Home Depot Inc. (HD, Financial) reported its fourth-quarter 2018 financial results before the opening bell on Feb. 26. The home improvement retailer posted earnings and revenue that failed to meet analysts’ expectations. Consequently, the company issued weak 2019 profit and sales guidance.
By the numbers
The company posted earnings of $2.09 per share for the quarter, falling short of estimates of $2.16. Revenue came in at $26.49 billion, just shy of the $26.57 billion analysts were expecting.
Comparable store sales rose 3.2% during the period versus the anticipated growth of 4.5%. The quarterly comps growth was aided by a 7.7% increase in customer transactions as well as a 2.5% increase in the average shopper’s ticket price.
At the end of quarter, Home Depot’s balance of cash and cash equivalents stood at $1.7 billion. Long-term debt was $26.8 billion, excluding current maturities.
Housing market cooling down
Home Depot’s success relies on demand from the housing market. While the sector saw robust demand in 2018, fewer people are looking to buy as mortgage rates have begun to climb, which means housing prices could rise at a slower rate.Â
Heavy online investments
The company has also been heavily investing in the digital arena. The home appliance retailer is emphasizing on reducing delivery times. As part of this initiative, it announced in July it would spend $1.2 billion over the next five years on improving its supply chain.
Guidance
The company projects sales growth of 3.3% for fiscal 2019. Comps are expected to grow 5% over the same period.
Capital expenditures for fiscal 2019 are anticipated to be $2.7 billion as the company plans to open about five new stores. While cash flow from operating activities is projected to be $14.1 billion, depreciation and amortization guidance is $2.3 billion.
“We focused on enhancing the interconnected retail experience for our customers, providing localized and innovative product, and delivering best in class productivity," CEO Craig Menear said. "Our view on the health of the economy and the consumer, as well as the momentum of our strategic investments, supports our belief that we can deliver comparable sales growth of 5% in fiscal 2019."
Disclosure: I do not hold any positions in the stocks mentioned.
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