By Juveria Tabassum
(Reuters) -Home Depot forecast a decline in annual profit and a bigger drop in its annual comparable sales on Tuesday, as tepid discretionary spending dashed hopes of a recovery in demand for home improvement projects.
Shares of the Dow component fell 4% in premarket trading after the company also reported a bigger drop in comparable sales than expected for the second quarter.
“During the quarter, higher interest rates and greater macroeconomic uncertainty pressured consumer demand more broadly, resulting in weaker spend,” CEO Ted Decker said.
Customers delayed big-scale projects such as flooring, kitchen cabinets and bath to tackle steep inflation, even as higher mortgage rates and home prices hurt new homes sales.
Weak new home sales in May and June led to foot traffic dropping 0.4% in July after a 4.3% rise in June, according to data from Placer.ai.
Home Depot expects annual comparable sales to drop between 3% and 4%, compared with its prior view of a nearly 1% decline.
Comparable sales in the second quarter fell 3.3%, steeper than expectations of a 1.98% decline, according to LSEG data, while customer transactions fell 1.8%, its 13th straight quarter of drop.
“…continued pressure on average ticket hurt sales a little bit, but ultimately it’s the volume number that’s a little bit more disappointing,” said John Tomlinson, global director of research at M Science.
The retailer expects diluted earnings per share to decline between 2% and 4%, compared with a prior forecast of a nearly 1% rise. Adjusted earnings per share of $4.67 for the reported quarter was a tad below $4.68 a year ago.
Shares of rival Lowe’s, which is expected to report results next week, fell 3% before the bell. Retail bellwether Walmart will report earnings on Thursday.
“Depending on the type of retailer, you’re going to see more conservative viewpoints towards the back half of the year, given I think there is probably a softening in overall consumer demand,” Tomlinson said.
(Reporting by Juveria Tabassum in Bengaluru; Editing by Arun Koyyur)
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