Home Depot Shares Rally on Earnings Beat, Even as Home Improvement Sales Level Off

Home Depot’s quarterly sales declined 3% from 2022, but topped Wall Street’s expectations as customers chipped away at more modest projects and home repairs. The company indicated caution about the coming months and narrowed its full-year outlook. It said it now anticipates sales will fall by 3% to 4% from 2022, compared with a previous expectation of a 2% to 5% decline. Home Depot expects earnings per share to slide by 9% to 11%, compared with prior guidance of a 7% to 13% drop.

Home Depot said many trends had started to normalize after years of upheaval following the Covid pandemic. Prices have settled after a bumpy ride from inflation. Appliances are in stock again, which has helped support sales. And promotion levels have reverted to pre-pandemic levels, bolstering profits.

Still, Home Depot has not emerged entirely from a tough stretch for its business. In an interview with CNBC, CFO Richard McPhail said the company’s results reflect that this year “is a period of moderation in home improvement.”

“A customer who might have remodeled their entire home may be opting for a partial remodel,” he said. “Maybe they won’t redo their entire kitchen. Maybe they’ll just do the countertop and backsplash. And so it’s really just the downscaling of projects that we’ve seen.”

Here’s what the retailer reported for the fiscal third quarter ended Oct. 29 compared with what Wall Street was anticipating, based on a survey of analysts by LSEG, formerly known as Refinitiv:

  • Earnings per share: $3.81 vs. $3.76 expected
  • Revenue: $37.71 billion vs. $37.6 billion expected

Home Depot reported net income of $3.81 billion, or $3.81 per share, down from $4.34 billion, or $4.24 per share, 2022. Revenue fell from $38.87 billion in 2022.

Comparable sales declined 3.1% year over year, a drop that wasn’t as deep as the 3.6% analysts expected, according to Factset. However, it marked the fourth straight quarter of falling comparable sales, an industry metric that takes out the effect of store openings, closures and renovations.

Home Depot has faced dual challenges over the past year: elevated mortgage rates  and high inflation. In recent quarters, customers have pulled back on pricier projects and items — a trend that continued in the most recent quarter, McPhail said.

The housing market has had a mixed effect on Home Depot’s sales, as mortgage rates rise, home values remain high and supply stays low, McPhail said. On the one hand, he said, customers aren’t moving as much and taking on projects that typically come with a new home. Yet on the other hand, some have chosen to spruce up the house where they have a lower fixed-rate mortgage.

Customer transactions fell to 399.8 million from 409.8 million in 2022. When shopping online and in person, customers’ average ticket was $89.36, roughly the same as 2022.

Even before those dynamics intensified, Home Depot anticipated sales would decrease, after so many homeowners ticked off kitchen remodels, painting projects and more during the Covid pandemic. McPhail has also noted a shift in budget priorities to experiences, such as vacations and concerts.

Still, he said Home Depot’s customers are in good shape financially. “The consumer — and particularly the homeowning consumer who is our customer — is healthy,” he said. “They’re employed. They’ve seen income gains and wealth gains in recent years. They have excess savings and they remain engaged in home improvement.”

To view the full results, visit the Home Depot website. 

Source: CNBC
Source: Yahoo Finance

Loblaw Profit Rises More Than 11% as Grocery, Drug Store Sales Continue to Climb

Loblaw Co.s Ltd. reported an 11.7% increase in profit in the 2023 third quarter, driven by rising grocery and drug store sales and cost-cutting initiatives. The company’s net earnings available to common shareholders increased to $621-million or $1.95 per share in the quarter ended October 7, compared to $556-million or $1.69 per share in the same period last year. Loblaw has benefited from shoppers gravitating to discount grocery stores as food inflation has severely impacted household budgets. The company owns discount chains such as No Frills and Maxi, which reported higher traffic in the third quarter. Loblaw is investing in opening more discount locations.

Food inflation has been under intense scrutiny, with growth in grocery prices slowing in September. Loblaw reported that its internal measure of food inflation at its stores was lower than the food price growth tracked by Statistics Canada’s Consumer Price Index. The federal government announced that grocery chains promised to offer discounts and price-matching in a bid to “stabilize” prices, though some critics argue the plan mostly included strategies the sector already employs.

Loblaw reported $18.3-billion in revenue for the third quarter, up 5% compared to the same period last year. Same-store sales grew by 4.5% at Loblaw’s grocery stores and 4.6% at its Shoppers Drug Mart chain.

To view the full results, visit the Loblaw website. 

