Home Depot Earnings Beat Expectations Despite Declining Sales

Home Depot

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Key Takeaways

  • Home Depot third quarter earnings beat analyst expectations despite a decline in sales and net income.
  • Compared to the same period last year, third quarter net income at $3.8 billion was down 12% while sales at $37.7 billion were 3% lower.
  • Slowing sales could be attributed to high inflation and interest rate environment.
  • The company narrowed the range for decline in sales and earnings it expects for the year.

Home Depot (HD) reported better-than-expected third-quarter earnings even as consumer demand was weakened by high inflation and interest rates, leading to a decline in sales.

Net income fell roughly 12% compared to the year-ago quarter to $3.8 billion, or $3.80 per share. Revenue fell by a less-than-expected 3% to $37.7 billion.

Home Depot also refined its guidance for the decline in sales and earnings it expects for the year. It now projects a 3% to 4% revenue decline, versus the sales decline in the range of 2% and 5% over last fiscal it anticipated at the start of this year. Similarly, diluted earnings per share loss expectations are 9% to 11% lower compared to fiscal year 2022, narrower from the 7%-13% range at the end of the first quarter.

This slump could be broadly tied to the series of interest rate hikes by the Federal Reserve, historically a significant headwind for home improvement companies. Higher rates are often tied with slower home sales, and customers also tend to pause plans for DIY home projects when costs are elevated, as in periods of rampant inflation.

Home Depot's earnings were also negatively impacted by adverse materials price changes. The company posted a second straight quarter of comparable sales declines as a result of lumber prices.

Shares of Home Depot were up about 6% in early trading Tuesday but have fallen by about 7% in the last year.

Correction—Nov. 21, 2023: A previous version of this article mischaracterized the changes Home Depot made to its sales and earnings outlook. The headline and story have been changed to reflect that accurately.

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  1. Home Depot. "The Home Depot Announces First Quarter Fiscal 2023 Results; Updates Fiscal 2023 Guidance."

  2. Home Depot. "The Home Depot Announces Third Quarter Fiscal 2023 Results; Narrows Fiscal 2023 Guidance."

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