Image Source: HomeDepot.com

Home Depot, Inc. (HD - Free Report) is set to report first-quarter fiscal 2023 results on May 16, before market open. Its top and bottom lines are likely to have declined. The Zacks Consensus Estimate for its fiscal first-quarter earnings of $3.81 per share suggests a decline of 6.9% from the year-ago period’s reported figure. The consensus estimate has moved south by 1% in the past seven days.

The consensus mark for quarterly revenues is pegged at $38.55 billion, indicating a decline of 0.9% from the figure reported in the year-ago quarter.

We expect the company’s fiscal first-quarter total revenues to fall 0.3% year over year to $38,796.9 million and the bottom line to decline 5.7% to $3.86 per share.

In the last reported quarter, the company delivered an earnings surprise of 0.9%. The leading home improvement retailer delivered an earnings surprise of 4.4% in the last four quarters, on average.

The Home Depot, Inc. Price and EPS Surprise

The Home Depot, Inc. price-eps-surprise | The Home Depot, Inc. Quote

Key Factors to Note

Home Depot’s first-quarter fiscal 2023 performance is likely to have been affected by soft consumer spending trends, normalized transactions and continued investments to capture market share. On the last reported quarter’s earnings call, the company noted that transactions gradually normalized as consumer spending shifted from goods to services. The company stated that many economists projected flat real economic growth and consumer spending for 2023, which is likely to get reflected in the fiscal first quarter.

Moreover, the company’s fiscal first-quarter results are expected to reflect the continued negative impacts of lumber deflation, leading to soft comps. In the fiscal fourth quarter, it witnessed a significant decline in lumber prices relative to the year-ago quarter.

HD has been witnessing continued cost pressures, driven by inflation, supply-chain dynamics and the consumer spending environment. Higher transportation costs and product mix are expected to have resulted in rising costs of goods sold in the fiscal first quarter, leading to a lower gross margin.

The company's investments in its supply chains are expected to have harmed the gross margin in the to-be-reported quarter. Higher inventory levels and interest expenses are anticipated to have been concerning.

However, the company is likely to have benefited from continued strong growth in project-related categories across the business. Strong demand for home improvement projects, a robust housing market and ongoing investments are expected to have been positives. The company has been witnessing a rise in average tickets, driven by high-value purchases by home builders.

HD is expected to have witnessed growth in the Pro and DIY customer categories, along with digital momentum, in the fiscal first quarter.

Home Depot has been seeing significant benefits from the execution of its "One Home Depot" plan focused on expanding the supply chain, technology investments and digital enhancements. The company’s interconnected retail strategy and underlying technology infrastructure have been consistently boosting web traffic for the past few quarters. This is expected to have aided digital sales in the to-be-reported quarter.

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