Raphael Stevens

Home Depot posted fiscal first-quarter earnings that beat expectations and revenue that missed estimates.
The home improvement retailer is seeing customers defer major home projects due to high interest rates.
Home Depot is focusing more on building its business with professionals, including through its acquisition of SRS Distribution.

Home Depot on Tuesday posted quarterly revenue below Wall Street’s expectations, as shoppers postponed bigger discretionary projects like bath and kitchen remodels because of higher interest rates and made spring purchases late.
Still, the home improvement retailer reaffirmed its full-year guidance, which includes an additional week from the prior year. It said it expects total sales to grow about 1% in fiscal 2024, including those extra days. However, the retailer said it anticipates comparable sales, which take out the impact of store openings and closures, to decline about 1%, excluding that additional week.

In an interview with CNBC, Chief Financial Officer Richard McPhail said customers are in a waiting game that began in the second half of last year, as they responded to mortgage rates climbing. He said the company anticipated those trends would continue.
“The home improvement customer is extremely healthy from a financial perspective,” he said. “And so it’s not the case of not having the ability to spend. What they tell us is they’re just simply deferring these projects as given higher rates, it just doesn’t seem the right moment to execute.”

The logo of U.S. home improvement chain Home Depot is seen in Mexico City, Mexico, on Jan. 15, 2020.
Luis Cortes | Reuters

Here’s what the company reported for the three-month period that ended April 28 compared with what Wall Street expected, based on a survey of analysts by LSEG:

Earnings per share: $3.63 vs. $3.60 expected

Revenue: $36.42 billion vs. $36.66 billion expected

Net income for the fiscal first quarter decreased to $3.6 billion, or $3.63 per share, from $3.87 billion, or $3.82 per share, in the year-ago period. Net sales fell 2.3% from $37.26 billion.
Comparable sales dropped 2.8% in the fiscal first quarter across the business and declined 3.2% in the U.S.

Shares of Home Depot were up modestly in premarket trading.
Home Depot is contending with a tougher housing backdrop, which has dampened demand for do-it-yourself projects. About half of Home Depot’s sales come from DIY customers, and the other half come from pros like roofers and landscapers.
As interest rates remain high, consumers have been reluctant to move out of their homes and into new ones — the kind of turnover that often inspires home projects. Higher interest rates have also dinged the desire for larger-scale projects that can require financing. For the past several quarters, Home Depot has seen customers buy fewer big-ticket items and take on more modest projects – a trend that persisted in the most recent quarter.
In the fiscal first quarter, customers made fewer visits to Home Depot’s stores and website and tended to spend less when they did. Customer transactions declined 1% to 386.8 million and average ticket fell 1.3% to $90.68.
Home Depot has seen sales moderate after more than two years of explosive demand during the Covid pandemic. The company posted its worst revenue miss in nearly two decades and cut its forecast in the year-ago first quarter. Home Depot’s sales totaled $152.7 billion in the fiscal year that ended in late January, a drop of 3% from the previous year.
Inflation may also be playing a role in that pullback, as consumers spend more money on essentials and have to make trade-offs when spending discretionary income.
However, McPhail said Home Depot is not seeing customers trade down to cheaper items, like less expensive power tools or appliances. He pinned the company’s softer sales in large part on consumers’ “deferral mindset” and a housing market that has slowed dramatically.
“When we have seen mortgage rates decrease slightly, as we saw at the beginning of this quarter, the housing turnover seems to respond quickly and sharply in a positive direction,” he said. “And so we think that’s an indicator that there is a tremendous amount of pent-up demand for household formation and housing turnover and the larger projects that are associated with housing turnover.”
Weather pressured sales, too, in the recent quarter, he said. Spring is the biggest sales season for home improvement retailers, including Home Depot. Yet customers delayed outdoor purchases because of colder and wetter weather in many parts of the country, he said.
Those spring purchases have begun to pick up as the weather improves, he said.
To overcome slower sales, the home improvement retailer has revved up its strategy to attract pros, since they tend to buy larger quantities and offer a steadier source of sales. Home Depot has a growing network of distribution centers across the country that can store and deliver roofing shingles, insulation and other supplies straight to job sites. It announced in late March that it would acquire SRS Distribution, a Texas-based specialty distributor of roofing, landscaping and pool supplies, for $18.25 billion in the largest acquisition in the company’s history.
McPhail said the deal is still on track to close this fiscal year, which ends in early February.
Along with wooing pros, Home Depot is trying to drive growth by opening about a dozen new stores this fiscal year and adding features to improve its online and in-store experience.
Shares of Home Depot closed Monday at $340.96. So far this year, Home Depot’s shares have fallen about 2% compared with the roughly 9% gains of the S&P 500.

