenvironment hasn’t been favorable, the firm noted.
“The company noted incremental impact from deflation and weather but also cited weakening demand trends,” analysts said.
“There are some regional factors; we believe the West Coast (weather + macro) had a meaningful impact ... We think the company can speak to some signs of improvement where weather has turned more favorable, but we think underlying demand is still weak, and there is a message of short-term uncertainty.”
Home Depot also lowered its guidance. The company now anticipates a 2% to 5% decline in sales and comparable sales compared to fiscal 2022. It expects diluted earnings per share to drop between 7% and 13% compared to fiscal 2022, reflecting uncertainties and softer demand.
“The low end of the range implies a full reset of home improvement wallet share back to 2019 levels,” the analysts noted. “… There is the potential that the multiple expands as the market gains more confidence that this reset gets HD closer to trough EPS as seen in prior cycle.”
Contact Andrew Kessel at andrew.kessel@proactiveinvestors.com
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