Shoppers arrive at a Home Depot Inc. store in Louisville, Kentucky, U.S. (Photographer: Luke Sharrett/Bloomberg)

Home Depot Slips After a Disappointing Slowdown in Sales Outlook

(Bloomberg) -- Home Depot Inc. fell in early trading after the retailer said that sales growth will start to slow this year, casting doubt on a growth story that has lifted the stock 50 percent in the past three years. Share declines were likely limited, however, by plans to buy back as much as $15 billion of stock and boost the dividend.

  • Fourth-quarter earnings per share were $2.09, short of analysts’ average estimate of $2.16. Same-store sales -- a key gauge of a retailer’s success -- rose 3.2 percent, trailing estimates of 4.5 percent.

Key Insights

  • Home Depot sees comparable-store sales growing 5 percent this year -- just short of 2018’s rate of 5.2 percent. That rate of gains would be the weakest since 2012.
  • The Atlanta-based company took steps to bolster the stock, including increasing its quarterly dividend by 32 percent and authorizing the stock buyback, which will include about $5 billion in repurchases for the fiscal year.
  • Home Depot’s results are often seen as a proxy for confidence in the U.S. housing market. When homeowners believe prices will continue rising, they spend more on renovations. Values had been steadily rising since the recession, but have shown weakness lately.
  • Home Depot joined a host of other U.S. retailers that posted disappointing sales recently. The results came amid a historic cold snap in the U.S., where it generates more than 90 percent of its sales, and a shutdown of the federal government.
Home Depot Slips After a Disappointing Slowdown in Sales Outlook
Home Depot Slips After a Disappointing Slowdown in Sales Outlook

What Bloomberg Intelligence Says

“The 4Q earnings miss won’t deter Home Depot from beating its goal of $115 billion to $120 billion in sales and a 15 percent operating margin by 2020, given the retailer’s focus on the repair and remodel market, scale and growing store productivity, digital commerce and traffic."
-Seema Shah, Retail Analyst
Click here to read research.

Market Reaction

  • Home Depot fell 3.1 percent at 8:15 a.m. in premarket trading Tuesday. The stock had gained 11 percent this year through Monday’s close, in line with the S&P 500 Index.

Get More

  • For the company statement, click here.

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