Home Depot’s Q3 Earnings Leave Room for Improvement

Investors were hoping for a better full-year outlook for Home Depot.

This week, Home Depot reported its third-quarter earnings, and the results were somewhat mixed. The company barely beat earnings expectations but fell short on its revenue and same-store sales. 

And more importantly, the company’s full-year forecast was less than inspiring. Here is an overview of Home Depot’s third-quarter earnings results:

  • Earnings: $3.53 per share, as opposed to $2.52 forecasted
  • Revenue: $27.22 billion, as opposed to $27.53 billion forecasted
  • Same-store sales: 3.6% growth, as opposed to 4.7% forecasted

Home Depot’s growth is slower than expected

Home Depot has been investing heavily in improving its stores over the past year. The company has been working on improving its stores, IT systems, and supply chain. 

But unfortunately, these investments haven’t paid off quite yet. These investments caused the company’s revenue to take a hit during the third quarter. And now, company management believes they will affect its full-year guidance. 

According to CEO Craig Menear, Home Depot is starting to see positive results from these investments, but the payoff is taking longer than anticipated. Menear added that the company needs to improve its digital channels as well. 

Home Depot has been working on improving its digital presence, but the process is “more complex” than company management expected. 

For instance, a big part of the company’s business is catering to professional contractors. 45% of Home Depot’s customers are contractors, which is much larger than its competitor Lowe’s. 

So Home Depot has been working on maintaining its stronghold in the professional contractor space. The company is currently working on updating its B2B website, but it has encountered a number of unexpected technical issues.    

Final thoughts

There was some good news for Home Depot during the third quarter. For instance, its average ticket price increased to $66.36 per customer. And its sales per square foot increased to $449.17.

And overall, analysts seem to be positive when it comes to Home Depot. A Jefferies analyst pointed to the strength of the home improvement industry as a good sign for Home Depot. More affordable housing and lower interest rates have given the industry a boost in recent years.

The company’s shares are trading slightly lower this week, but this could present a good buying opportunity for interested investors.