Home Depot Disappoints
Home Depot shares tumbled about 5% on Tuesday after the company said it would take more time for its investments to pay off. The Atlanta-based home improvement retailer once again cut its 2019 forecast and reported same-store sales well below estimates. Although earnings came in a penny better than expected, the company said revenue, which also missed analysts’ targets, was hurt by spending on improvements to its IT systems, stores and supply chain.
“We are largely on track with these investments and have seen positive results, but some of the benefits anticipated for fiscal 2019 will take longer to realize than our initial assumptions,” CEO Craig Menear said in the release.
Home Depot and its followers were betting in the latest quarter that its investments in technology to better align its online business with its 2,290 brick-and-mortar stores would have resulted in greater sales gains. The company now says that it is going to take more time.
“Our sales performance was below our expectations,” Chief Executive Craig Menear said on a call with analysts. “Our rollout is largely on track and we are realizing benefits, it’s just taking a little longer than our original assumptions.”
Finance Chief Richard McPhail said in an interview that while the company is taking its time with its re-engineering efforts, overall consumer spending is still healthy. “The consumer is alive and well,” he said. “It was one of the most balanced quarters we’ve had in a long time.”
The number of customer transactions during the third quarter was up 1.5% from a year ago, while the amount of money customers spent per visit rose 1.9%. Big-ticket transactions, or the number of comparable transactions over $1,000, climbed 4.8% from a year earlier.
Lower lumber prices continued to weigh on the company in the third quarter, resulting in about $175 million in lost revenue from a year ago, Mr. McPhail said. In August, the company reported weaker than expected second-quarter results and cut its sales outlook as a result.