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Home Depot (HD) Q1 2022 earnings

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Home Depot on Tuesday raised its full-year outlook and reported strong quarterly earnings, fueled by the corporate’s strongest first-quarter sales on record, an early signal that the retailer is to date weathering inflation.

Home Depot executives said they have not seen shoppers trading down within the face of upper prices, and do not expect them to start out.

For the fiscal 12 months, the retailer is now expecting sales to extend about 3% and earnings per share growth within the mid single digits. The corporate previously forecast “barely positive” sales growth and an earnings per share increase within the low single digits. Wall Street was expecting revenue growth of 1.8% and earnings per share growth of three.6% for fiscal 2022.

Here’s what Home Depot reported for the quarter ended May 1 compared with what Wall Street was expecting, based on a survey of analysts by Refinitiv:

  • Earnings per share: $4.09 vs. $3.68 expected
  • Revenue: $38.91 billion vs. $36.72 billion expected

The house improvement retailer reported fiscal first-quarter net income of $4.23 billion, or $4.09 per share, up from $4.15 billion, or $3.86 per share, a 12 months earlier. Analysts surveyed by Refinitiv were expecting the corporate to earn $3.68 per share.

Net sales rose 3.8% to $38.91 billion, topping expectations of $36.72 billion. Same-store sales increased 2.2% within the quarter.

U.S. same-store sales rose 1.7%, despite domestic same-store sales declines in March and April as the corporate faced tougher comparisons against last 12 months’s stimulus check sales boost and an earlier spring. A 12 months ago, the corporate reported U.S. same-store sales growth of 29.9%.

“The strong performance within the quarter is much more impressive given the robust performance we were comparing against last 12 months,” CEO Ted Decker said on the corporate’s conference call with analysts.

Weathering inflation

Decker said that the corporate hasn’t seen the sensitivity to inflation that was initially expected.

Customer transactions fell 8.2% but were offset by higher sales amid inflationary pricing. The corporate’s average ticket climbed 11.4%, and customers were still willing to trade up for premium products. Transactions of at the very least $1,000 increased 12.4% within the quarter.

Sales to professionals outpaced those for do-it-yourself projects. Kitchen and loo installation and constructing materials were among the many categories that saw double-digit growth, likely because of that trend.

“While we do not understand how inflation might impact consumer behavior going forward, we’re closely monitoring elasticities and customer trends across our respective categories and geographies and remain encouraged by the underlying strength we see within the business,” he said.

This marks Decker’s first quarter on the helm of the corporate. Decker, a longtime Home Depot veteran, previously served as chief operating officer and inherited the highest job at a troublesome time for home improvement.

Many consumers spent the early days of the coronavirus pandemic painting their partitions, buying recent patio furniture and caring for other do-it-yourself projects that will not must be repeated for at the very least a couple of years. Persistent inflation may lead consumers to postpone renovation projects.

Moreover, rising rates of interest could end in a slowdown in the new housing market. To this point, nevertheless, Home Depot executives said consumers who’re considering a move are actually more tempted to remain of their current low fixed-rate mortgages and remodel their homes as a substitute.

“We consider that the medium-to-longer term underpinnings of demand for home improvement have never been stronger,” Decker said.

Read the total report here.

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