The Home Depot Inc (HD, Financial) released its 8-K filing on August 13, 2024, reporting its second quarter fiscal 2024 results. The world's largest home improvement retailer, operating over 2,300 stores across the US, Canada, and Mexico, posted sales of $43.2 billion, a 0.6% increase from the same period last year. However, the company faced a 3.3% decline in comparable sales, with a 3.6% drop in the US.
Performance and Challenges
The Home Depot Inc (HD, Financial) reported net earnings of $4.6 billion, or $4.60 per diluted share, slightly above the analyst estimate of $4.48 per share. This represents a 2.1% decrease from the $4.7 billion, or $4.65 per diluted share, reported in the same period last year. The company's operating income for the quarter was $6.5 billion, with an operating margin of 15.1%, compared to $6.6 billion and 15.4% in the previous year.
Despite the slight increase in total sales, the decline in comparable sales highlights the challenges posed by higher interest rates and macroeconomic uncertainty, which have pressured consumer demand. Ted Decker, chair, president, and CEO, commented,
The underlying long-term fundamentals supporting home improvement demand are strong. During the quarter, higher interest rates and greater macro-economic uncertainty pressured consumer demand more broadly, resulting in weaker spend across home improvement projects."
Financial Achievements
The Home Depot Inc (HD, Financial) achieved a gross profit of $14.4 billion, up 1.8% from the previous year. The company's adjusted operating income was $6.6 billion, with an adjusted operating margin of 15.3%. These metrics are crucial for value investors as they indicate the company's ability to maintain profitability despite economic headwinds.
Key Financial Metrics
| Metric | Q2 FY2024 | Q2 FY2023 | % Change |
|---|---|---|---|
| Net Sales | $43.2 billion | $42.9 billion | 0.6% |
| Gross Profit | $14.4 billion | $14.2 billion | 1.8% |
| Operating Income | $6.5 billion | $6.6 billion | -0.8% |
| Net Earnings | $4.6 billion | $4.7 billion | -2.1% |
| Diluted EPS | $4.60 | $4.65 | -1.1% |
Income Statement Highlights
The Home Depot Inc (HD, Financial) reported a slight increase in net sales to $43.2 billion, while gross profit rose to $14.4 billion. Operating expenses increased by 4.1% to $7.9 billion, leading to a marginal decline in operating income. Interest expenses also rose by 22.2%, impacting the overall earnings before tax, which stood at $6.0 billion, a 1.9% decrease from the previous year.
Balance Sheet and Cash Flow
The company's balance sheet showed total assets of $96.8 billion, with significant increases in goodwill and intangible assets due to recent acquisitions. Total liabilities stood at $92.4 billion, with long-term debt increasing to $51.9 billion. The Home Depot Inc (HD, Financial) generated $10.9 billion in net cash from operating activities, although net cash used in investing activities was $19.1 billion, primarily due to acquisitions.
Updated Fiscal 2024 Guidance
The Home Depot Inc (HD, Financial) updated its fiscal 2024 guidance, projecting total sales to increase between 2.5% and 3.5%, including the impact of a 53rd week. Comparable sales are expected to decline between 3% and 4%. The company also plans to open approximately 12 new stores and maintain a gross margin of around 33.5%.
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Explore the complete 8-K earnings release (here) from The Home Depot Inc for further details.
