Home Depot posts rare sales miss as delayed spring hits demand

(Reuters) – Home Depot Inc (HD.N) on Tuesday missed Wall Street forecasts for sales at established stores, as an unusually long winter hit sales of springtime gardening products such as fertilizers and mulch.

The miss is the first in seven quarters for the top U.S. home improvement chain, which has in recent years largely bucked the trend of big-box stores losing shoppers to online retailers including Amazon.com Inc (AMZN.O).

Still, Home Depot kept its full-year sales and earnings forecasts intact and said it was seeing double-digit sales growth in May, helping the Atlanta-headquartered company’s shares trim initial losses of 3 percent. The stock was last down 1.3 percent at $188.64 on Tuesday morning.

Sales at Home Depot stores open for more than a year rose 4.2 percent in the first quarter ended April 29, falling short of analysts’ average expectation of a 5.4 percent increase, according to Thomson Reuters I/B/E/S.

A winter that prolonged into March and April in some parts of the United States caused a 1.3 percent decline in customer traffic and forced Home Depot to slap deep discounts on several seasonal products.

Patio furniture, for instance, was marked down by up to 30 percent, Home Depot’s website showed.

Sales of garden-related products — which account for 15 percent to 20 percent of revenue — took a beating in the first quarter, company executives told analysts on a conference call.

“The miss in terms of garden was significant against what we planned,” Chief Executive Officer Craig Menear said.

The lower-than-expected sales could pressure Home Depot’s ability to meet its full-year targets, Loop Capital analyst Laura Champine said. “How much of the sales they’ve missed will they get back? That’s the key,” she said.

Recent data has suggested that U.S. homebuilding activity may be slowing, after construction of single-family homes — the biggest share of the housing market — fell 3.7 percent in March.

The figures have also raised concerns that rising mortgage and interest rates — though historically low — were weighing on construction activity and consumer spending.

Home Depot’s Menear allayed some of those fears, saying: “The U.S. economy is strong and housing fundamentals continue to be supportive of our business … we do not expect interest rates to lead to a slowdown in customer desires or demand.”

The company’s total net sales rose 4.4 percent to $24.95 billion in the first quarter but fell short of expectations, while earnings per share topped estimates.