Home Depot just forecast weak consumer demand — here’s what that could mean for the rest of the economy

Just an awful net report from the banal market's astir important retailer connected Tuesday: Home Depot.

Bottom enactment – the broader-market implications of Tuesday morning's post-earnings banal determination for Home Depot are going to beryllium significant. And don't expect overmuch betterment from the location betterment retailer immoderate clip soon.

Home Depot is tumbling 5%, oregon $13 a share, successful premarket trading. That's worthy astir 100 points connected the Dow Jones Industrial Average and should instrumentality a wound retired of the S&P 500 too. Remember, it's the astir impactful retailer successful the price-weighted Dow – having astir treble the value of Walmart (since it is astir treble the price). And contempt Walmart's overmuch larger marketplace headdress – arsenic we highlighted yesterday – Home Depot has some a greater scale and net power successful the S&P 500 owed to the Walton family's hefty involvement successful Walmart that reduces its weighting successful the main equity benchmark. Lowe's is down 3% pre-open successful sympathy, but it won't study results until adjacent Tuesday.

Home Depot, 1 day

Home Depot's EPS bushed by 2 cents arsenic a 3.9% simplification successful SG&A costs helped a little. However, it is inactive the retailer's archetypal net diminution since May 2020 (i.e., since the commencement of the pandemic).

But the existent communicative is the request demolition – arsenic indicated by the company's immense gross miss. Sales were 2.7% beneath Wall Street's expectations ($37.26B vs. $38.28B est. from Refinitiv) – it's biggest gross miss since November 2002. It is besides the 2nd consecutive gross miss for the location betterment retailer – which follows 12 consecutive gross beats. It's besides the biggest gross driblet since the Financial Crisis (revenue down 4.2% YOY successful the latest quarter). Comps came successful down 4.5% vs. down 1.6% statement estimation (StreetAccount), with transactions falling 4.8% and mean summons fundamentally level (slightly positive).

Pretty darn ugly.

Home Depot, YTD

So what's hurting demand? A fig of factors. In Q1 – utmost upwind successful California hurt. But problems agelong beyond the weather. There's besides lumber deflation. But astir importantly, arsenic CEO Ted Decker flagged, "We besides observed much broad-based unit crossed the concern compared to erstwhile we reported 4th fourth results a fewer months ago."

The institution has chopped its FY EPS and gross maturation projections owed to the anemic Q1 arsenic good arsenic "further softening of request comparative to our expectations, and continued uncertainty regarding user demand." The caller forecast is not pretty. Home Depot sees afloat twelvemonth gross down 2%-5% vs. the down 0.7% statement estimation and EPS down 7%-13% vs. the down 5.7% statement estimate.