Home Depot (NYSE: HD), one of America's premier retailers for home improvement products, suffered a hit to their share price after a disappointing Q3 2019 earnings report. While earnings per share exceeded analyst expectations by a penny, revenue and same-store sales growth were under expectations and caused Home Depot's shares to slide while causing a boost in the stock price of major home improvement rival Lowe's Companies (NYSE: LOW). The main rationale behind the slump in Home Depot shares can be attributed to internal issues in rolling out new paradigms for company success, as opposed to an external factor such as supply chain issues or prices in goods like lumber and appliances. Home Depot's CEO, Craig Menear, noted the positive changes that the company was making from its reorganization efforts, but also noted that those changes were coming on a longer time horizon that he initially did not anticipate.
One of the most eye-raising metrics that came from this most recent earnings report is a same-store sales growth that missed analyst expectations by more than a percentage point. Analysts had predicted a same-store sales growth of 4.7% year on year; however, the actual result was a much less impressive 3.6%. One of the issues that confounds this lagging same-store sales growth is the increased focus on infrastructure for Home Depot's commercial and contractor customers.
At this time, Home Depot provides 45% of its business to professionals looking for supplies to build houses and perform other complex building and infrastructure processes. Home Depot has tried to build a special B2B infrastructure to give high-paying accounts an easier way of shopping for and picking up materials that they buy in bulk from Home Depot. However, this may not be enough to ensure further profitability for the home improvement giant. It notes that a lack of interest in home improvement from a younger clientele has led them to slash their fiscal year projections from 4% to 3.5%, but is still confident that a growing level of new housing starts will buoy the company's profitability into the future.