For once, blaming the weather is a legitimate excuse for a retailer looking for a culprit for its disappointing sales results.
The Home Depot (HD) on Tuesday reported lower than expected comparable U.S. sales, saying that the long winter had dented business in one of the rare instances in recent years the do-it-yourself chain has disappointed Wall Street. The retailer said comparable-store sales overall rose 4.2% and were up 3.9% in the U.S. in the quarter ended April 29, below the 5.6% and 5.5% clips, respectively, analysts polled by Consensus Metrix were expecting. And many snowbound shoppers skipped store visits, which fell 1.5%.
Shares were down 2% on Tuesday morning.
Pointing to unfavorable weather has been the go-to excuse for countless retailers, particularly department stores and apparel chains, in the last few years and it’s an excuse Home Depot has rarely trotted out. But the seemingly endless winter that saw record snowfalls in the Northeast well into April delayed expenditures on things like garden products. Chief Financial Officer Carol Tomé told analysts on a conference call that without the hit to its garden business, it’s U.S. comparable sales would have been up 6.5%, in line with the chain’s performances in recent quarters. But even at 4.2% growth, Home Depot’s performance is the envy of almost every other major retailer, for which a 2-3% increase is a victory nowadays.
Before April, things were better at Home Depot. U.S. comparable sales were up 5.6% in February, 5.9% in March, and 2.2% last month. So far in May, they are up at least 10%.
And more crucially for the medium and long term, the U.S. economy is strong, prompting Home Depot to stick with its full-year sales forecast despite the soft April.
“Wages are increasing, home prices are appreciating, buoyed by a housing shortage,” Tomé said. What’s more, Home Depot’s business is very diverse, helping it mitigate any hit to one part of its business. The company said sales of things like interior doors, bath fixtures, and interior paint have been strong, along with its contractor business.
To some degree, Home Depot is paying a price for years of very strong results that for one quarter, were merely very good.
Despite the sales shortfall, profit was up: net earnings rose to $2.40 billion or $2.08 per share, from $2.01 billion or $1.67 per share a year earlier.
