NEW YORK (AFX) -- Home Depot Inc. told Wall Street on Tuesday it would no longer be reporting same-store sales measurements, leaving investors somewhat skeptical.
The change comes as the retailer posted a 19% jump in first-quarter profits, but sales came in below what analysts had expected, on average.
Analysts had been expecting Home Depot to provide more clarity and break out results for its two businesses, but the absence of same-store sales data caught the Street off guard.
'They had not talked about this before, and that's spooking the market a little bit,' Anthony Chukumba, a stock analyst with Morningstar said. 'They're justifying it because they have two divisions.'
Shares ended the session down 5% at $38.45 --their lowest close in almost 7 months.
The No. 1 home-improvement retailer said that since its acquisition of Hughes Supply earlier this year it would be reporting its results for the two separate segments: retail and supply and doing away with same-store sales.
'For comparability purposes we have moved away from comp sales reporting and now will provide sales growth for both segments as a percentage change over the prior period,' Home Depot's Chief Financial Officer Carol Tome said on a conference call with analysts and investors. 'We will continue to provide you with retail operating metrics, including sales per square foot and weighted average weekly store sales.'
Same-store sales, also known as comp store sales, is a closely-watched retail benchmark that measures sales at stores open at least one year.
By measuring the sales movement in the stores that have an operating history, and stripping out new store openings and other expansions, industry watchers can better gauge the health of a particular retailer.
Many retailers report same-store sales tallies on a monthly basis. Home Depot only disclosed them each quarter.
Home Depot, which is locked in competition with its faster-growing rival Lowe's Cos. Inc. , has been looking for ways to drive profits even as it slows store openings, like expanding its supply business and beefing up services.
It has been on an acquisition spree, snapping up EnerBank, which helps finance home-improvement projects; catalog and online home-fashions retailer Home Decorators Collection; and swallowing Hughes Supply Inc. for $3.51 billion, a deal which more than doubled the size of its supply operations.
Some analysts think the move to not report same-store sales shows that the company's sales were weak for the period, and will stay that way.
'The decision to not to report comps is likely to create some skepticism on the core retail business particularly given that retail sales were light,' Morgan Stanley analyst Gregory Melich wrote in a note to clients. He estimated that the results imply a same-store increase of 2.2%.
Raymond James said that by its calculations, same-store sales were about flat.
AG Edwards analyst Brian Postol said Home Depot's management is too smart to hide a weakening same-store sales trend by not reporting the data.
'Acknowledgement that they would like investors to concentrate equally between retail and Home Depot Supply without simply concentrating on retail same-store sales is a legitimate request,' he wrote in a note to clients.
But he added that he 'highly' encourages the company to reinstate same-store sales reporting.
'This is an important data point for investors to gauge progress within the all-important retail channel, particularly as Home Depot reinvests back into the stores with departmental resets,' Postol said.
During the question and answer segment of Home Depot's conference call, Sanford Bernstein analyst Colin McGranahan voiced the sentiments of many on Wall Street.
'I think it would be very helpful from my perspective if you did continue to report comparable store sales growth,' he said. This story was supplied by MarketWatch. For further information see www.marketwatch.com.