Source: Globe and Mail
Source: The Star
Source: The Star

Canadian Tire Cutting 3% of Work Force, Trimming Costs as Consumer Spending Slows

Canadian Tire Corp. Ltd. has cut about 3% of its workforce in its fourth quarter as tougher economic times weigh on consumer’s willingness to spend. The retailer said on November 9 that it also won’t fill most of its current job vacancies, resulting in a further reduction of 3%. The president and chief executive of Canadian Tire characterized the decision to slash jobs as “tough” and said it was made “with a heavy heart.”

“There’s no question that the most difficult business decisions are the ones that impact your people,” Greg Hicks said on a call with analysts. “At the same time, we know this is what’s required to continue to execute our strategy and ensure we are equipped to deliver on our commitments to our customers, employees and shareholders.”

Canadian Tire said it expects to take a charge of between $20 million and $25 million in its fourth quarter in connection with the decision, putting it on pace for annualized savings of about $50 million.

The cuts came as Canadian Tire and other retailers are seeing their customers become stretched ahead of the typically bustling Black Friday and holiday shopping season. High inflation and a high interest rate are pushing more to seek deals or put off purchases that are seen as discretionary.

“Customers are shifting away from higher ticket discretionary items and also reducing the number of items in their basket, with an increase in single-unit baskets,” said chief financial officer Gregory Craig on the same call as Hicks.

Much of the softness Canadian Tire is seeing in discretionary spending is coming from indebted households, especially in Ontario and B.C. Less spending, attributed to “debt-burdened” customers, drove 70% of the sales decline the company recent saw, Hicks said.

Source: Globe and Mail
Source: The Star
Source: Financial Post

Canadian Tire Corporation Reports Third Quarter 2023 Results

Canadian Tire Corporation, Limited released its third quarter results for the period ended September 30, 2023. Highlights are as follows:

  • Consolidated comparable sales down 1.6% as consumers continue to shift to essentials
  • Increase in Retail Gross margin rate as higher CTR product margin offset promotional intensity at other banners
  • Normalized diluted Earnings Per Share (“EPS”) was $2.96; Diluted EPS was $(1.19)
  • Annualized dividend increased from $6.90 to $7.00 per share; intention to repurchase up to an additional $200.0 million Class A Non-Voting Shares during 2024

“Against softening consumer demand, our Q3 results show the continued resilience, relevance, and underlying strength of our business as we leveraged loyalty and prioritized essential categories within our multi-category assortment,” said Greg Hicks, President and CEO, Canadian Tire Corporation. “We remain focused on driving value for our customers as we head into the important fourth quarter.”

“In a more challenging economic environment, we are accelerating efficiency initiatives, prioritizing investments within our Better Connected strategy, and actively managing our resource allocation,” added Hicks.

To view the full results, visit the Canadian Tire website. 

Amazon Reports Better-Than-Expected Results, as Revenue Jumps 13%

Amazon reported third-quarter earnings and revenue that sailed past analysts’ estimates. The stock climbed in extended trading.

Here are the results:

  • Earnings per share: 94 cents vs. 58 cents expected by LSEG, formerly known as Refinitiv.
  • Revenue: $143.1 billion vs. $141.4 billion expected by LSEG.

Investors are also following these segment numbers:

  • Amazon Web Services: $23.1 billion vs. $23.2 billion in expected revenue, according to StreetAccount
  • Advertising: $12.1 billion vs. $11.6 billion in expected revenue, according to StreetAccount

Amazon said fourth-quarter sales, which include the key holiday period, will be between $160 billion and $167 billion. Analysts were expecting revenue of $166.6 billion, according to LSEG. At the mid-point of its guidance range, revenue of $163.5 billion would represent growth of 9.6% from $149.2 billion a year earlier.

Revenue jumped 13% in the third quarter, a sign that the business is seeing some acceleration after a difficult 2022 that was marred by soaring inflation and rising interest rates.

Amazon has been in cost-cutting mode for the past year as it became clear that it expanded too quickly during the pandemic. The company has laid off 27,000 employees since fall 2022 and it’s axed some of its more unprofitable bets.

CEO Andy Jassy, who succeeded founder Jeff Bezos at the helm in mid-2021, said those belt-tightening efforts continue to bear fruit. “We had a strong third quarter as our cost to serve and speed of delivery in our Stores business took another step forward, our AWS growth continued to stabilize, our Advertising revenue grew robustly, and overall operating income and free cash flow rose significantly,” Jassy said in a statement.

Sales in Amazon’s core e-commerce business continued to recover, expanding 7% year over year, after growing 4% in the previous quarter. The September quarter includes the results of this year’s Prime Day promotion, which took place in July. Amazon described it as its “biggest ever” sale.

