(Reuters) - Home Depot Inc on Tuesday blamed wet weather in February and a slump in lumber prices for its slowest growth in quarterly same-store sales in at least three years, while warning of a $1 billion impact from new tariffs on Chinese imports.
Bad weather along with land and labor shortages have constrained builders’ ability to construct new houses especially in the low-price segment, creating a supply glut for lumber, a key building material.
Home Depot said weak lumber prices hurt its first-quarter sales growth by $200 million and if prices do not improve for the rest of its fiscal year, it could dent overall sales by as much as another $600 million.
Lumber futures have fallen 28.6% since their 2019 highs in early February. The commodity made up nearly 8% of Home Depot’s sales in the last fiscal year.
The unfavorable weather also led contractors to delay housing projects and prevented the company’s do-it-yourself customers from working outdoors, further impacting demand for Home Depot’s products in February.
Same-store sales at the home improvement chain rose 2.5% in the quarter ended May 5, but missed expectations of a 4.2% increase, according to IBES data from Refinitiv.
Still, Home Depot marginally beat overall net sales estimates as it services like credit lines and equipment rentals to rope in more big and frequent spending clients such as electricians, plumbers and builders.
In a conference call with analysts, Edward Decker, executive vice president of merchandising, said Washington’s latest round of tariffs on $200 billion worth of Chinese goods would raise annual cost of goods sold by about $1 billion.
The company said it has already seen a $1 billion impact from U.S. tariffs enacted in 2018.
The impact, however, is manageable, Decker said, as it was less than 1% of total annual sales. In the last fiscal year, the company’s net sales was $108.2 billion.
“We haven’t worked through what we will do if the cost increase comes to us,” outgoing Chief Financial Officer Carol Tomé told Reuters, when asked if the company would raise its product prices.
“Sometimes when we have cost increases, we pass it through in retail prices, sometimes we don’t.”
The company’s net income rose to $2.51 billion, or $2.27 per share, and beat analyst average estimate of $2.18 per share.
Net sales rose 5.7% to $26.38 billion, beating expectations of $26.36 billion.
Reporting by Uday Sampath in Bengaluru; Editing by Arun Koyyur