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Home Depot Q1 Sales Beat Estimates, Stock Dips 2% on Earnings Miss
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The Home Depot Inc. (HD - Free Report) has reported first-quarter fiscal 2025 results, wherein earnings missed the Zacks Consensus Estimate and declined year over year. However, sales surpassed the consensus mark and improved year over year. The company’s first-quarter results aligned with its expectations, backed by sustained customer engagement in smaller projects and its spring events. As spring unfolds nationwide, the company is confident in its store preparedness and product offerings.
Home Depot's adjusted earnings of $3.56 per share declined 3% from $3.67 in the year-ago quarter. The bottom line missed the Zacks Consensus Estimate of $3.59 per share. (See the Zacks Earnings Calendar to stay ahead of market-making news.)
Net sales advanced 9.4% to $39.86 billion from $36.42 billion in the year-ago quarter. Also, sales surpassed the Zacks Consensus Estimate of $39.14 billion.
Shares of the company declined 1.6% in the pre-market trading session after the dismal earnings results. This Zacks Rank #3 (Hold) company’s shares have lost 1.5% in the past three months compared with the industry's 3.4% decline.
The Home Depot, Inc. Price, Consensus and EPS Surprise
HD is confident about its initiatives to strengthen the business. It has been on track with its investments to craft the best interconnected experience for customers, improving the pro wallet through its unique ecosystem of capabilities and expanding stores. It is also optimistic about the future of the home improvement industry and its ability to expand market share in this space.
Detailed Picture of HD’s Q1 Results
Home Depot's comparable sales declined 0.3% in the reported quarter. The company’s comparable sales in the United States rose 0.2% in the fiscal first quarter. Foreign exchange fluctuations reduced total company comparable sales by 70 basis points (bps), reflecting the continued impact of a stronger U.S. dollar on international revenue conversion. The increase resulted from the rise in customer transactions. In the fiscal first quarter, customer transactions improved 2.1% year over year, whereas the average ticket was flat.
Our model estimated comps to improve by 3.8% in the first quarter of fiscal 2025, led by a 2.1% rise in customer transactions and a 1.4% increase in the average ticket.
In dollar terms, the gross profit rose 8.3% year over year to $13.5 billion in the fiscal first quarter. However, the gross margin of 33.8% declined 30 basis points (bps) year over year. Our model predicted a 20-bps year-over-year decline in the gross margin to 33.9% for the fiscal first quarter.
Image Source: Zacks Investment Research
SG&A expenses of $7.5 billion increased 12.9% from $6.7 billion in the year-ago quarter. SG&A expenses, as a percentage of sales, grew 60 bps year over year to 18.9%.
The adjusted operating income rose 2.7% year over year to $5.3 billion, while the adjusted operating margin of 13.2% contracted 90 bps year over year. The decline in the operating margin resulted from gross margin contraction and higher SG&A expenses as a percentage of sales.
Our model predicted the SG&A expense rate to increase by 70 bps year over year to 19%. Consequently, we anticipated the operating income to increase 0.7% year over year and the operating margin to contract 90 bps to 13.2% for the fiscal first quarter.
HD’s Other Financial Updates
Home Depot ended first-quarter fiscal 2025 with cash and cash equivalents of $1.4 billion, long-term debt (excluding current installments) of $47.3 billion and shareholders' equity of $8 billion. In first-quarter fiscal 2025, the company generated $4.3 billion of net cash from operations.
What Does HD Plan for Fiscal 2025?
Management reiterated its sales and earnings per share view for fiscal 2025. Home Depot anticipates sales to increase 2.8% year over year. The company expects comparable sales to increase 1% for the 52 weeks.
HD estimates the gross margin for fiscal 2025 to be 33.4%, with an operating margin of 13%. It expects an adjusted operating margin of 13.4%. The company expects an effective tax rate of 24.5% for fiscal 2025. Net interest expenses are likely to be $2.2 billion. HD plans to open 13 stores for fiscal 2025.
Home Depot anticipates GAAP earnings per share to decline 3% year over year for fiscal 2025. It expects adjusted earnings per share to fall 2% year over year. The company anticipates capital expenditures to be 2.5% of total sales.
Canada Goose is a global outerwear brand. Canada Goose is a designer, manufacturer, distributor and retailer of premium outerwear for men, women and children. It carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Canada Goose’s current fiscal-year sales and earnings indicates declines of 4.9% and 1.4%, respectively, from the previous year’s figures. GOOS has a trailing four-quarter average earnings surprise of 71.3%.
Nordstrom is a leading fashion specialty retailer in the United States. It currently carries a Zacks Rank #2. JWN has a trailing four-quarter negative earnings surprise of 26.1%, on average.
The Zacks Consensus Estimate for Nordstrom’s current financial-year sales and earnings indicates growth of 2.2% and 1.8%, respectively, from the year-ago numbers.
Stitch Fix is a leading online personal styling service with more than 2.4 million active clients. It currently carries a Zacks Rank of 2.
The Zacks Consensus Estimate for Stitch Fix’s current financial-year earnings implies growth of 47% from the year-ago period’s actual. SFIX has a trailing four-quarter earnings surprise of 48.9%, on average.
