Home Depot Sets Cautious Outlook -- WSJ
December 12 2019 - 3:02AM
Dow Jones News
By Sarah Nassauer and Allison Prang
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (December 12, 2019).
Home Depot Inc. tempered its sales targets for next year, saying
the long U.S. economic expansion is expected to cool and the
home-improvement chain will need more time for some investments to
pay off in sales gains.
The company's 2020 forecast reflects slower growth in gross
domestic product and a housing market that is positive but "not at
a level that we've seen in prior years," Chief Executive Craig
Menear told investors on Wednesday.
"We will continue to gain outsized share in our market," he
said.
Buoyed by a strong housing market and low unemployment, Home
Depot has enjoyed several years of robust sales growth even as some
retailers, including its rival Lowe's Cos., have struggled. More
recently, its growth has slowed.
For fiscal 2020, Home Depot said it expects total sales and
comparable sales to rise by 3.5% to 4%. Analysts polled by FactSet,
on average, were expecting same-store sales to increase 4.3%. Two
years ago, executives were projecting comparable sales would rise
4.5% to 6% in 2020.
The Atlanta-based company, which operates nearly 2,300 stores,
has missed same-store sales expectations for the last four fiscal
quarters, according to FactSet, and hasn't reported annual
same-store sales below 4% since fiscal 2012.
Home Depot executives said heading into 2020 U.S. consumer
spending is healthy, boosted by low unemployment and rising wages.
They also said the overall housing market is healthy, with
home-equity rising and Americans staying in homes longer, making
them more willing to spend on improvements.
"While we don't expect to see the same tailwinds in prior years,
we do expect to see a positive influence from housing," said
Richard McPhail, who recently took over as finance chief. The
company estimates a 1.8% rise in GDP next year.
The company also lowered its operating profit forecasts for next
year, citing in part higher theft from stores. Executives said they
were working with law enforcement to counter what they said were
organized crime groups. "We all hypothesize that this ties to the
opioid crisis, but we're not positive about that," Mr. Menear
said.
Home Depot's disappointing outlook comes not long after the
company lowered its sales expectations for the current fiscal
year.
The company has been working on revamping its supply chain to
deliver products to customers faster. For example, it is investing
$1.2 billion over five years on its supply chain and distribution
centers to automate more of the delivery of lumber and other
building materials rather than fulfill such online orders from
stores.
Mr. Menear said in November that it was taking longer than
expected for some of the company's strategic plans to show
results
The company said it still expects fiscal 2019 sales to rise
about 1.8%, with comparable sales on a 52-week basis up about 3.5%.
It also backed its full-year earnings forecast of $10.03 a
share.
Shares closed down 1.8% Wednesday at $212. The stock has gained
about 18% over the past year.
Write to Sarah Nassauer at sarah.nassauer@wsj.com and Allison
Prang at allison.prang@wsj.com
(END) Dow Jones Newswires
December 12, 2019 02:47 ET (07:47 GMT)
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