The Home Depot Inc. failed to fully rebound from a lackluster end to last year, with the company saying a calendar adjustment added to the drag from wet weather. Tariffs also weighed on the stock, with the company saying that a recent increase in duties isn’t included in its guidance.
First-quarter same-store sales — a key gauge of a retailer’s success — rose 2.5%, trailing estimates of 4.3% compiled by Consensus Metrix. However, the company said without a calendar shift this growth metric would have been 330 basis points higher. First-quarter earnings per share rose to $2.27, topping projections of $2.18.
Homeowners often spend more when home prices are rising because they increasingly view their properties as an investment. This trend has been in place since the recession, offering Home Depot a big boost, but there have been signs that the market is cooling off.
On May 21, the company said the current housing backdrop led it to reaffirm its guidance for fiscal 2019. All the rain in February hurt the company’s performance, but “those sales are coming back as the weather improves,” Chief Financial Officer Carol Tome said on a call with analysts. Falling lumber prices also weighed on sales.
The company said a popular piece of wood is being sold for more than 50% less than it was a year ago. If this deflation continues, it may reduce full-year revenue by $800 million, according to the chain. Same-store sales were dampened because of a quirk in the fiscal-year calendar, the company said. In accounting terms, last year contained 53 weeks, and this year has 52. Total revenue rose 5.7% to $26.4 billion, meeting the average estimate.