The Home Depot Announces First Quarter Fiscal 2025 Results; Reaffirms Fiscal 2025 Guidance
- Sales increased 9.4% year-over-year to $39.9 billion
- U.S. comparable sales showed positive growth of 0.2%
- Company plans to open approximately 13 new stores
- Maintained strong gross margin guidance of 33.4%
- Overall comparable sales decreased 0.3%
- Net earnings declined 4.6% to $3.4 billion
- Diluted EPS decreased 5% to $3.45
- Foreign exchange rates negatively impacted comparable sales by 70 basis points
- Company expects adjusted diluted earnings-per-share to decline approximately 2% in fiscal 2025
Insights
Home Depot reports mixed Q1 results with 9.4% sales growth but declining earnings; maintains cautious full-year outlook despite solid U.S. performance.
Home Depot's Q1 fiscal 2025 presents a complex picture of growth amid profitability challenges. The company achieved
The earnings narrative reveals more significant challenges. Net earnings dropped to
Cost pressures are evident in the financials. Cost of sales increased
Looking at the balance sheet, Home Depot carries significant leverage with
Management's reaffirmed guidance projects continued challenges, with full-year EPS expected to decline approximately
While Home Depot maintains its dominant market position with 2,350 retail stores and 790+ branches, the financial results reflect the difficulties facing the home improvement sector as consumers remain cautious about discretionary spending on larger projects.
Net earnings for the first quarter of fiscal 2025 were
Adjusted(1) diluted earnings per share for the first quarter of fiscal 2025 were
"Our first quarter results were in line with our expectations as we saw continued customer engagement across smaller projects and in our spring events," said Ted Decker, chair, president and CEO. "We feel great about our store readiness and product assortment as spring continues to break across the country, and I would like to thank our associates for their continued hard work and dedication."
Fiscal 2025 Guidance
The company reaffirms its guidance for fiscal 2025, a 52-week year compared to fiscal 2024, a 53-week year.
- Total sales growth of approximately
2.8% - Comparable sales growth of approximately
1.0% for the comparable 52-week period - Approximately 13 new stores
- Gross margin of approximately
33.4% - Operating margin of approximately
13.0% - Adjusted(1) operating margin of approximately
13.4% - Tax rate of approximately
24.5% - Net interest expense of approximately
$2.2 billion - Diluted earnings-per-share to decline approximately
3% from$14.91 - Adjusted(1) diluted earnings-per-share to decline approximately
2% from$15.24 - Capital expenditures of approximately
2.5% of total sales
(1) | The Company reports its financial results in accordance with |
The Home Depot will conduct a conference call today at 9 a.m. ET to discuss information included in this news release and related matters. The conference call will be available in its entirety through a webcast and replay at ir.homedepot.com/events-and-presentations.
At the end of the first quarter, the company operated a total of 2,350 retail stores and over 790 branches across all 50 states, the
Cautionary Note Regarding Forward-Looking Statements
Certain statements contained herein constitute "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on currently available information and our current assumptions, expectations and projections about future events, and use words such as "may," "will," "could," "should," "would," "anticipate," "intend," "estimate," "project," "plan," "believe," "expect," "target," "prospects," "potential," "commit" and "forecast," or words of similar import or meaning or refer to future time periods. Forward-looking statements may relate to, among other things, the demand for our products and services, including as a result of macroeconomic conditions and changing customer preferences and expectations; net sales growth; comparable sales; the effects of competition; our brand and reputation; implementation of interconnected retail, store, supply chain, technology innovation and other strategic initiatives, including with respect to real estate; inventory and in-stock positions; the state of the economy; the state of the housing and home improvement markets; the state of the credit markets, including mortgages, home equity loans, and consumer and trade credit; the impact of tariffs, trade policy changes or restrictions, or international trade disputes and efforts and ability to continue to diversify our supply chain; issues related to the payment methods we accept; demand for credit offerings including trade credit; management of relationships with our associates, jobseekers, suppliers and service providers; cost and availability of labor; costs of fuel and other energy sources; events that could disrupt our business, supply chain, technology infrastructure, or demand for our products and services, such as tariffs, trade policy changes or restrictions or international trade disputes, natural disasters, climate change, public health issues, cybersecurity events, labor disputes, geopolitical conflicts, military conflicts, or acts of war; our ability to maintain a safe and secure store environment; our ability to address expectations regarding sustainability and human capital management matters and meet related goals; continuation or suspension of share repurchases; net earnings performance; earnings per share; future dividends; capital allocation and expenditures; liquidity; return on invested capital; expense leverage; changes in interest rates; changes in foreign currency exchange rates; commodity or other price inflation and deflation; our ability to issue debt on terms and at rates acceptable to us; the impact and expected outcome of investigations, inquiries, claims, and litigation, including compliance with related settlements; the challenges of operating in international markets; the adequacy of insurance coverage; the effect of accounting charges; the effect of adopting certain accounting standards; the impact of legal and regulatory changes, including executive orders and other administrative or legislative actions, such as changes to tax laws and regulations; store openings and closures; guidance for fiscal 2025 and beyond; financial outlook; and the impact of acquired companies, including SRS, on our organization and the ability to recognize the anticipated benefits of any acquisitions.
