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Shares of the largest U.S. home improvement chain tumbled about
4% premarket, while those of smaller rival Lowe's Cos Inc
dropped 3%.
Home improvement retailers have now lost their pandemic-era
sparkle as consumers shift away from home renovations and focus
on travel, vacations and other services, driving quarterly
transactions 4.8% lower at Home Depot.
"It's definitely a surprise. The speed and magnitude of the
weakness is surprising relative to what we were thinking," D.A.
Davidson analyst Michael Baker said.
Home Depot kicks off a big week for U.S. retailers' earnings,
with Target Corp and Walmart Inc scheduled to report on
Wednesday and Thursday, respectively.
Data on Friday showed consumer sentiment slumped to a six-month
low in May, while U.S. long-term inflation expectations jumped
to the highest since 2011.
While Home Depot is grappling with a bigger slowdown in the
home-related sector, the results signal retail sales will be
soft across the board, Baker added.
An unusually wet and cold March across many parts of the U.S.
further dented sales at a time when lumber prices have declined,
while Home Depot finance chief Richard McPhail said demand was
softening even further compared to the company's expectations.
Home Depot now expects fiscal 2023 comparable sales to fall
between 2% and 5%, compared to its prior outlook for nearly flat
sales. Analysts were expecting a 0.9% decline, according to
Refinitiv IBES data.
The company forecast earnings per share to decline between 7%
and 13%, compared to a mid-single digits decline estimated
previously.
Home Depot's first-quarter comparable sales decreased 4.5%,
compared with estimates for a 1.74% drop.
The company posted a profit of $3.82 per share, above estimates
of $3.80.
(Reporting by Deborah Sophia in Bengaluru; Editing by Sriraj
Kalluvila)
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