Home Depot (HD) earnings will give an inside look at the state of the US consumer.
Wall Street expects another quarter of subdued results, as consumers seek out fewer DIY projects compared to during the pandemic. However, more spending by pro customers may offset some of that loss.
The home improvement chain is expected to report its results on Tuesday morning, with an estimated revenue of $36.66 billion, and adjusted earnings per share of $3.61.
Though the expected revenue is a 2% drop year over year, it’s better than the 3.5% drop seen in Q4.
Lower foot traffic and a smaller ticket size is expected to contribute to a fall in same-store sales growth, down 1.09% and 1.50%, respectively.
“Home Depot faces tough comparisons from the past four years fueled by higher home values and home-related spending during the pandemic,” Telsey Advisory Group managing director Joe Feldman wrote in a note to clients.
Consumers are also “strained” by inflation, interest rates, and a “slow housing market,” Feldman wrote.
The latest Consumer Price Index (CPI) showed inflation tick up 3.5% in March, while existing home sales fell 4.3% that month.
Oppenheimer analyst Brian Nagel said “consumer demand trends within home improvement retail remain challenged and are likely to stay sluggish, at least through 2024, owing to ongoing post-pandemic dislocations, weaker underlying confidence, and historically subdued housing activity,” in a note to clients.
Professionals like contractors and roofers are expected to provide a boost to the business. The pro consumer makes up roughly 50% of Home Depot’s customer base, compared to 25% for Lowe’s (LOW).
In March, Home Depot announced plans to acquire SRS Distribution, a network of independent roofing and building supply distributors in the US. The pending deal could increase its total addressable market by $50 billion dollars, “as it would open up opportunities with the specialty trade pro,” per Bank of America analyst Robert Ohmes.
Ohmes, who has a buy rating, believes this audience and potential acquisition could help sales growth.
“While the macro remains choppy, and we expect continued pressure in 2024 on discretionary and big ticket, we expect HD to see continued share gains as it accelerates growth and capabilities with the complex pro,” he wrote to clients.
He also expects on-shelf availability improvements, a strong value proposition, and strategic investments to help the quarterly results.
Following its Q4 quarterly results, CEO Ted Decker told investors, “After several years of unprecedented sales growth, we entered 2023 with more inventory than we would have preferred … we feel very good about our inventory position heading into 2024.”
Here’s what Wall Street expects from Home Depot, according to Bloomberg consensus:
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Revenue: $36.66 billion, compared to $37.26 billion
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Adjusted earnings per share: $3.61, compared to $2.82
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Same-store sales growth: -2.16%, compared to -4.50%
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Foot traffic: -1.09%, compared to -4.80%
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Average ticket size: -1.50%, compared to 0.20%
As of Q4, it expects to end fiscal 2024 with 1% total sales growth, and a drop of 1% in same store sales, compared to fiscal 2023.
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Brooke DiPalma is a senior reporter for Yahoo Finance. Follow her on Twitter at @BrookeDiPalma or email her at bdipalma@yahoofinance.com.