Home Depot’s earnings beat estimates, but retailer is seeing pressure on big-ticket items

Consumers have been struggling this year with higher interest rates and inflationary pressures, that have some conserving cash for essentials. The housing market has been under pressure as rates have risen, leaving some unable to afford to take out mortgages.

See now: Mortgage rates plunge amid signs of a weakening consumer

The Atlanta-based home-improvement retailer
HD,
+6.55%
had net income of $3.8 billion, or $3.81 a share, for the quarter, down from $4.3 billion, or $4.24 a share, in the year-earlier period. Sales fell 3% to $37.7 billion.

The FactSet consensus was for EPS of $3.75 and sales of $37.6 billion.

Same-store sales fell 3.1%, while FactSet was expecting a decline of 3.6%

The company narrowed its prior guidance for the full year and said it now expects EPS to fell 9% to 11% and for sales and same-store sales to be down 3% to 4%.

The FactSet consensus implies an EPS decline of 9.4%, and a sales decline of 3%.

The stock rose 1% premarket, and is down 9% to date in 2023, while the S&P 500
SPX,
+1.83%
has gained 15%.

D.A. Davidson analyst Michael Baker noted one bright spot in total comps that were 155 basis points better than the industry decline of 4.65%.

“This is the widest positive gap in HD’s favor since 1Q21,” he wrote in an early note to clients.

Baker also noted that the guidance brackets the consensus at the high end. “That does imply some downside to 4Q23 versus consensus, but while HD’s business trends clearly remain soft, this is likely no worse than most expected, and as a result we think the stock should act fine today.”

The company was set to hold its earnings call with analysts at 9 a.m. Eastern time.