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Home Depot Q1 Sales Beat Estimates, Stock Dips 2% on Earnings Miss
The Home Depot Inc. (HD - Free Report) has reported first-quarter fiscal 2025 results, wherein earnings missed the Zacks Consensus Estimate and declined year over year. However, sales surpassed the consensus mark and improved year over year. The company’s first-quarter results aligned with its expectations, backed by sustained customer engagement in smaller projects and its spring events. As spring unfolds nationwide, the company is confident in its store preparedness and product offerings.
Home Depot's adjusted earnings of $3.56 per share declined 3% from $3.67 in the year-ago quarter. The bottom line missed the Zacks Consensus Estimate of $3.59 per share. (See the Zacks Earnings Calendar to stay ahead of market-making news.)
Net sales advanced 9.4% to $39.86 billion from $36.42 billion in the year-ago quarter. Also, sales surpassed the Zacks Consensus Estimate of $39.14 billion.
Shares of the company declined 1.6% in the pre-market trading session after the dismal earnings results. This Zacks Rank #3 (Hold) company’s shares have lost 1.5% in the past three months compared with the industry's 3.4% decline.
The Home Depot, Inc. Price, Consensus and EPS Surprise
The Home Depot, Inc. price-consensus-eps-surprise-chart | The Home Depot, Inc. Quote
HD is confident about its initiatives to strengthen the business. It has been on track with its investments to craft the best interconnected experience for customers, improving the pro wallet through its unique ecosystem of capabilities and expanding stores. It is also optimistic about the future of the home improvement industry and its ability to expand market share in this space.
Detailed Picture of HD’s Q1 Results
Home Depot's comparable sales declined 0.3% in the reported quarter. The company’s comparable sales in the United States rose 0.2% in the fiscal first quarter. Foreign exchange fluctuations reduced total company comparable sales by 70 basis points (bps), reflecting the continued impact of a stronger U.S. dollar on international revenue conversion. The increase resulted from the rise in customer transactions. In the fiscal first quarter, customer transactions improved 2.1% year over year, whereas the average ticket was flat.
Our model estimated comps to improve by 3.8% in the first quarter of fiscal 2025, led by a 2.1% rise in customer transactions and a 1.4% increase in the average ticket.
In dollar terms, the gross profit rose 8.3% year over year to $13.5 billion in the fiscal first quarter. However, the gross margin of 33.8% declined 30 basis points (bps) year over year. Our model predicted a 20-bps year-over-year decline in the gross margin to 33.9% for the fiscal first quarter.
Image Source: Zacks Investment Research
SG&A expenses of $7.5 billion increased 12.9% from $6.7 billion in the year-ago quarter. SG&A expenses, as a percentage of sales, grew 60 bps year over year to 18.9%.
The adjusted operating income rose 2.7% year over year to $5.3 billion, while the adjusted operating margin of 13.2% contracted 90 bps year over year. The decline in the operating margin resulted from gross margin contraction and higher SG&A expenses as a percentage of sales.
Our model predicted the SG&A expense rate to increase by 70 bps year over year to 19%. Consequently, we anticipated the operating income to increase 0.7% year over year and the operating margin to contract 90 bps to 13.2% for the fiscal first quarter.
HD’s Other Financial Updates
Home Depot ended first-quarter fiscal 2025 with cash and cash equivalents of $1.4 billion, long-term debt (excluding current installments) of $47.3 billion and shareholders' equity of $8 billion. In first-quarter fiscal 2025, the company generated $4.3 billion of net cash from operations.
What Does HD Plan for Fiscal 2025?
Management reiterated its sales and earnings per share view for fiscal 2025. Home Depot anticipates sales to increase 2.8% year over year. The company expects comparable sales to increase 1% for the 52 weeks.
HD estimates the gross margin for fiscal 2025 to be 33.4%, with an operating margin of 13%. It expects an adjusted operating margin of 13.4%. The company expects an effective tax rate of 24.5% for fiscal 2025. Net interest expenses are likely to be $2.2 billion. HD plans to open 13 stores for fiscal 2025.
Home Depot anticipates GAAP earnings per share to decline 3% year over year for fiscal 2025. It expects adjusted earnings per share to fall 2% year over year. The company anticipates capital expenditures to be 2.5% of total sales.
Stocks to Consider
Some better-ranked stocks are Canada Goose (GOOS - Free Report) , Nordstrom (JWN - Free Report) and Stitch Fix (SFIX - Free Report) .
Canada Goose is a global outerwear brand. Canada Goose is a designer, manufacturer, distributor and retailer of premium outerwear for men, women and children. It carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Canada Goose’s current fiscal-year sales and earnings indicates declines of 4.9% and 1.4%, respectively, from the previous year’s figures. GOOS has a trailing four-quarter average earnings surprise of 71.3%.
Nordstrom is a leading fashion specialty retailer in the United States. It currently carries a Zacks Rank #2. JWN has a trailing four-quarter negative earnings surprise of 26.1%, on average.
The Zacks Consensus Estimate for Nordstrom’s current financial-year sales and earnings indicates growth of 2.2% and 1.8%, respectively, from the year-ago numbers.
Stitch Fix is a leading online personal styling service with more than 2.4 million active clients. It currently carries a Zacks Rank of 2.
The Zacks Consensus Estimate for Stitch Fix’s current financial-year earnings implies growth of 47% from the year-ago period’s actual. SFIX has a trailing four-quarter earnings surprise of 48.9%, on average.