Home Depot Inc (NYSE:HD) Shares Dive After It Announces Its Q1 Financial Results

U.S retail giant Home Depot Inc (NYSE: HD) announced its quarterly financial results for Q1 of 2018, leading to a decline in its sales after it revealed that sales were lower than expected.
Neha Gupta
The Home Depot Store

According to the report, Home Depot managed to outperform analysts’ expectations as far as earnings are concerned but its sales were lower than expected. The poor sales performance has been attributed to the unfavorable spring weather which heavily affected the company’s gardening business.

“We are pleased by the strength of our business despite a slow start to the spring selling season. Outside of our seasonal business, we had solid results in all markets and categories and are seeing strong momentum in all lines of business during these first few weeks of May,” stated Home Depot CEO, Craig Menear.

Minear also acknowledged that the sales miss had a lot to do with the garden story and that the company missed the mark by a smaller margin than they had anticipated. Home Depot’s same-store sales declined by 4.2 percent which was significantly lower than the 5.2 percent anticipated decline. The firm grew by 6.5 percent excluding the garden business according to Home Depot executives, thus highlighting its massive impact.

Carol B. Tome, the Chief Financial Officer of Home Depot described the spring season as a reluctant bride. The company reported a revenue of $24.95 billion in Q1, 2018, marking a 4.4 percent increase compared to the revenue that it reported in the first quarter of the previous year. However, the figure fell short of the $25.15 billion revenue estimate by Thomson Reuters.

Home Depot’s net income in Q1, 2018 was $2.08 per share, or $2.40 billion, thus marking a noteworthy improvement compared to the net income of $1.67 per share equivalent to $2.01 billion that the company reported in Q1 of the previous year. However, customer transactions dropped by 1.3 percent during the quarter despite shoppers spending $66, 5.9 percent more than they did in Q1 of 2017. The announcement of these figures seems to have rubbed stakeholders the wrong way following the slight decline in the value of the company’s stock.

Just a week ago, analysts at research firm Jefferies lowered their estimates for the retail giant as a result of the unfavorable spring weather. The analysts also expect shoppers not to abandon their projects but rather to push them forward to the summer season. The past year has been a relatively good year for Home Depot as a result of favorable economic performance and a strong housing market.

Meanwhile, the future outlook seems positive owing to different factors, among them being the improved weather conditions which should spearhead a recovery. Home Depot has also been strengthening its e-commerce strategy. The retail firm also revealed that it has launched a 2-hour delivery program and that it expects same-store sales to surge by 5 percent.

The company also plans to change how it records revenue for its private label gift cards and credit cards. Regardless of the slow performance reported in Q1, Home Depot is optimistic about better performance for the rest of the year.

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