The Home Depot posted its weakest quarter in years, with Q1 2023 seeing a 4.5% comparable sales decline year-over-year. Total sales were $37.3 billion, down 4.2% from Q1 2022. The declines were attributed to a slowdown following three years of “unprecedented growth” in which the retailer boosted its sales by over $47 billion, according to President and CEO Ted Decker.
Challenges like deflation in lumber prices and unfavorable weather that caused customers to put off home improvement projects weighed heavily on the results. The impact was particularly severe in Home Depot’s Western division, where extreme weather in California disproportionately affected results.
“We also observed more broad-based pressure across the business compared to when we reported fourth quarter results a few months ago,” said Decker in a statement. “Despite a more challenging environment, our associates maintained their relentless focus on our customers, and I would like to thank them and our many partners for their hard work and dedication. 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 now expects a year-over-year comparable sales decline between 2% and 5% for 2023 due to these near-term pressures, compared to previous projections that sales would remain flat for the year. The retailer’s share price fell about 2% the morning of May 16 in response to the results and adjusted outlook.
“Given the negative impact to first quarter sales from lumber deflation and weather, further softening of demand relative to our expectations, and continued uncertainty regarding consumer demand, we are updating our guidance to reflect a range of potential outcomes,” said Richard McPhail, EVP and CFO at Home Depot in a statement.
The home improvement chain saw the first signs of financial instability in Q4 2022, when comparable sales for the period fell 0.3% year-over-year and net earnings remained flat at $3.4 billion due to weak demand. These recent results mark the end of a long period of success for Home Depot, including a record-setting Q1 2022 and a 32.7% sales surge in Q1 2021, driven by an spike in home improvement projects during and following COVID lockdowns.