These statements are not guarantees of future performance and are subject to future events, risks and uncertainties – many of which are beyond our control, dependent on the actions of third parties, or currently unknown to us – as well as potentially inaccurate assumptions that could cause actual results to differ materially from our historical experience and our expectations and projections. These risks and uncertainties include, but are not limited to, those described in Part I, Item 1A. "Risk Factors," and elsewhere in our Annual Report on Form 10-K for our fiscal year ended February 2, 2025 and also as described from time to time in reports subsequently filed with the Securities and Exchange Commission. There also may be other factors that we cannot anticipate or that are not described herein, generally because we do not currently perceive them to be material. Such factors could cause results to differ materially from our expectations. Forward-looking statements speak only as of the date they are made, and we do not undertake to update these statements other than as required by law. You are advised, however, to review any further disclosures we make on related subjects in our filings with the Securities and Exchange Commission and in our other public statements.
Non-GAAP Financial Measures
These statements are also supplemented with certain non-GAAP financial measures. When used in conjunction with our GAAP financial measures, we believe these supplemental non-GAAP financial measures will help management and investors to better understand and analyze our performance. However, this supplemental information should not be considered in isolation or as a substitute for the related GAAP measures. Refer to the end of this release for an explanation and definitions of these non-GAAP financial measures and reconciliations to the most directly comparable GAAP measures.
THE HOME DEPOT, INC. CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited) | |||||
Three Months Ended | |||||
in millions, except per share data | May 4, | April 28, | % Change | ||
Net sales | $ 39,856 | $ 36,418 | 9.4 % | ||
Cost of sales | 26,397 | 23,985 | 10.1 | ||
Gross profit | 13,459 | 12,433 | 8.3 | ||
Operating expenses: | |||||
Selling, general and administrative | 7,530 | 6,667 | 12.9 | ||
Depreciation and amortization | 796 | 687 | 15.9 | ||
Total operating expenses | 8,326 | 7,354 | 13.2 | ||
Operating income | 5,133 | 5,079 | 1.1 | ||
Interest and other (income) expense: | |||||
Interest income and other, net | (24) | (57) | (57.9) | ||
Interest expense | 615 | 485 | 26.8 | ||
Interest and other, net | 591 | 428 | 38.1 | ||
Earnings before provision for income taxes | 4,542 | 4,651 | (2.3) | ||
Provision for income taxes | 1,109 | 1,051 | 5.5 | ||
Net earnings | $ 3,433 | $ 3,600 | (4.6) % | ||
Basic weighted average common shares | 992 | 989 | 0.3 % | ||
Basic earnings per share | $ 3.46 | $ 3.64 | (4.9) | ||
Diluted weighted average common shares | 994 | 992 | 0.2 % | ||
Diluted earnings per share | $ 3.45 | $ 3.63 | (5.0) | ||
Three Months Ended | |||||
Selected Sales Data (1) | May 4, | April 28, | % Change | ||
Customer transactions (in millions) | 394.8 | 386.8 | 2.1 % | ||
Average ticket | $ 90.71 | $ 90.68 | — | ||
————— | |||||
(1) Selected Sales Data does not include results for HD Supply or SRS. | |||||
THE HOME DEPOT, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) | |||||
in millions | May 4, | April 28, | February 2, | ||
Assets | |||||
Current assets: | |||||
Cash and cash equivalents | $ 1,369 | $ 4,264 | $ 1,659 | ||
Receivables, net | 5,886 | 4,105 | 4,903 | ||
Merchandise inventories | 25,763 | 22,416 | 23,451 | ||
Other current assets | 1,511 | 1,837 | 1,670 | ||
Total current assets | 34,529 | 32,622 | 31,683 | ||
Net property and equipment | 26,780 | 25,997 | 26,702 | ||
Operating lease right-of-use assets | 8,699 | 7,913 | 8,592 | ||
Goodwill | 19,568 | 8,464 | 19,475 | ||
Intangible assets, net | 8,888 | 3,555 | 8,983 | ||
Other assets | 693 | 679 | 684 | ||
Total assets | $ 99,157 | $ 79,230 | $ 96,119 | ||
Liabilities and Stockholders' Equity | |||||
Current liabilities: | |||||
Short-term debt | $ 38 | $ 8 | $ 316 | ||
Accounts payable | 14,696 | 12,563 | 11,938 | ||
Accrued salaries and related expenses | 2,180 | 2,005 | 2,315 | ||
Current installments of long-term debt | 4,885 | 763 | 4,582 | ||
Current operating lease liabilities | 1,311 | 1,073 | 1,274 | ||
Other current liabilities | 8,479 | 7,947 | 8,236 | ||
Total current liabilities | 31,589 | 24,359 | 28,661 | ||
Long-term debt, excluding current installments | 47,343 | 42,060 | 48,485 | ||
Long-term operating lease liabilities | 7,714 | 7,107 | 7,633 | ||
Other long-term liabilities | 4,556 | 3,884 | 4,700 | ||
Total liabilities | 91,202 | 77,410 | 89,479 | ||
Total stockholders' equity | 7,955 | 1,820 | 6,640 | ||
Total liabilities and stockholders' equity | $ 99,157 | $ 79,230 | $ 96,119 | ||
THE HOME DEPOT, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) | |||
Three Months Ended | |||
in millions | May 4, | April 28, | |
Cash Flows from Operating Activities: | |||
