By Matt Grossman 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (May 20, 2020).

Home Depot Inc. reported an 11% decline in quarterly earnings as costs from boosting workers' pay and benefits during the coronavirus pandemic offset higher sales from locked-down customers doing more projects around the house.

Home Depot was among a small group of retailers whose stores have remained open as much of the country was forced to shut down. That led to higher sales, driven in part by strong growth online, but also increased expenses as the company took steps to support its employees.

The added employee benefits -- which included weekly bonuses and expanded paid time off -- totaled $640 million in the quarter ended May 3. Chief Financial Officer Richard McPhail said much of that was from paid-leave expenses that won't recur in the future.

"We have seen the full impact occur all in the first quarter," Mr. McPhail said. He added that other enhanced compensation, such as higher overtime pay, has continued into the second quarter.

Revenue rose a better-than-expected 7.1% in the quarter. The rise partially reflected more interest in do-it-yourself projects, the company said, as people faced stay-at-home orders during the pandemic.

"Clearly, the customer is reengaged with DIY," Chief Executive Craig Menear said.

Sales from Home Depot's digital platforms grew by about 80% in the quarter as people favored online shopping over in-person browsing during the pandemic, Mr. McPhail said. He added that the online sales bore out the company's past technology investments.

"Demand for buy online, pick up in store really took off," Mr. McPhail said.

Customers spent an average of $74.70 per transaction during the quarter, up 11% from a year earlier, while the number of transactions fell 3.9%. The pattern reflected people's desire to limit trips to the store, Mr. Menear said.

The company said comparable sales -- which compares sales at stores opened more than a year -- rose 6.4% overall and 7.5% in the U.S. during the period.

Home Depot's report came on the same day as Walmart Inc., which also reported strong revenue growth, boosted by e-commerce sales.

Home Depot said that despite positive sales trends in the first quarter and the first two weeks of the current quarter, it was withdrawing its guidance for the year because of uncertainties related to the pandemic.

Shares of Home Depot fell 3% Tuesday to $238.10. The stock, a member of the Dow Jones Industrial Average, has bounced back strongly since its selloff in March. Shares are up 9% this year, despite the declines Tuesday, and is the second-best performer on the Dow, behind only Microsoft Corp.

Overall, for the first quarter, Home Depot's earnings fell to $2.25 billion from $2.51 billion as expenses rose 17%. The company's latest per-share earnings of $2.08 included 60 cents of costs from the added employee benefits; analysts polled by FactSet were expecting earnings of $2.30 a share.

Revenue rose to $28.26 billion from $26.38 billion, and surpassed the average analyst estimate of $27.56 billion on FactSet.

Write to Matt Grossman at matt.grossman@wsj.com

 

(END) Dow Jones Newswires

May 20, 2020 02:47 ET (06:47 GMT)

Copyright (c) 2020 Dow Jones & Company, Inc.
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