The Dow Jones Industrial Average (^DJI 0.40%) has lost three points in pre-market trading, suggesting a flat start to the stock market today. With first-quarter earnings season almost done, companies did pretty well overall. Three-quarters of S&P 500 stocks beat profit estimates and roughly 50% came in ahead of sales forecasts for the quarter, according to Bloomberg. That improving earnings picture is a big reason why the Dow is just 0.4% below the record high set last week.
But earnings seasons isn't quite finished yet, and Home Depot (HD 0.94%) and Staples (SPLS) stocks are both on the move after the retailers delivered their quarterly numbers this morning.
Home Depot beat Wall Street's profit estimates by posting $1 in per-share earnings, or 20.5% above last year's result. However, the home improvement retailer booked weaker than expected sales growth: revenue ticked higher by 2.9%, while analysts were looking for a more robust 4.3% boost. Home Depot said a slow start to the spring selling season crimped results. That weakness showed up in customer traffic levels: comparable-store sales grew by just 3.3%, a slowdown from the previous quarter's 5% bounce. Still, the company reaffirmed its full-year sales growth outlook and even raised its profit forecast for 2014, suggesting that its growth story is far from over. Investors who have been sitting on the sidelines might get a chance to pick up shares in this quality retailer for a discount today. The stock was down 1.3% in pre-market trading.
Staples today posted a 3% decline in first-quarter sales, exactly what analysts expected. However, the office supply retailer had to sacrifice loads of profitability to achieve that revenue result, and earnings dove by 31% to $0.18 a share. The culprit was weak traffic in Staples' stores, which posted a brutal 5% comparable sales dip. Operating margin was also cut nearly in half to 3.5% as the company lowered prices and ramped up marketing in an effort to keep market share steady. Despite that rough beginning to the year, CEO Ron Sargent sounded an optimistic tone, saying in a press release that "we expect to build momentum throughout 2014." Investors don't appear to agree with that assessment: the stock was down 10.5% in pre-market trading.