Don’t miss these exclusives from CNBC PRO More

Shares of Novavax jumped as much as 50% as Wall Street cheered a new multibillion-dollar deal with French drugmaker Sanofi that kicked off a dramatic turnaround for the struggling vaccine maker.
Novavax said the licensing agreement allows the company to remove its “going concern” warning, which it first issued last year due to substantial doubts about its ability to stay afloat.
Some analysts said the deal will provide significant capital to Novavax and “validates” the company’s protein-based vaccine platform. 

A vial labeled “Novavax V Covid-19 Vaccine” is seen in this photo taken Jan. 16, 2022.
Dado Ruvic | Reuters

Shares of Novavax closed nearly 50% higher on Monday as Wall Street cheered the company’s new multibillion-dollar deal with French drugmaker Sanofi that sparked a dramatic turnaround for the struggling vaccine maker.
Novavax’s stock almost doubled on Friday after it announced the licensing agreement with Sanofi. Novavax on Friday said the deal allows the company to remove its “going concern” warning, which it first issued in February 2023 due to major doubts about its ability to stay afloat.

“It really does help our business. It keeps us well capitalized, it takes the going concern off, it gives us the chance to pivot our strategy more toward what we’re best at — to bring additional value to all of our stakeholders, including our shareholders,” Novavax CEO John Jacobs told CNBC in an interview. 
Under the agreement, Sanofi will take a less than 5% stake in Novavax. The deal also entitles Novavax to an upfront cash payment of $500 million and future payments contingent on certain milestones, as well as royalties. 
Sanofi, one of the world’s largest vaccine makers, will co-market Novavax’s Covid vaccine in most countries starting in 2025. The deal also allows Sanofi to use Novavax’s Covid shot and flagship vaccine technology, Matrix-M adjuvant, to develop new vaccine products. The shots include combination jabs targeting Covid and the flu. 

A logo on the Sanofi exhibition space at the Viva Technology conference dedicated to innovation and startups at Porte de Versailles exhibition center in Paris, France, on June 15, 2022.
Benoit Tessier | Reuters

In a note Sunday, Jefferies analyst Roger Song said the deal will provide significant capital to Novavax and support the company’s growth. 
“Economically, the deal is highly lucrative and impactful,” Song wrote. 

He said the upfront payment helps remove investor worry about Novavax’s going concern warning, and that milestone payments are “significant and relatively near-term” for the company since they are not tied to sales. Meanwhile, royalties will provide a steady revenue stream each year, Song said. 
He added that the deal “validates” the company’s protein-based vaccine platform. 
Novavax’s shot is the first Covid vaccine to use protein technology, a decades-old method for fighting viruses used in routine shots against Hepatitis B and shingles. Health officials view the vaccine as a valuable alternative for people who do not want to take messenger RNA jabs from Pfizer and Moderna.
In a note on Sunday, Leerink Partners analyst David Risinger said he is interested to see how effective Sanofi is at raising consumer awareness about how the side effects of Novavax’s Covid vaccine are easier for patients to tolerate compared to competing shots from Pfizer and Moderna.
Risinger noted that consumer hesitancy around Covid boosters has come in part from fears about the fatigue and discomfort associated with Pfizer’s and Moderna’s shots. 
The firm expects Sanofi “to drive greater commercial success of [Novavax’s] vaccine starting in 2025, due to its commercial scale and contracting abilities, but it is difficult to predict the magnitude of impact,” Risinger wrote. 
He added that there could be “further upside” for Sanofi and Novavax if they develop a combination Covid and flu vaccine that has advantages over the mRNA combo shots being developed by Pfizer and Moderna. 

