Home Depot's sales blew past Wall Street's expectations in the fiscal third quarter, as consumers continued to pour money into their houses — yet even as the retailer reiterated its confidence in internal initiatives and a robust economy, investors weren't impressed.
Shares of the home improvement chain fell more than 2 percent in early trading Tuesday, as management said it expects comparable-store sales to increase roughly 3 percent in the holiday period. That's slightly slower growth than analysts were calling for, with FactSet estimates forecasting a 4 percent increase for the period.
Home Depot is facing a tough fourth-quarter comparison from 2015, when unseasonably warm weather boosted its U.S. comparable sales 8.9 percent higher. But the anticipated slowdown also comes as investors are questioning how much runway the housing recovery has left.
"We are up against big numbers," CEO Craig Menear admitted to investors. "[But] we feel confident in the programs that the merchant teams have laid out."
In its own stores, Menear said, new, exclusive products should drive consumer and professional interest during the current quarter. A more efficient supply chain and redesigned website should also serve as catalysts. Home Depot continues to enhance these types of digital offerings, including a broader rollout of its ability to ship merchandise from its stores. That functionality allows retailers to deliver online orders faster.
Meanwhile, Home Depot's market share gains should continue in the fourth quarter, CFO Carol Tome said. Even as a slew competitors hone in on appliances — including J.C. Penney's recent entrance into the category — Home Depot logged another double-digital sales gain. This type of ongoing share grab should help boost the retailer's fiscal fourth-quarter sales, as the period is typically robust for appliance sales.