Home Depot Reports First Positive Same-Store Sales Since 2022

In its latest quarterly report, Home Depot (NYSE: HD) achieved positive same-store sales for the first time since the third quarter of 2022, effectively ending a notable string of declining comparable-store sales. Same-store sales are a key performance metric for retailers, revealing how existing locations are faring. As costs like wages, utilities, and maintenance generally rise over time, stagnant sales can lead to a situation known as operating deleverage, where profits decline at a faster rate than sales.

Here’s a detailed look at Home Depot’s fiscal fourth-quarter performance and its guidance, which may determine if the stock can sustain its recent momentum.

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Home Depot Experiences Increase in Same-Store Sales

The backdrop for home improvement retailers has been challenging over the past few years. COVID-19 lockdowns initially spurred high demand for renovations, but rising interest rates have since hampered housing transactions and increased project financing costs.

After enduring eight consecutive quarters of declining same-store sales, Home Depot reported a 0.8% increase for fiscal Q4 and a 1.3% jump in the U.S. This increase exceeded analysts’ expectations, which projected a 1.7% decline, according to StreetAccount. While transaction numbers rose by 0.6%, the average ticket size inched up by 0.2%, influenced entirely by higher lumber and copper wire prices. The company also noted a positive impact from hurricane-related sales.

Quarter/Year	Same-Store Sales Growth (Decline)	U.S. Same-Store Sales Growth (Decline)
Q3 2022	4.3%	4.5%
Q4 2022	(0.3%)	(0.3%)
Q1 2023	(4.5%)	(4.6%)
Q2 2023	(2%)	(0.2%)
Q3 2023	(3.1%)	(3.5%)
Q4 2023	(3.5%)	(4%)
Q1 2024	(2.8%)	(3.2%)
Q2 2024	(3.3%)	(3.6%)
Q3 2024	(1.3%)	(1.2%)
Q4 2024	0.8%	1.3%

Data source: Home Depot earnings reports. Home Depot’s fiscal quarters end approximately one month after standard calendar quarters.

Despite continued softness in big-ticket items, which the company defines as those costing $1,000 or more, comparable sales for these products saw a modest 0.9% rise in the quarter. Strength was noted in appliances, building materials, and lumber, although larger discretionary projects, such as kitchen and bathroom remodels that typically require financing, remained weak.

A positive note is that ten of Home Depot’s 16 product categories experienced growth in comparable sales during the quarter. Additionally, sales increased for both professional contractors and DIY customers, and positive comparable sales were observed in 15 out of 19 geographic regions where Home Depot operates.

Overall revenue rose by 14% to $39.7 billion, largely due to an additional week in the quarter and the recent acquisition of SRS Distribution. Adjusted earnings per share (EPS) increased by 7% to $3.02, surpassing the analyst consensus estimates of $3.01 on $39.2 billion in sales, as reported by LSEG.

For the future, Home Depot forecasts revenue growth of 2.8%, alongside a 1% rise in same-store sales. However, it anticipates a decline of about 2% in adjusted EPS and plans to open 13 new stores by 2025.

Image source: Getty Images.

Will Home Depot Sustain Its Positive Momentum?

Home Depot remains cautious about the housing market’s current state. The company does not foresee a resurgence in new housing starts or a significant increase in existing home turnover, which is at 40-year lows. It also anticipates no substantial drop in mortgage rates. High-interest rates pose ongoing challenges for larger home remodeling projects.

The company expects the home improvement market to remain stable, with potential slight growth. This outlook appears conservative, especially considering that it often outperforms the industry. Despite the evident challenges, such as elevated interest rates and housing turnover—critical for many remodeling projects that depend on home buying and selling—the market’s most severe headwinds seem to be diminishing.

Source: Joint Center for Housing Studies of Harvard University.

Regarding valuation, Home Depot’s stock trades at a price-to-earnings (P/E) ratio of roughly 26 and a forward P/E of 25.8 based on analyst projections for 2025. These figures position the stock at the higher end of its historical valuations.