Net earnings | $ 3,433 | $ 3,600 | |
Reconciliation of net earnings to net cash provided by operating activities: | |||
Depreciation and amortization, excluding amortization of intangible assets | 855 | 785 | |
Intangible asset amortization | 139 | 52 | |
Stock-based compensation expense | 170 | 124 | |
Changes in working capital | (244) | 842 | |
Changes in deferred income taxes | (3) | 83 | |
Other operating activities | (25) | 11 | |
Net cash provided by operating activities | 4,325 | 5,497 | |
Cash Flows from Investing Activities: | |||
Capital expenditures | (806) | (847) | |
Payments for businesses acquired, net | (156) | — | |
Other investing activities | 31 | 17 | |
Net cash used in investing activities | (931) | (830) | |
Cash Flows from Financing Activities: | |||
(Repayments of) proceeds from short-term debt, net | (278) | 8 | |
Proceeds from long-term debt, net of discounts | 29 | — | |
Repayments of long-term debt | (1,106) | (1,172) | |
Repurchases of common stock | — | (649) | |
Proceeds from sales of common stock | 11 | 62 | |
Cash dividends | (2,286) | (2,229) | |
Other financing activities | (126) | (166) | |
Net cash used in financing activities | (3,756) | (4,146) | |
Change in cash and cash equivalents | (362) | 521 | |
Effect of exchange rate changes on cash and cash equivalents | 72 | (17) | |
Cash and cash equivalents at beginning of period | 1,659 | 3,760 | |
Cash and cash equivalents at end of period | $ 1,369 | $ 4,264 | |
NON-GAAP FINANCIAL MEASURES
Adjusted operating income, adjusted operating margin (calculated as adjusted operating income divided by total net sales), and adjusted diluted earnings per share are presented as supplemental financial measures in the evaluation of our business that are not required by or presented in accordance with GAAP. The Company excludes the impact of amortization expense from acquired intangible assets from adjusted operating income and adjusted operating margin, and the impact of amortization expense from acquired intangible assets, including the related tax effects, from adjusted diluted earnings per share. We do not adjust for the revenue that is generated in part from the use of our acquired intangible assets. Amortization expense, unlike the related revenue, is not affected by operations in any particular period unless an intangible asset becomes impaired, or the useful life of an intangible asset is revised.
When used in conjunction with our GAAP results, we believe these non-GAAP measures provide investors with meaningful supplemental measures of our performance period to period, make it easier for investors to compare our underlying business performance to peers, and align to how management analyzes trends and evaluates performance internally. The Company provides non-GAAP financial information on this basis to facilitate comparability when we report earnings results. These non-GAAP measures should not be a substitute for their comparable GAAP financial measures. Investors should rely primarily on our GAAP results and use non-GAAP financial measures only supplementally in making investment decisions. Our calculation of non-GAAP measures may not be comparable to similarly titled measures reported by other companies and other companies may not define these non-GAAP financial measures in the same way, which may limit their usefulness as comparative measures.
RECONCILIATION OF ADJUSTED OPERATING INCOME AND ADJUSTED OPERATING MARGIN | |||||
Three Months Ended | |||||
USD in millions | May 4, | April 28, | % Change | ||
Operating income (GAAP) | $ 5,133 | $ 5,079 | 1.1 % | ||
Operating margin (1) | 12.9 % | 13.9 % | |||
Acquired intangible asset amortization (2) | 139 | 52 | |||
Adjusted operating income (Non-GAAP) | $ 5,272 | $ 5,131 | 2.7 % | ||
Adjusted operating margin (Non-GAAP) (3) | 13.2 % | 14.1 % | |||
————— | |
(1) | Operating margin is calculated as operating income divided by total net sales. |
(2) | Amounts include acquired intangible asset amortization of |
(3) | Adjusted operating margin is calculated as adjusted operating income divided by total net sales. |
Our adjusted operating margin guidance for fiscal 2025 excludes an expected approximately 40 basis point impact from acquired intangible asset amortization.
RECONCILIATION OF ADJUSTED DILUTED EARNINGS PER SHARE | |||||
Three Months Ended | |||||
per share amounts | May 4, | April 28, | % Change | ||
Diluted earnings per share (GAAP) | $ 3.45 | $ 3.63 | (5.0) % | ||
Impact of acquired intangible asset amortization | 0.14 | 0.05 | |||
Income tax impact of non-GAAP adjustment (4) | (0.03) | (0.01) | |||
Adjusted diluted earnings per share (Non-GAAP) | $ 3.56 | $ 3.67 | (3.0) % | ||
————— | |
(4) | Calculated as the per share impact of acquired intangible asset amortization multiplied by the Company's effective tax rate for the period. |
Our adjusted diluted earnings per share guidance for fiscal 2025 excludes an expected after-tax impact of approximately
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SOURCE The Home Depot
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