NEW YORK -- Home Depot reported slower-than-expected sales growth for the first quarter, as spring weather that was colder than usual hurt sales of fertilizer, live plants and other gardening-related items.
Sales rose 4.2 percent at all established Home Depot stores during the February through April period. It was the lowest quarterly rate of growth since the second quarter in 2015. The figure was also below the 5.5 percent increase analysts expected, according to FactSet.
However, the company kept its earnings and revenue guidance unchanged for the year, saying that despite the slow start to the spring selling season, it's been building momentum during May. Executives also said Tuesday that the company should benefit from the strong U.S. economy and encouraging housing market.
"During the downturn -- the housing downturn -- we decided our economic engine would be no longer driven by store growth," Carol Tome, the company's chief financial officer, told The Atlanta Journal-Constitution on Tuesday. "It would be driven by productivity and efficiency."
"The whole business is coming back," with the arrival of warmer temperatures, Tome said Tuesday during a conference call. "As we look to the remainder of the year, we are encouraged by what we are seeing in housing and the broader economic environment."
Home Depot's fortunes are so tightly intertwined with the housing market that they are often viewed as a proxy for the sector. The rationale is simple: If Americans feel like their properties are rising in value, they'll spend more fixing them up.
Neil Saunders, a managing director at GlobalData Retail, said Home Depot may be able to recapture some of the sales lost because of the cold weather. But, he said, "many more impulse-driven buys are likely to have been lost."
The Atlanta-based company earned $2.4 billion, or $2.08 per share, for the three months ended April 29. A year earlier the home improvement retailer earned $2.01 billion, or $1.67 per share.
The results were 2 cents better than Wall Street expected, according to a survey by Zacks Investment Research.
Revenue climbed to $24.95 billion from $23.89 billion, just short of analyst projections.
The Commerce Department will report on newly started residential construction today, and there are signs that buyers have not been deterred by soaring home prices and rising mortgage rates.
Builders have become a little more tentative. In April, homebuilder confidence slid for the fourth consecutive month as the cost of home ownership moves out of reach for more Americans.
Home Depot can still benefit even if home sales flatten. A large number of Americans are choosing to stay put and plow money into the homes they already own.
Chief Executive Officer Craig Menear also said Tuesday that the company has increased prices on lumber and wood panels because of tariffs, but it hasn't affected demand from customers.
Shares of Home Depot Inc. slipped $3.10, or 1.6 percent to close Tuesday at $187.98.
Information for this article was contributed by staff members of The Associated Press, Michael E. Kanell of The Atlanta Journal-Constitution and Matt Townsend of Bloomberg News.
Business on 05/16/2018