Don’t miss these exclusives from CNBC PRO More

Xponential Fitness, the parent company of CycleBar and Pure Barre fitness studios, has suspended CEO Anthony Geisler indefinitely and named an interim CEO.
Xponential Fitness also said it had received a notice that the U.S. Attorney’s Office is conducting an investigation into the company.
It had previously disclosed an SEC investigation, which alleged the company provided false and/or misleading information to investors and franchise owners.

Xponential Fitness CEO Anthony Geisler at the New York Stock Exchange.
Source: NYSE

Shares of Xponential Fitness, the parent company of CycleBar and Pure Barre fitness studios, bounced around in trading Monday after the company announced late Friday that CEO Anthony Geisler would be suspended indefinitely and would become an inactive member of the board.
The company’s shares were initially down about 10% Monday morning, but rebounded and ended the trading session 11% higher. The company has a market capitalization of just under $500 million.

Brenda Morris, a board member since 2019, will be stepping in as interim CEO.
Xponential Fitness, which owns more than 3,000 boutique fitness and wellness studios globally, also said it received notice last week of a probe by the U.S. Attorney’s Office for the Central District of California.
“As it relates to the investigation, it sounds like the information requested largely mimics that of the previously disclosed SEC investigation,” said Korinne Wolfmeyer, an analyst at Piper Sandler. Piper Sandler maintains a hold rating on Xponential Fitness stock, but lowered its price target to $9 from $12. As of Monday’s close, shares were trading for $9.44 apiece.
Xponential Fitness’ leadership had previously disclosed an SEC investigation in December, which alleged that the company provided false and/or misleading information to investors, including unit volume metrics and franchise closures. Shareholders filed a class action lawsuit related to the allegations against the company in February seeking financial damages.
“The Company intends to continue cooperating with the SEC and intends to cooperate with the USAO,” Xponential Fitness said in a press release announcing the executive changes.

Courtesy: Xponential Fitness

Xponential Fitness also reaffirmed its full-year 2024 guidance, which was previously announced May 2.
The company did not respond to CNBC’s request for comment about the probe.
“In our view, we’re pleased financial targets are still intact, and Ms. Morris seems like a fit leader for the interim role,” Wolfmeyer said.
However, Wolfmeyer noted that the firm remains cautious.
“We struggle to get behind this name even after Friday’s pullback,” she added.
Correction: This story has been updated to correct Xponential Fitness’s market capitalization, which is just under $500 million.

Don’t miss these exclusives from CNBC PRO More

Major airlines and an industry trade association asked a federal appeals court to toss out a new Transportation Department rule requiring earlier disclosure of add-on fees during flight booking.
Trade group Airlines for America, and Alaska, American, Delta, Hawaiian, JetBlue and United airlines argue the DOT exceeded its legal authority when it published the rule.
Airlines for America said in a statement to CNBC the rule will “confuse consumers” and “complicate the buying process.”

Aerial view of United Airlines passenger planes docked in a terminal of Newark Airport in Newark, New Jersey, on May 11, 2024. 
Charly Triballeau | Afp | Getty Images

Major airlines and an industry trade association asked a federal appeals court to toss out a new Department of Transportation rule requiring earlier disclosure of add-on fees during flight booking.
The challengers — trade group Airlines for America, and Alaska, American, Delta, Hawaiian, JetBlue and United airlines — argue the DOT exceeded its legal authority when it published the rule, in late April, and that the rule is “arbitrary, capricious” and an “abuse of discretion.”

