Home Depot Inc posted quarterly sales that fell short of Wall Street's heightened expectations on Tuesday after demand slowed in April following a jump in home improvement projects spurred by an unusually warm winter.
But results were stronger than the company expected, as the warm weather pushed forward a significant amount of sales that would have normally occurred in the second quarter.
And despite recent encouraging signs about the U.S. housing market, the company said it has not fully recovered from the housing crash.
"Adjusting for weather impacts and the pull-forward of activity, the quarter's results were encouraging and consistent with our view that growth this year will be reflective of broad GDP growth, rather than a recovery in the housing market," said Home Depot Chief Executive Frank Blake on a conference call.
Spring is traditionally the biggest selling season of the year for home improvement chains. But this year, customers began projects early, the company said. That fueled investor optimism which lifted sales expectations past the company's own outlook.
Home Depot's sales rose 5.9 percent to $17.81 billion in the first quarter ended on April 29, missing analysts' average estimate of $17.96 billion, according to Thomson Reuters I/B/E/S. Same-store sales, or sales open at least a year, rose 5.8 percent globally, and 6.1 percent in the United States.
After the unusually warm weather in February and March, Wall Street analysts were looking for a global same-store sales rise of 6.5 percent in the quarter, Oppenheimer analyst Brian Nagel said.
"A 5.8 percent increase in (same-store) sales is a very good number, but expectations are the name of the game, and they had gotten a little high," said Edward Jones analyst Robin Diedrich.
Home Depot shares, which had gained more than 18 percent this year through Monday, were down 1.7 percent in midday trade.
Home Depot estimated that weather lifted U.S. same-store sales by 3 percentage points, with as much as a third of that being sales that would have otherwise occurred during the second quarter. The company said second-quarter same-store sales growth should be lower than the first quarter.
The average transaction price at Home Depot rose 2.2 percent to $54.51 in the quarter.
Same-store sales rose 6.2 percent in February, 6 percent in March and 5.4 percent in April. The U.S. market saw a similar slowdown in April, rising only 5.6 percent, after gains of 7.2 percent in February and 5.8 percent in March.
The lower-than-expected sales at Home Depot caused JPMorgan analyst Christopher Horvers to lower his sales estimates for smaller rival Lowe's, to 4 percent growth from a prior estimate of 5 percent growth. Lowe's plans to report quarterly results next week.
Home Depot saw strength in seasonal products like lawn mowers, grills and planters, while plumbing and kitchen supplies were weaker.
The company's net earnings rose to $1.04 billion, or 68 cents a share, from $812 million, or 50 cents a share, a year earlier.
Excluding items, Home Depot earned 65 cents a share, meeting analysts' estimates, according to Thomson Reuters I/B/E/S.
Home Depot was quicker to cut costs than rival Lowe's, and has benefited as housing demand picks up in regions where it has a heavy presence. It has also gained from opening more centralized distribution facilities.
The company expects sales to pick up later in the year. It sees fiscal-year sales rising about 4.6 percent, up from its prior outlook calling for a 4 percent increase. It raised its profit outlook for the year to $2.90 a share from a prior forecast of $2.79 a share.
The outlook implies a 1 percent to 2 percent rise in same-store sales for the rest of the year, which is probably conservative, UBS analyst Michael Lasser said.
Shares of Home Depot were down 86 cents, or 1.7 percent, at $49.02 on the New York Stock Exchange.
(Reporting by Dhanya Skariachan in New York; Editing by Lisa Von Ahn, Bernard Orr)