Home improvement retail giant Home Depot (NYSE:HD) reported results in line with analysts' expectations in Q4 FY2023, with revenue down 2.9% year on year to $34.79 billion. It made a GAAP profit of $2.82 per share, down from its profit of $3.30 per share in the same quarter last year.
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Home Depot (HD) Q4 FY2023 Highlights:
- Revenue: $34.79 billion vs analyst estimates of $34.67 billion (small beat)
- EPS: $2.82 vs analyst estimates of $2.78 (1.4% beat)
- Free Cash Flow of $3.88 billion, similar to the same quarter last year
- Gross Margin (GAAP): 33.1%, in line with the same quarter last year
- Same-Store Sales were down 3.5% year on year
- Store Locations: 2,335 at quarter end, increasing by 13 over the last 12 months
- Market Capitalization: $360.6 billion
"After three years of exceptional growth for our business, 2023 was a year of moderation," said Ted Decker, chair, president, and CEO.
Founded and headquartered in Atlanta, Georgia, Home Depot (NYSE:HD) is a home improvement retailer that sells everything from tools to building materials to appliances.
Home Improvement Retailer
Home improvement retailers serve the maintenance and repair needs of do-it-yourself homeowners as well as professional contractors. Home is where the heart is, so any homeowner will want to keep that home in good shape by maintaining the yard, fixing leaks, or improving lighting fixtures, for example. Home improvement stores win with depth and breadth of product, in-store consultations for customers who need help, and services that cater to professionals. It is hard for non-focused retailers and e-commerce competitors to match these. However, the research, convenience, and prices of online platforms means they can’t be fully written off, either.
Sales Growth
Home Depot is a behemoth in the consumer retail sector and benefits from economies of scale, an important advantage giving the business an edge in distribution and more negotiating power with suppliers.
As you can see below, the company's annualized revenue growth rate of 8.5% over the last four years (we compare to 2019 to normalize for COVID-19 impacts) was steady despite not opening many new stores.
This quarter, Home Depot reported a rather uninspiring 2.9% year-on-year revenue decline to $34.79 billion in revenue, in line with Wall Street's estimates. Looking ahead, Wall Street expects sales to grow 1.4% over the next 12 months, an acceleration from this quarter.
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Same-Store Sales
Same-store sales growth is a key performance indicator used to measure organic growth and demand for retailers.
Home Depot's demand has been shrinking over the last eight quarters, and on average, its same-store sales have declined by 0.1% year on year.
In the latest quarter, Home Depot's same-store sales fell 3.5% year on year. This decrease was a further deceleration from the 0.3% year-on-year decline it posted 12 months ago. We hope the business can get back on track.
Key Takeaways from Home Depot's Q4 Results
Zooming out, we think this was mostly a decent quarter, showing that the company is staying on target. The market was likely expecting more, and the stock is down 1.2% after reporting (likely due to the continued decline in same store sales), trading at $357.73 per share.
So should you invest in Home Depot right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.