Net income more than tripled to $9.9 billion, or 94 cents a share, from $2.9 billion, or 28 cents a share, a year earlier. Net income for the quarter includes pre-tax valuation gain of $1.2 billion from the company’s investment in electric car company Rivian.

Digital advertising continues to be a bright spot for Amazon, as third-party sellers and large brands bolster their ad spending to improve visibility in an increasingly competitive marketplace. Ad revenue soared 26% from a year earlier. That’s much faster than Google’s ad growth, which was 9%, and topped Facebook’s ad growth of 23%. 

In cloud, however, Amazon appears to be giving up some market share. Amazon Web Services, which leads Microsoft Azure and Google Cloud, showed growth in the quarter of 12%. Microsoft said Azure revenue jumped 29%, and Google Cloud expanded by 22%.

Growth at AWS has slowed in recent quarters as big businesses looked to reel in spending. CFO Brian Olsavsky told reporters that the company continues to see some “cost optimization” from customers, albeit at a slower rate than before. He also noted the company is taking a lot of costs out of the business. That includes expenses tied to fulfillment, delivery and the handling of inventory.

Amazon’s cost cutting is showing up in its profit margin. The company reported an operating margin, the profit left after accounting for costs of core operations, of 7.8%, the highest since early 2021.

On a conference call with analysts, Jassy spoke optimistically about the outlook for AWS and said the cloud unit is seeing “the pace and volume of closed deals pick up.” He said several deals were signed in September that will show up in the fourth quarter.

To view the full results, visit the Amazon website. 

Source: CNBC

Grocery, Fresh Food Spur Costco’s October Comparable-Sales Growth

Costco Wholesale kept sales on the upside in October but at a slower pace in annual and sequential comparisons, with online sales growth virtually mirroring the prior-month gain.

For the four weeks ended October 29, net sales rose 4.5% to $18.53 billion from $17.73 billion in 2022. The uptick trailed the 6% year-over-year net sales gain in September and came against a 7.7% increase in October 2022.

The eight-week year-to-date period saw Costco lift net sales by 5.3% to $36.5 billion from $34.74 billion in 2022.

Overall comparable-club sales advanced 3% year over year and were up 3.4% excluding changes in gas prices and foreign exchange (FX) rates, Costco said. That fell short of the 4.5% comp-sales gain (+3.7% excluding fuel and FX) for September and came atop 6% growth (+6.7% excluding fuel and FX) in October 2022.

Among Costco’s business units, October comp sales edged up 1.1% in the United States (+2.2% excluding fuel and FX), 8.5% in Canada (+9.5% excluding fuel and FX) and 8.2% internationally (+4.1% excluding fuel and FX), according to Costco. Canada was Costco’s only business unit to ring up higher comp-sales growth in October.

E-commerce sales stayed on the growth path in October following some up-and-down months. Online sales for the month climbed 3.7% (+3.4% adjusted) following a 3.7% uptick (+3.5% adjusted) in September, a 2.5% decline (-2.2% adjusted) in August and a 4.1% increase (+4% adjusted) in July, which had capped off eight straight months of digital sales declines. For October 2022, e-commerce sales had dipped 0.7% year over year (+1.6% adjusted).

“Our comp traffic, or frequency, for October was up 4.1% worldwide and 2.9% in the U.S.,” Josh Dahmen, assistant vice president of finance and investor relations at Costco, said in a phone report late Wednesday. “Worldwide, the average transaction was down about 1%, which includes the impacts from gas deflation and FX,” he added.

In September, comparable traffic gained 4.9% worldwide and 4.5% in the U.S., while the average transaction dipped 0.3%. “Gas price deflation negatively impacted total reported comp sales by approximately 1%,” Dahmen noted. “The average worldwide selling price per gallon was down approximately 7% versus last year.”

Excluding the impact of FX, groceries and fresh food remained growth catalysts among Costco’s core merchandise categories for October, reflecting shoppers’ ongoing focus on staple items versus discretionary goods amid an uncertain economy.

“Food and sundries were positive mid-single digits. Food, sundries and cooler were the strongest departments. Fresh foods were up mid-single digits; better-performing departments included bakery and produce,” Dahmen said. “Nonfood was negative low single digits. Better-performing departments included jewelry, tires and health-and-beauty aids. Weaker departments were office supplies, home furnishings and sporting goods. Ancillary business sales were positive low single digits. Pharmacy, food court and hearing aids were the top performers. Gasoline was down by mid-single digits.”

To view the full results, visit the Costco website. 

Source: Grocery Business