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Home Depot Stock Slumps as Slowing U.S. Sales Growth Clouds Earnings Beat

Stronger same-store sales, as well as record quarterly revenues, highlight a solid second quarter earnings report for the world's biggest home improvement retailer.

Home Depot  (HD) - Get Home Depot, Inc. (HD) Report posted stronger-than-expected second quarter earnings Tuesday, as well as the highest revenue tally on record, as the red-hot housing market bolstered home improvement spending. 

The stock traded sharply lower, however, as same-store sales growth for its U.S. outlets slowed to 3.4% from last quarter's 29.9% tally.

Home Depot said earnings for the three months ending on August 1, the company's fiscal second quarter, were pegged at $4.53 per share, up 12.7% from the same period last year and well ahead of the Street consensus forecast of $4.43 per share. Group revenues, Home Depot said, rose 8% to $41.1 billion, again topping analysts' estimates of a $40.73 billion tally.

Same store sales were up 4.5% from last year, Home Depot said, just ahead of the Refinitiv forecast of 4.25%, while comparable sales in the U.S. were up 3.4%, a figure that fell well shy of Street forecasts. Average tickets, however, rose 11.3% to $82.48 per trip, helping the overall revenue increase even amid the slowing domestic traffic.

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"I am very proud of our associates, who continue to demonstrate a relentless focus on serving our customers," said CEO Craig Menear. "As a result of their efforts, we achieved a milestone of over $40 billion in quarterly sales for the first time in Company history. I would like to extend my sincere appreciation to our team, as well as our supplier and supply chain partners, as they continue to operate in this dynamic and challenging environment."

Dow component Home Depot shares were marked 5.1% lower in early trading following the earnings release to change hands at $318.50 each, a move that would still leave the stock with a year-to-date gain of around 20%.

Home improvement and homebuilding spending has been bolstered in part by a jump in housing starts, which rose 6.3% in June to an annual rate of 1.643 million.

However, sky-high lumber prices, the ongoing job shortage and various supply-chain disruptions pushed permits for new construction to the lowest levels in 8 months, according to the most recent data from the Commerce Department.