9:10 AM, May 15, 2018 — Home Depot (HD) reported a light quarter amid worse-than-forecast revenue and full-year guidance but better-than-expected earnings.
The company reported first-quarter revenue at $24.95 billion, missing consensus compiled by Capital IQ of 25.17 billion. Revenue last year was 23.89 billion.
Home Depot reaffirmed its 2018 guidance of $9.31, short of Street projections of $9.38. The company said it expects sales to grow by about 6.7% from $100.90 billion in 2017, up from prior guidance 6.5%, implying an expectation of $107.7 billion, shy of the Street estimate of $107.7 billion.
First-quarter earnings, however, came in at $2.08 a share, up from $1.67 a year earlier and topping estimates compiled by Capital IQ for $2.04 per unit. Comps came in at a 4.2% gain versus 5.5% consensus and Wedbush’s view for a 5% increase.
“The top-line miss was driven by a late-breaking spring, with non-seasonal category sales growth still strong,” Wedbush said. “The company expects to capture `missed’ seasonal category sales in (the second quarter). Excluding an accounting change, gross margins were in line with expectations and SG&A deleveraged 10 basis points more than expected due to the soft comp.”
Shares were down more than 2% in early trading Tuesday.
Despite the top-line miss, the company “navigated well” in a challenging beginning to the season thanks to the unfavorable spring weather. Customer traffic, down 1.3%, fell for the first time since the first quarter 2011. Per-ticket items rose almost 6%. Outside of seasonal business, Home Depot saw “favorable” results in all of its markets and categories with stronger trends expected in May.
“Strength in pro-related sales and a mix shift away from lower-ticket lawn and garden products likely contributed to strong growth in average ticket growth,” Wedbush said. “HD adopted a new revenue recognition policy which resulted in the change of certain expenses and cost reimbursements associated with its private label program, certain expenses related to the sale of gift cards to customers and gift card breakage income.”
Minus the margin impacts from the policy change, gross margins of 34.1% were down 7 basis points year-on-year, in line with estimates and better than consensus. Wedbush said it believes gross margins likely fell due to mix as the company drives sales in big-ticket categories.
Companies: Home Depot, Inc. (The)
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