Both Home Depot and Lowe’s are scheduled to report their FY4Q (period end January) next week. We put together the following earnings preview using Amenity's text analytics platform. Our efforts focused on analyzing sentiment as well as key themes from recent Home Depot and Lowe's earnings calls, and also identified broader Retail sector trends to determine what investors should look for next week.
Recent data points suggest it was likely an eventful quarter with several crosscurrents. The Fed may have triggered macro headwinds in the first half of the quarter, while signals from the Retail ecosystem have recently been mixed. On the company-specific level, we a look for potential competitive impact as new management at Lowe’s implements its restructuring efforts.
Please note: This in no way represents investment advice. All transcript text provided by S&P Global Market Intelligence.
"Although interest rates have ticked up and housing turnover has been pressured, the home improvement backdrop remains strong, driven by robust real residential investment, home price appreciation, which continues to encourage homeowners to engage in discretionary projects."
"And as we look at the future and what’s happening, fundamentally, you got to look at the economy and the economy is good. People are employed, they have more income, they’ve got more to come with tax reform. So fundamentally, we feel very good about just the drivers of the spend in our business."
As the following chart illustrates, the first two months of the January quarter likely felt the pain of higher interest rates and steep stock market declines:
"Walmart U.S. continued to have great sales momentum. Comp sales excluding fuel grew 4.2% in the quarter and 6.8% on a 2-year stack basis, the best result in 9 years."
"I think we’re just recognizing that this last year had some tailwinds in it that this year we won’t have."
The second weekly update from the IRS shows tax refunds this season are -16% in quantity (pointing to delays) and -8.7% in average size when compared to the same period last year. As we wrote about last week, we see this as an emerging risk for consumer spending in 1H.
"Our inefficient reset process continue to create disruption in our stores and contributed to out-of-stocks. In fact, all of our categories with negative comps: millwork, paint, fashion fixtures and flooring were pressured by poorly executed resets."
"We’re certainly seeing much more promotional activity as folks have made decisions to close stores and liquidate inventory."
"As far as inventory categories, we’re not going to give specific about where we invested for competitive reasons."
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Transcript text provided by S&P Global Market Intelligence.
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