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Home Depot (HD) Defies Supply Issues, Beating Q1 Earnings

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Updated 17 May 2022

Key points:

  • Home Depot posted solid earnings, beating on EPS and revenue
  • Resilience in home-renovation trend supports consistent growth
  • The company raised its FY guidance to sales growth of around 3%

Investors who were expecting a similar earnings story to Walmart would have been in for a pleasant surprise this morning, as home-renovation specialist Home Depot (NYSE: HD) reported better-than-expected earnings; defiant of the current climate affecting retailers. HD shares are currently trading at a premarket premium of 3.5%. The company not only beat earnings but announced its strongest first-quarter sales on record. 

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Analysts were expecting Q1 earnings to come in at $3.68,  but Walmart’s earnings were pegged at $4.09; beating the consensus comfortably. The company also beat on the top line, with revenue recorded at $38.9B against analyst expectations of $36.7B. Same-store sales also rose 2.2% over the quarter.

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Not only is this a quarter reflective of solid growth, it’s indicative of a continued trend in home restoration, one that investors feared might die out with Covid restrictions ending and people spending less time at home. Yet clearly, despite inflation, consumers are still willing to spend money on DIY projects, supporting consistent revenue growth off the back of a historic period for the company.

CEO Ted Decker, long-standing Walmart veteran but only recent CEO, stated:

“The solid performance in the quarter is even more impressive as we were comparing against last year’s historic growth and faced a slower start to spring this year”

With no sign of a trend reversal just yet, management is expecting the pattern to continue; perhaps slowly tapering as inflation weighs on spending. Backing continued spending, the company upped its FY guidance to sales growth of about 3% on EPS growth in the mid-single digits. We still have a few more retailers to announce earnings in the coming days, it will be interesting to see how they fare up against opposite precedents set by Walmart and Home Depot.