Why Home Depot Stock Dropped 5% Today

What happened

Home Depot (NYSE:HD) reported another strong quarter Tuesday morning. It also announced a 10% increase in its quarterly dividend, but shares nonetheless headed lower, trading down by 5% as of 12:30 p.m. EST.

The home-improvement retailer said it wouldn’t provide guidance due to “the uncertainty related to the duration of the COVID-19 pandemic and its influence on the consumer.”  

So what

In Home Depot’s fiscal fourth quarter, which ended Feb. 2, overall sales increased 25.1% versus the prior-year period. Comparable sales at existing stores increased 24.5% as the chain completed a strong fiscal year during which comp sales rose 19.7%. Those fiscal 2020 results have investors looking ahead toward difficult comparisons over the next year. In the earnings release, Executive Vice President and CFO Richard McPhail said “if the demand environment during the back half of fiscal 2020 were to persist through fiscal 2021, it would imply flat to slightly positive comparable sales growth.” 

front of Home Depot store

Image source: Home Depot.

Now what

Home Depot completed its acquisition of HD Supply in December, and though the consumer spending environment may be difficult to predict, that purchase should help bolster the company’s professionals business. Home Depot has also been investing in growing its digital channel sales. “We continue to lean into these investments because we believe they are critical in enabling market share growth in any economic environment,” Chairman and CEO Craig Menear said in a statement. 

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The market may not have liked the lack of guidance, but the business continues to perform well, and long-term investors could take advantage of Tuesday’s drop as a buying opportunity. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

View more information: https://www.fool.com/investing/2021/02/23/why-home-depot-dropped-5-today/

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