Some analysts said Home Depot's struggles could indicate bigger difficulties for the retail sector up ahead.
Shares of home improvement retailers Home Depot Inc. and Lowe’s Cos. fell on Tuesday, after Home Depot HD cut its outlook on harsher weather and falling lumber prices. But some analysts said the pain might not be restricted to those chains alone.
“The housing market boomed and then crashed and what is happening with Home Depot could be a warning of what will come to the broader retail space,” Edward Moya, senior market analyst at OANDA, said in emailed commentary on Tuesday. U.S. retail sales crept 0.4% higher in April, below consensus estimates, with non-store retailers, general merchandise, and restaurants and bars leading the gains, BofA analysts said in a note on Tuesday. Sales for furniture, electronics, appliances and clothing fell for the third straight month.
“Given the negative impact of the first quarter sales from the lumber and weather, further softening of demand relative to our expectations and continued uncertainty regarding consumer demand patterns, we are updating our guidance to reflect a range of potential outcomes,” Chief Financial Officer Richard McPhail said on Home Depot’s earnings call on Tuesday.
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