So there's a lot going on there, but I think that maybe the most important dynamic is just kind of that nice recovery in transactions as both ticket and transactions begin to converge and normalize." But we're also seeing the impacts of what we call softness in certain large-ticket discretionary item purchases like patio and appliances. Customers are more likely to opt for smaller versus larger, and that may have some impact on ticket. With respect to large versus small projects, certainly, our customers and our contractors tell us that there is some stance of deferral when it comes to large projects. So I think that's the most macro comment that we could make about ticket progression. And we think that that's actually a healthy signal in the business. "First, just with respect to stacks and progression, what we're encouraged by what we're seeing - as cost pressures in our industry sort of abate, we're seeing ticket and transactions actually begin to converge. On its Q2 earnings call, CFO Richard McPhail said: EPS at the time was projected to fall by mid-single-digits, while operating margins were forecast to be 14.5%. HD originally guided for flat revenue and same-store sales in fiscal year 2024 ending January. Notably the company did reduce its guidance in May when it reported its Q1 earnings. It's looking for an operating margin of between 14-14.3%. The company is looking for same-store sales to decline by between -2% to -5%. Looking ahead, HD reaffirmed its full-year guidance. The company certainly saw a sequential improvement versus Q1, but overall it was nothing to get too excited about, with negative same-store sales and continued lumber deflation pressure. Overall, HD set a low bar ahead of the quarter after reducing its full-year guidance the prior quarter and then jumped over it. OpEx was 17.7% of sales, up 100 basis pointsĮarnings fell -9.9% to $4.7 billion, while EPS dropped -7.9% to $4.65. Gross margins were 33.0%, down -8 basis points. The company said Pro sales were slightly negative and outpaced sales from DIY customers. The company said items like patio and appliances were weak, likely indicating an earlier pull-forward of demand from Covid. Big ticket comp transactions were down -5.5%. Six of HD's 14 department saw positive comps, including building materials, plumbing, millwork, hardware, tools, and outdoor garden. Framing lumber prices were down -40% year over year. The company said deflation from core commodities, largely lumber, negatively hurt average ticket by -160 basis points. Transactions fell -2.0% in the quarter, while average ticket edged up 0.1%. Same-store sales fell -2.0% both in the U.S. That topped the analyst consensus by $690 million. The company ended Q2 with 2,326 stores.įor fiscal Q2, HD saw revenue drop -2.0% to $42.92 billion. About 37% of its sales are building materials, 32% décor, and 31% hardlines. It also offers installation services in several areas. The company caters to both professional and do it yourself (DIY) customers. It operates warehouse type stores that typically stock between 30,000 to 40,000 items in a year. The stock, however, has been a solid performer since then, up over 16% versus 12% for the SP over the same period.Īs a refresher, HD is a home improvement retailer that sells a variety of items including home improvement products, tools, building materials, lawn & garden items, repair & maintenance, and home décor. Back in March, I placed a "Sell" rating on Home Depot ( NYSE: HD), on the belief that the stock was overvalued and that the repair and remodel market would start to slow while the company faced pressures from wage inflation and lumber deflation.
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