• by Sarah Mahoney  @mahoney_sarah, May 16, 2023

The Home Depot just reported first-quarter financial results, with declining sales marking an end to its long pandemic-fueled gains. The 4.2% dip has observers worrying about what that trend might mean for the housing market and the health of middle America’s bank accounts. The company updated its forecast for the full year to project a decrease in sales, which hasn’t happened since 2009.

The Atlanta-based retailer says sales slipped to $37.3 billion for the first quarter of its fiscal 2023. On a comparable sales basis, that amounts to a fall of 4.5% and a decrease of 4.6% in its U.S. stores.

Net earnings also dropped, coming in at $3.9 billion, compared to $4.2 billion in the comparable period last year.

The company says extreme weather, particularly in California, is partially to blame, and moderating lumber prices also had some impact. “After three years of unprecedented growth for our sector, during which we grew sales by over $47 billion, we expected that fiscal 2023 would be a year of moderation for the home improvement market,” said Ted Decker, the company’s chair, president and CEO, in its announcement. 

He conceded the results fell below expectations, citing broader economic pressures as the quarter continued.

“While the near-term environment is uncertain, we remain very positive on the medium-to-long term outlook for home improvement and our ability to grow share in a large and fragmented market.”

Home Depot also updated its forecast for the full fiscal year. Previously, it had expected sales to be flat. It now expects sales to fall between 2% and 5% -- which would be the company’s first annual sales decline since 2009.

Seth Basham, an analyst who covers Home Depot for Wedbush, called the sales number a “sharp miss.”

And while he anticipates some seasonal sales recovery, it’s “not enough to offset weather events occurring in West last quarter that eliminated some project-oriented spending.”

Home Depot's store traffic is declining, which also bodes poorly for other brands: “We see an incremental negative read-through to Lowe’s and other home-oriented retailers.”