(Reuters) – Home Depot Inc missed estimates for quarterly profit on Tuesday, as the home improvement chain spent about $850 million on benefits for employees keeping its stores and warehouses running through the COVID-19 pandemic.
Shares of Home Depot, which have gained 12.4% this year, dropped nearly 3% in premarket trading, as the company also scrapped its full-year outlook, citing uncertainties stemming from the pandemic.
Home Depot, which is heavily reliant on a solid housing market to drive sales, is at risk of a potential drop in home improvement spending this year as lockdown measures to control the spread of the novel coronavirus batter the economy.
Homebuilding activity collapsed in March at a speed not seen in 36 years.
Still, shelter-in-place restrictions and government stimulus checks had an initial benefit on Home Depot’s sales as people spent more on tools for do-it-yourself house projects, such as small repairs, painting and gardening.
The company also saw a surge in demand for cleaning supplies, but was forced to cut operating hours and limit the number of customers allowed in stores to maintain social distancing.
The risks posed to staff working through the crisis led the company to provide additional bonuses, double pay for overtime and add more hours of paid time-off.
The company’s net earnings fell 10.7% to $2.25 billion, or $2.08 per share, in the first quarter ended May 3, while analysts had expected earnings of $2.27 per share, according to IBES data from Refinitiv.
Total net sales rose to 7.1% to $28.26 billion, beating estimates of $27.54 billion. Same-store sales rose 6.4%.
The company also declared a first-quarter cash dividend of $1.50 per share.
Reporting by Uday Sampath in Bengaluru; Editing by Shinjini Ganguli and Saumyadeb Chakrabarty.