Home Depot Shares Fall (and Drag the Dow Along With The Way)

Shares of home improvement retailer Home Deport fell more than 3 percent in premarket trading, on Tuesday, after posting disappointing fourth quarter results.  Sales also missed analyst’s expectations, which poses a weaker outlook for the fiscal year 2019.  While that is already significant for the company, it appears this drop could be responsible for half of the Dow Jones Industrial Average’s pre-open sell-off. 

Times are tough, right now, that much is certain; but US home prices are under pressure, with fewer shoppers picking up materials for home improvement and renovation projects. But the company also remarks that they were not prepared for the long run of unfavorable and unforgiving weather that befell much of the country at the end of the year. 

Home Depot’s CEO Craig Menear commented, in a conference call with analysts, “Wet weather delays projects, and that is evidenced in our sales performance in the quarter.”

In a press release, he also said, “We achieved record sales and net earnings in fiscal 2018, while making great progress on the strategic investments we laid out in December of 2017.  We focused on enhancing the interconnected retail experience for our customers, providing localized and innovative product, and delivering best in class productivity.”

With that, let’s take a look at the numbers.  Home Depot report net fourth quarter income (ending February 3, 2019) of $2.34 billion. This translates to $2.09 per share. One year ago, net income for the same quarter was $1.78 billion, which equates to $1.52 per share.  These latest results include a pretax impairment of approximately $247 million, which is about 16 cents per share, and is connected to Home Depot’s wholesale business: Interline Brands.  

Analysts had originally called for earnings of $2.16 per share. 

Fourth quarter revenue did climb more than 10 percent from the year prior, from $23.88 billion to $26.49 billion.  And, looking back at the inclement weather, Home Depot Chief Financial Officer Carol Tome said that weather drove down sales, impacting the numbers by 0.85 percent.

Looking ahead, however, Menear is optimistic. He trusts that “the health of the economy and the consumer, as well as the momentum of our strategic investments,” will help them to meet their new goals in this new year. 

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