Home Depot (NYSE:HD) investors were hoping to see a growth rebound in the first quarter after the home improvement giant announced a surprising slowdown at the end of 2018. Management at the time blamed a wet winter for delaying construction projects, and so it seemed that revenue gains might accelerate in the following months as those projects restarted.

On Tuesday, the retailer instead reported another modest growth slowdown to begin fiscal 2019. However, because of a few unusual pricing and demand trends, Home Depot should still achieve its aggressive full-year outlook, according to executives.

More on that steady forecast in a moment, but first here's a look at the big-picture metrics from the quarter that just closed:


Q1 2019

Q1 2018

Year-Over-Year Growth


$26.4 billion

$24.9 billion


Net income

$2.5 billion

$2.4 billion


Earnings per share




Data source: Home Depot's financial filings.

What happened this quarter?

Sales growth decelerated for the third straight quarter due to what management described as temporary factors. Expense discipline, meanwhile, helped push profitability higher despite pricing challenges.

A man shopping for lumber.

Image source: Getty Images.

The key highlights of the quarter:

  • Comparable-store sales gains landed at 2.5%, compared to 3.2% last quarter and nearly 5% in the third quarter of 2018. That slowdown was a surprise considering management blamed weather for delaying construction projects in the previous quarter, which should have lifted sales this quarter as people began those projects.
  • Customer traffic was healthy, with transactions rising 3.8% compared to 2.7% over the prior 12 months. Average spending gains were much weaker at 2%.
  • Gross profit margin declined slightly, but Home Depot made up for that drop by holding the line on expenses. Operating profit, as a result, edged up to $3.6 billion, or 13.6% of sales, from $3.4 billion, or 13.5% of sales, a year ago.
  • The company spent $3 billion on direct shareholder returns, split evenly between dividend payments and stock repurchase spending.

What management had to say

Executives said wet weather and unusual price moves made an otherwise strong quarter look a bit weak. "We were pleased with the underlying performance of the core business," CEO Craig Menear said in a press release, "despite unfavorable weather in February and significant deflation in lumber prices compared to a year ago."

Menear went on to add that economic trends, and management's retailing investments, should support faster growth over the next three quarters. "As a result of these initiatives, and the current macroeconomic and housing backdrop, today we are reaffirming our sales and earnings guidance for fiscal 2019," he said.

Looking forward

Home Depot is still calling for comps to increase by 5% this year, which implies a significant acceleration in the key spring selling season and into the holiday shopping crush. The retailer made no changes to its other financial targets, including expectations for earnings to pass $10 per share in 2019. Executives still plan to shift spending toward the physical store base by adding a few new locations in the U.S. and remodeling several existing stores.

Looking further out, Home Depot hopes to reach between $115 billion and $120 billion of annual sales by 2020 after having just crossed the $100 billion mark in 2017. Hitting the high end of that range would mean sales will have nearly doubled in the past decade since clocking in at $66 billion in 2010 in the wake of the housing crisis.

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