Here's our initial take on Home Depot's (HD 1.22%) fourth-quarter financial results.
Key Metrics
| Metric | Q4 FY23 | Q4 FY24 | Change | vs. Expectations |
|---|---|---|---|---|
| Revenue | $34.8 billion | $39.7 billion | +14% | Beat |
| Earnings per share (adjusted) | $2.86 | $3.13 | +9% | Beat |
| Operating margin | 11.9% | 11.3% | -60 bps | n/a |
| Comparable-store sales | -3.5% | +0.8% | n/a | n/a |
Home Depot Is Making the Most of a Not-Great Environment
The past couple of years have been challenging for Home Depot and its home improvement retailing peers. Between the sharp rise in interest rates pounding the housing market and making home improvement projects more expensive, there is less incentive for many people to visit its stores.
A quick glance at its fourth-quarter results might make that seem less apparent, with revenue up 14% and GAAP earnings per share 7.1% higher. The caveat is that Home Depot's fiscal fourth quarter was 14 weeks, compared to 13 weeks in the prior year's period, with that extra week generating about half of Home Depot's revenue growth in Q4.
On a comparable-store basis -- results at stores open at least one year -- it was more clear that the challenging economic environment continues. Comps revenue was up just 0.8% in the quarter; U.S. stores did a little better, with comp sales up 1.3%. It's worth noting that this was a positive step (if a small one). For the full year, comps were down 1.8%, even when including Q4's modest comps growth.
On the bottom line, the results reflected the challenging macroeconomic environment. Adjusted earnings per share were up 9%, but when we back out the $0.30 per share from that extra week, earnings fell about 5% in the quarter. For the full year, adjusted earnings were flat, even with the benefit of the extra week.
It's not just weak traffic affecting Home Depot. Operating expenses increased faster than revenue last year and in the quarter, with selling, general, and administrative (largely salary costs) increasing 15.7% in the quarter and 8.1% in the year and interest expenses up 55% in the quarter and 20% for the full year.
NYSE: HD
Key Data Points
Immediate Market Reaction
Shares are up a small amount in premarket trading, essentially flat, with the business's results coming in just above expectations and its next-year guidance showing signs that last quarter's modest improvements should continue. The challenges Home Depot faces are well known by investors, and its results are essentially what was expected.
What to Watch
Home Depot management says revenue should grow just below 3% in 2025, with comps up about 1%; the majority of revenue growth is expected to come from the 13 new stores it plans to open. Management is calling for continued pressure on profitability, with operating margin of 13% for the full year that would fall from 13.5% in the year just ended and 14.2% in the year before that.
In many ways, the company is married to the cycle of spending for home improvements that is largely driven by consumer confidence, disposable income, and interest rates. It remains the best operator in its space, but the environment remains unfavorable. We should watch closely for discipline in this environment, including the company's moves to reduce costs including interest expense, and manage operating expenses without weakening the store experience.
Helpful Resources
- Earnings press release [link downloads a PDF]
- Investor relations page
