What You Need To Know Ahead of Home Depot's Earnings Report Tuesday

Home improvement retailer Home Depot (HD) will report its first-quarter earnings ahead of the market open Tuesday, with analysts expecting slight year-over-year declines in sales and earnings amid concerns inflation could dampen the number of big-ticket purchases consumers are willing to splurge on.

Home Depot is expected to report $3.54 billion in net income or $3.58 per share, on a total of $36.65 billion in revenue, down from $3.87 billion in profit or $3.82 a share on $37.26 billion in revenue a year ago.

The retailer beat estimates in the previous quarter with $2.8 billion in profit on $34.79 billion in revenue, but warned at the time that the home improvement market is still facing headwinds that could hamper sales in 2024.

Key Metric: Big-Ticket Sales

Home Depot has said multiple times over the last year that inflation negatively impacted sales of big-ticket items, which Home Depot classifies as transactions greater than $1,000, as consumers became less likely to take on significant home improvement projects, weighing on Home Depot's sales. The retailer has also had to cope with an overall decline in spending on home improvement projects following a surge during the pandemic.

Business Spotlight: Raising Pro Market Share

Amid a pullback in consumer spending on home improvement projects, a possible area of growth for Home Depot is the professional contractor market. Earlier this year, Home Depot announced an $18.25 billion acquisition of SRS Distribution, which sells and ships construction supplies like roofing materials, in the hopes of expanding its share of the professional contractor market.

The retailer said it estimated SRS Distribution's customer base should add about $50 billion to Home Depot's existing total addressable market, taking that market over $1 trillion.

"SRS's branch network, coupled with The Home Depot's 2,000+ U.S. stores and distribution centers, comprehensive product offering, and extensive pro brands, provides the residential pro customer with more fulfillment and service options than ever before," Home Depot CEO Ted Decker said in late March when the acquisition was announced.

Decker said in the company's February earnings call that Home Depot's priorities for 2024 included increasing its market share among professional contractors, along with opening new stores and warehouses capable of shipping large orders directly to construction sites.

Home Depot shares have lost about 0.5% since the start of the year, trading at $344.92 as of 11:40 a.m. ET Thursday.