To The Moon

$Home Depot(HD)$ the retailer of home improvement and building materials, fell 2.5% on May 16th due to its Q1 2023 financial results and guidance being lower than expected.

The sales revenue for the quarter was $37.26 billion, a year-on-year decrease of 4.2%, which is lower than the market expectation of $38.55 billion; same-store sales decreased by 4.5% YoY, lower than the expected decline of 1.42%; earnings per share were $3.82, slightly higher than the expected $3.8.

Previously, it was believed that HD's performance might be affected by weak consumer spending, declining real estate transactions and more capital expenditures among other factors; in addition to this, lumber inflation and adverse weather also impacted Q1 revenue.

However, on the other hand, cost reductions for some products as well as better control over supply chain management and more efficient internal operations have led to higher-than-expected profit margins for the company. At the same time inventory levels are slowly being controlled with Q1 ending at $25.37 billion which is lower than expected at $26.16 billion.

Nevertheless,the main reason for such a sharp drop is due to lowered guidance: The company expects sales revenue and comparable sales will fall between 2% to 5% this fiscal year which is below their previous forecast; operating profit margin is also predicted to decline between14%to14 .3%, compared with an earlier estimate of14 .5%.

At the same time,HomeDepot has dragged downthe entire real estate sector,and companies related to housing were yesterday's biggest losers，

Including $Atkore Inc.(ATKR)$ $Carlisle(CSL)$ $Carrier Global Corporation(CARR)$ $Trex(TREX)$ $The AZEK Company(AZEK)$ $Janus International Group(JBI)$ $Mohawk(MHK)$ $Masco(MAS)$ $Gibraltar(ROCK)$ $Fortune Brands Home & Security(FBIN)$

Is the lowered guidance from HD a harbinger of things to come? One only needs to look at the new housing starts in the US over the past six months, which have been declining YoY since Q4 last year.

It seems that this industry will continue to be under pressure until inflation subsides and monetary policy tightens.