Home Depot profits are exceeding expectations. Why is his stock plummeting?

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Home deposit

shares are down after the home improvement retailer reported earnings above expectations.

Home Depot reported adjusted earnings of $ 4.53 per share, beating expectations of $ 4.43 per share, on sales of $ 41.12 billion, beating expectations of $ 40.73 billion.

“I am very proud of our associates, who continue to relentlessly focus on serving our customers,” said Craig Menear, CEO of Home Depot, in the earnings release. “Thanks to their efforts, we have passed the $ 40 billion quarterly sales milestone for the first time in company history. “

Despite better-than-expected earnings, same-store sales, however, rose only 4.5%, missing estimates of 5.4%.

The company did not provide advice, although it was widely expected.

Home Depot shares fell 5.2% to $ 317.56 on Tuesday. The stock has climbed 26% this year through Monday’s close, while the

S&P 500

gained 19%, and the

Dow Jones Industrial Average

increased by 16%.

There were things to note for the bulls and bears during the quarter. On the bright side, cost control was tight, the company is starting to cover the high costs of Covid-19 compared to a year ago, and Home Depot repurchased some $ 3 billion in shares during the period.

Nonetheless, same-store sales were always going to be the focus given the difficult year-over-year comparisons for the home improvement industry. While consumers on average spent more at Home Depot, at least part of this is likely due to inflationary pressures on many products, and traffic turned negative in the quarter from high levels there was. a year. Additionally, gross margins have declined as Home Depot, like other retailers, grapples with supply chain issues and increased transportation costs.

In the end, The Home Depot’s quarter did not result in a significant decline for the home improvement industry as a strong real estate market and a backlog of projects remain favorable winds. However, some investors may have been hoping that the company “understands the competition” despite the high bar it set for 2020.

Write to Ben Levisohn at [email protected] and to Teresa Rivas at [email protected]