ii view: Home Depot reassures despite trade tariffs

First-quarter results to 4 May  

• Total revenue up 9.4% to $39.85 billion
• Like-for-like sales down 0.3%
• Adjusted diluted earnings per share (EPS) down 3% to $3.56 per share

Guidance: 

• Continues to expect comparable full-year sales growth of around 1%
• Continues to expect full-year adjusted diluted EPS down 2% to $15.24   

Chief executive Ted Decker said:

“Our first quarter results were in line with our expectations as we saw continued customer engagement across smaller projects and in our spring events. 

“We feel great about our store readiness and product assortment as spring continues to break across the country, and I would like to thank our associates for their continued hard work and dedication.”

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ii round-up:

The Home Depot Inc (NYSE:HD) today left its full-year sales and profit hopes unchanged, as the DIY retail giant remained confident that its diversified supply chains would help it navigate newly imposed US trade tariffs. 

First-quarter comparable, or same store sales to early May fell 0.3% from a year ago, although the retailer with stores in the US, Canada and Mexico retailer is still confident about full-year growth of around 1%. US-only sales on the same basis rose 0.2%, helping overall revenue to climb 9.4% to $39.95 billion. Analysts had been forecasting $39.3 billion. 

Shares in the Dow Jones company rose 2% in US trading having come into these latest results up by around a tenth over the last year. That’s ahead of a 7% gain for the Dow Jones itself. UK and European DIY retailer and owner of B&Q, Kingfisher (LSE:KGF), is up by almost a fifth in that time. 

Home Depot operates more than 2,300 stores. Accompanying management comments offered hope that the retailer would not have to raise product prices despite imposed trade tariffs. More than half of products sold are already sourced in the US, with moves being made to reduce imports from any other country to a maximum of 10%.

Slow US housing transactions meant adjusted earnings eased 3% from a year ago to $3.56 per share. Analysts had been forecasting $3.60 per share. 

Earnings on the same basis for the full-year are still expected to fall by 2% to $15.24 per share. Home Depot previously moved to diversify toward trade professionals, buying SRS, which is expected to contribute around $6.4 billion in full year 2025 sales. 

ii view:

Began in 1978, Home Depot today sells around 35,000 products instore and approximately one million items online. Headquartered in Atlanta, Georgia, it employs over 470,000 people across stores and operations. Geographically, the US remains its biggest market at 92% of sales during its last fiscal year to late January. 

For investors, the difficult economic backdrop for the group’s customers, including the uncertainty of trade tariffs and higher than previous interest rates, are not to be forgotten. The weather and its influence on sales is worth remembering, while a forecast one-year price/earnings (PE) ratio above the three-year and ten-year averages may suggest the shares are not obviously cheap.  

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More favourably, a majority of US sourced products are expected to help it combat trade tariffs. Diversity of both products and geographical region exist. The acquisition of SRS has added to sales and diversity of customer, while a forecast dividend yield of around 2.4% is not to be overlooked.   

On balance, and despite ongoing risks, a consensus analyst fair value estimate above $415 per share for this well managed retailer is likely to keep long-term investors interested.

Positives: 

• Strong brand name
• Progressive dividend policy

Negatives:

• Uncertain economic outlook
• The weather can impact performance

The average rating of stock market analysts:

Buy