Shares of Home Depot (HD) are little changed despite the company missing same store sales estimates for the second quarter in a row this morning.
Comparable store sales grew 2.5%, the lowest rate in seven years. Estimates were just above 4%.
Wet weather in February and significant lumber deflation were the primary headwinds.
Unfavorable weather was management's excuse for soft comp sales in the fourth quarter. First quarter results were hurt by the second wettest February on record. What's more, lumber prices have been cut in half after peaking last spring.
Management said that underlying comp sales were up 4.5% excluding one-off items, in-line with the company's internal forecast.
Interestingly, management continues to note that it doesn't see much of a correlation between its sales and lower housing turnover.
First quarter earnings grew 9% while gross margin contracted 30 basis points yr/yr; both results were better than expected.
The largest home improvement retailer reaffirmed guidance for the year, calling for EPS up 3.3%, sales up 3.1%, and comparable store sales up 5%.
Guidance does not include the impacts of the latest round of tariff increases on Chinese imports or of commodity price deflation. Management said that the tariff impact would still be manageable at ~$1 bln for the increase to 25% on top of a $1 bln impact from the original 10% duty.
Tough comparisons from hurricane-related sales in the South provide an additional headwind this year.
Stepping back, management continues to execute well. Their macroeconomic view is unchanged and largely positive, resulting in a mid-single digit comp sales growth forecast.
Investors are likely happy with the company's somewhat impervious nature relative to the slower housing market. The company continues to improve its position with professional contractors in the otherwise fragmented hardware segment.
At ~19x EPS estimates, Home Depot continues to trade at a slight premium to Lowe's (LOW) as it continues to outperform its rival on nearly every metric.