Home Depot Earnings Beat Expectations. Why Its Stock Is Tumbling.

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Updated Aug. 17, 2021 10:42 americium ET / Original Aug. 17, 2021 6:29 americium ET

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Home Depot shares are connected gait for their largest percent alteration since November erstwhile they fell 5%.

NICHOLAS KAMM/AFP/Getty Images

Home Depot banal is falling aft the home-improvement retailer reported earnings that topped expectations.

Home Depot reported an adjusted nett of $4.53 a share, beating forecasts for $4.43 a share, connected income of $41.12 billion, topping expectations for $40.73 billion.

“I americium precise arrogant of our associates, who proceed to show a relentless absorption connected serving our customers,” Home Depot CEO Craig Menear said successful the net release. “As a effect of their efforts, we achieved a milestone of implicit $40 cardinal successful quarterly income for the archetypal clip successful Company history.”

Despite the better-than-expected earnings, same-store sales, however, roseate conscionable 4.5%, missing estimates for 5.4%.

The institution didn’t supply guidance, though that was mostly expected.

Shares of Home Depot dropped 5.2% to $317.56 Tuesday. The banal has climbed 26% this twelvemonth done Monday’s close, portion the S&P 500 has gained 19%, and the Dow Jones Industrial Average has risen 16%.

There were items of enactment for some bulls and bears successful the quarter. On the affirmative side, outgo controls were tight, the institution is starting to thigh elevated Covid-19 costs from a twelvemonth ago, and Home Depot repurchased immoderate $3 cardinal successful banal during the period.

Still, same-store income were ever going to beryllium successful focus, fixed hard year-over-year comparisons for the home-improvement sector. Although consumers connected mean spent much astatine Home Depot, astatine slightest immoderate of that is apt owed to inflationary pressures connected galore products, and postulation turned antagonistic successful the 4th from elevated year-ago levels. In addition, gross margins declined, arsenic Home Depot, similar different retailers, grapple with supply-chain issues and accrued transport costs.

Ultimately, Home Depot’s 4th didn’t connote immoderate large drop-off for the home-improvement sector, arsenic a beardown lodging marketplace and backlog of projects stay tailwinds. However immoderate investors whitethorn person been hoping that the institution would “comp the comp” contempt the precocious barroom it acceptable successful 2020.

Write to Ben Levisohn astatine ben.levisohn@barrons.com

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