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No home sweet Home (Depot)
The retail giant reported a drop in sales and a weaker outlook than expected.
It looks like orange isn’t the new black. Home Depot is the latest major company to sound alarm bells about the United States economy. And investors are seeing red.
The home improvement retail giant said Tuesday that overall sales fell 4.2% in its fiscal first quarter. And same-store sales, results for locations open at least a year, were down 4.5% from a year ago.
Making matters worse, Home Depot indicated that revenue and same-store sales for the full fiscal year were likely to drop between 2% and 5%. That would be the first annual sales decline since 2009…just as the Great Recession was ending.
It’s painfully clear that the Federal Reserve’s rate hikes are having their intended effect of taking some air out of the economy…and housing in particular.
Home Depot CEO Ted Decker said in the earnings release that there was “more broad-based pressure across the business” compared to a few months ago. He added that is “a more challenging environment” and that “the near-term environment is uncertain.”
To be sure, deflation in the lumber market is also hurting Home Depot. Bad weather in the West, particularly California, had a negative impact on results too. But make no mistake. The weakness in the broader economy is a bigger issue for Home Depot going forward.
Home Depot CFO Richard McPhail noted that the company was tweaking its revenue guidance due to “further softening of demand relative to our expectations, and continued uncertainty regarding consumer demand.”
Not exactly a ringing endorsement of the supposedly shop until you drop American consumer. Shares of Home Depot fell about 3% in early trading Tuesday. The Dow component’s stock is now down 11% this year. Rival Lowe’s, which will report earnings on May 23, fell around 3% Tuesday as well, pushing its stock into the red for 2023 as well.
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