Dillard's Q4 Earnings & Sales Miss Expectations, Decline Y/Y

The Home Depot Inc. HD has reported fourth-quarter fiscal 2024 results, wherein earnings and sales surpassed the Zacks Consensus Estimate and improved year over year. HD surpassed fiscal fourth-quarter expectations with strong home improvement spending despite pressure on large remodels. Strategic investments position it for future growth.

Home Depot's adjusted earnings of $3.13 per share increased 9.4% from $2.82 in the year-ago quarter. The bottom line beat the Zacks Consensus Estimate of $3.04 per share.

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Net sales advanced 14.1% to $39.7 billion from $34.8 billion in the year-ago quarter. Also, sales surpassed the Zacks Consensus Estimate of $39.14 billion. The company’s sales benefited from an additional week in the fiscal fourth quarter, which added $2.5 billion in sales.

The Zacks Rank #3 (Hold) company’s shares have lost 4.7% in the past three months compared with the industry's 11.6% decline.

HD is confident about its initiatives to strengthen the business. It has been on track with its investments to craft the best inter-connected experience for customers, improving the pro wallet through its unique ecosystem of capabilities and expanding stores. It is also optimistic about the future of the home improvement industry and its ability to expand market share in this space.

Detailed Picture of HD’s Q4 Results

Home Depot's comparable sales improved 0.8% in the reported quarter. The company’s comparable sales in the United States rose 1.3% in the fiscal fourth quarter. The increase resulted from the rise in customer transactions and the average ticket. In the fiscal fourth quarter, customer transactions improved 7.6% year over year, whereas the average ticket was up 0.3%. Sales per retail square foot rose 1.2%.

Our model estimated comps to decline 2.4% in the fourth quarter of fiscal 2024, led by a 1.8% decline in customer transactions and a 0.8% fall in the average ticket.

The Home Depot, Inc. Price, Consensus and EPS Surprise

The Home Depot, Inc. price-consensus-eps-surprise-chart | The Home Depot, Inc. Quote

In dollar terms, the gross profit rose 13.3% year over year to $13 billion in the fiscal fourth quarter. However, the gross margin of 32.8% declined 30 basis points (bps) year over year. Our model predicted a 10-bps year-over-year decline in the gross margin to 33% for the fiscal fourth quarter.

SG&A expenses of $7.7 billion increased 15.7% from $6.7 billion in the year-ago quarter. SG&A expenses, as a percentage of sales, grew 30 bps year over year to 19.5%.

The adjusted operating income rose 10.7% year over year to $4.6 billion, while the adjusted operating margin of 11.7% contracted 40 bps year over year. The decline in the operating margin resulted from soft gross margin and higher SG&A expenses, as a percentage of sales.

Our model predicted the SG&A expense rate to increase 30 bps year over year to 19.5%. Consequently, we anticipated the operating income to increase 7.7% year over year and the operating margin to contract 40 bps to 11.7% for the fiscal fourth quarter.

HD’s Other Financial Updates

Home Depot ended fiscal 2024 with cash and cash equivalents of $1.7 billion, a long-term debt (excluding current installments) of $48.5 billion and shareholders' equity of $6.6 billion. In fiscal 2024, the company generated $19.8 billion of net cash from operations.

What HD Plans for Fiscal 2025?

Management outlined its sales and earnings per share view for fiscal 2025. Home Depot anticipates sales to increase 2.8% year over year. The company expects comparable sales to increase 1% for the 52 weeks.

HD estimates the gross margin for fiscal 2025 to be 33.4%, with an operating margin of 13%. It expects an adjusted operating margin of 13.4%. The company expects an effective tax rate of 24.5% for fiscal 2025. Net interest expenses are likely to be $2.2 billion. HD plans to open 13 stores for fiscal 2025.

Home Depot anticipates GAAP earnings per share to decline 3% year over year for fiscal 2025. HD expects adjusted earnings per share to fall 2% year over year. The company anticipates capital expenditures to be 2.5% of total sales.

Stocks to Consider

Some better-ranked stocks are Boot Barn BOOT, Ethan Allen Interiors Inc. ETD and Somnigroup International Inc. SGI.

Boot Barn operates as a lifestyle retail chain devoted to western and work-related footwear, apparel and accessories. It sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Boot Barn’s current fiscal-year sales and earnings indicates growth of 14.9% and 21.4%, respectively, from the previous year’s figures. BOOT has a trailing four-quarter average earnings surprise of 7.2%.

Ethan Allen Interiors is a leading interior design company and manufacturer and retailer of quality home furnishings. It currently carries a Zacks Rank #2 (Buy).

The Zacks Consensus Estimate for Ethan Allen Interiors’ current financial-year sales and earnings indicates growth of 3.5% and 6.8%, respectively, from the year-ago numbers. ETD has a trailing four-quarter earnings surprise of 0.2%, on average.

Somnigroup is involved in the development, manufacturing and marketing of bedding products primarily in North America and internationally. It currently carries a Zacks Rank of 2.

The Zacks Consensus Estimate for Somnigroup’s current financial-year sales and earnings implies growth of 29.8% and 11.4%, respectively, from the year-ago period’s actuals. SGI has a trailing four-quarter earnings surprise of 2.7%, on average.

This article originally published on Zacks Investment Research (zacks.com).

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