Within seconds of Home Depot (HD) reporting a rare comparable store sales miss we saw a flurry of articles about the slowdown in housing and even the great Orange retailer couldn't buck the trend.
The stock plummeted five points instantly in pre-market trading and I found myself saying on Squawk on the Street that it might pay to hear what the company is actually saying before drawing any conclusions.
Doesn't matter, conclusions were drawn and the stock stayed down $5 until the company began to talk about how the quarter was basically assaulted by bad weather pretty much everywhere. The stock seemed to stabilize as if the sellers said, "wait a second, maybe we are reacting too quickly."
And then the selling just stopped and the stock gapped up $4 when Carol Tome, the redoubtable chief financial officer gave the cadence of the quarter -- positive 5.6% in February, positive 5.9% in March and only positive 2.2% in April. The consensus was 5.6% was missed because of the incredibly important month of April -- the beginning of Spring.
Then Tome added "While Spring was a reluctant bride, she has arrived and our stores have the inventory necessary to meet demand, which is a good thing as month to date for the company our May comparable store sales are double -digit positive."
I can see the sellers' jaws drop and the stock gapped up to nearly even given the fact that double digit numbers for a chain of 2285 stores is inconceivable.
Plus, as the company delineated the weakness in April you can tell that the lost business -- mostly garden -- is going to be made up in this quarter, something the company confirmed in the question and answer period. You might be thinking, wait, can't on-line, which was up 20% year over year, make up for those lost sales. CEO Craig Menear answered that question swiftly: "so there actually is an impact from a seasonal standpoint in the on-line business, When it's snowing on the ground in April, people aren't really looking online for patio furniture. It's kind of funny but there actually is an impact."
How bad was it really? Tome put it succinctly: "As you may have personally experienced, April was one of the coldest and snowiest months in more than twenty years."
In other words, any read through to a negative housing market by the bots who must write those morning stories is just plain appalling. How can any journalist or analyst reach such conclusions without listening to the call? What a disgrace.
Oh and just to be sure, without even asking, the company noted that interest rates on the 10-year, up today through the 3% level, won't and haven't hurt sales, even as they drives mortgage rates higher, because housing is still very affordable. That means the contractors out there, who use Home Depot aggressively in part because it has amazing technology that allows them to get in and out or have delivery within two to four hours -- take that Amazon -- have seen no slowdown in their jobs. If anything you get the sense that as the spring recovered, the contractor business boomed.
Now obviously the market is terrible today so none of this really ended up mattering, especially given that the stock ran into the quarter. The stock might have been down anyway. Still, though, the only readthroughs to this quarter are positive. And, for the record, if we see any conclusions being drawn instantaneously about Home Depot can we remember that when a company as outstanding as this one blames the weather, it might actually be true?