Image Source: HomeDepot.com

Home Depot, Inc. (HD - Free Report) is set to report third-quarter fiscal 2023 results on Nov 14, before market open. Its top and bottom lines are likely to have declined in the to-be-reported quarter. The Zacks Consensus Estimate for the company’s fiscal third-quarter earnings of $3.82 per share suggests a decline of 9.9% from the year-ago period’s reported figure. The consensus estimate has moved up 0.5% in the past 30 days.

The consensus mark for quarterly revenues is pegged at $37.7 billion, indicating a decline of 3.1% from the figure reported in the year-ago quarter.

In the last reported quarter, the company delivered an earnings surprise of 4.3%. The leading home improvement retailer recorded an earnings surprise of 2.22% in the last four quarters, on average.

The Home Depot, Inc. Price and EPS Surprise

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Key Factors to Note

Home Depot’s third-quarter fiscal 2023 performance is likely to have been affected by soft consumer spending trends due to rising inflation, 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 has been witnessing continued pressure in some big-ticket, discretionary categories, a trend which started in fourth-quarter fiscal 2022. The deflation of core commodity categories, particularly in lumber prices, has been affecting the top-line performance. We expect this trend to have continued in the fiscal third quarter, affecting its sales results.

Moreover, the company’s fiscal third-quarter results are expected to reflect the continued negative impacts of lumber deflation, leading to soft comps. In the fiscal second quarter, it witnessed a significant decline in lumber prices relative to the year-ago quarter. The continuation of these trends is expected to have impacted comps in the to-be-reported quarter.

Additionally, deceleration across many departments and pressures in several big-ticket discretionary categories have been weighing on the comps performance. This is also expected to have affected the comps performance in the to-be-reported quarter.

We expect comps for the fiscal third quarter to decline 4.9% mainly on lumber deflation, continued deceleration across many departments and pressures in several big-ticket discretionary categories. Deflation from core commodity categories, primarily in lumber, is expected to have negatively impacted the company’s average ticket growth in the fiscal third quarter.

Our model predicts a 0.2% increase in average ticket in the fiscal third quarter, with a 3.9% decline in number of customer transactions.

However, 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 consistently been boosting web traffic for the past few quarters. This is expected to have aided digital sales in the to-be-reported quarter.

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

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