The petition for review was filed in the U.S. Fifth Circuit Court of Appeals late Friday.
The Biden administration introduced the airline fee disclosure rule in September 2022. It requires airlines and online travel agencies to disclose fees for seat selection, checked baggage and other add-ons upfront alongside the airfare, rather than adding the costs at checkout based on a customer’s selections.
“You should know the full cost of your ticket, right when you’re comparison shopping,” President Joe Biden said at the time.
Airlines for America said in a statement to CNBC on Monday that the rule will “confuse consumers” and “complicate the buying process.”
“Airlines already provide consumers with complete disclosure of all fees associated with air travel before they purchase a ticket,” the group said in the statement. “DOT’s attempt to regulate private business operations in a thriving marketplace is beyond its authority … The DOT ancillary rule is a bad solution in search of a problem.” More

Media giants including Netflix, Disney, NBCUniversal and Warner Bros. Discovery will try to charm advertisers during their annual Upfronts events this week.
The Hollywood writers and actors strikes are over, meaning Upfronts will likely be star-studded once again.
But the industry is still in a moment of disruption. Companies have cut back on spending, some are bundling their services, and the future of the NBA media rights remains unclear.

Kevin Mazur | Getty Images Entertainment | Getty Images

Media giants are making their annual pitches to advertisers this week against the backdrop of significant disruption in the industry.
The Hollywood writers and actors strikes are over, meaning Upfronts will likely be star-studded once again, major cost cutting is largely in the rear view mirror and streaming has fully embraced advertising models. Still, this year’s Upfronts presentations come in the midst of further tumult for the industry.

“It does feel like this is a moment, a moment in terms of what the next year, two years will bring,” Warner Bros. Discovery CEO David Zaslav said during the company’s earnings call last week. “I said a while back that this is a generational disruption.”
Here’s what will likely be topics of discussion during Upfronts week, whether it’s on stage, in the audience or in private.

Advertising rebound? That depends

Media companies just finished reporting quarterly earnings, which showed traditional TV is still lagging behind streaming and digital when it comes to ad revenue.
Traditional TV ad buying during Upfronts is expected to increase about 1% to $18.79 billion this year, according to data from eMarketer. This is an improvement from last year when it was down about 4% to $18.64 billion.
Meanwhile, digital advertising spend during the Upfronts and Newfronts — which take place a few weeks ahead of the traditional media events — is expected to increase nearly 32% to $16.45 billion this year, according to eMarketer.

There was a general improvement in traditional TV ad revenue last quarter, down 8% as opposed to nearly 16% in the same quarter last year, according to a note from Macquarie senior media tech analyst Tim Nollen. Streaming advertising was up 22% across media companies, and now makes up 18% of total advertising.
Tech companies including Snap, Roku, Google and Microsoft each saw digital advertising revenue make a comeback this past quarter. And Netflix, Amazon and Alphabet’s YouTube all have growth stories to tell advertisers.

People passing billboard posters for the Netflix television series The Crown in Waterloo on 17th November 2022 in London, United Kingdom.
Mike Kemp | In Pictures | Getty Images

“Netflix is in many respects the gold standard when it comes to streaming,” Disney CEO Bob Iger said during the company’s earnings call this month.
Netflix ended last quarter with about 270 million global subscribers, riding a wave of password-sharing-freeloaders-turned-paying-customers during the past year.
The company has leaned on its cheaper, ad-supported tier — at $6.99 per month in the U.S. — to coax price-conscious subscribers to pay monthly subscription fees. As of January, a little more than a year after its launch, Netflix’s ad-supported tier had more than 23 million monthly active users. 
Amazon Prime Video debuted its advertising tier earlier this year. Amazon has spent billions on live sports rights – coveted advertising real estate – in recent years, including paying about $1 billion per year to stream “Thursday Night Football,” one of the National Football League’s season-long packages of games. Amazon reported last month that its advertising revenue jumped 24% in the first quarter to $11.8 billion.
YouTube’s first-quarter advertising revenue also surged more than 20% to $8.1 billion, surpassing analyst estimates. In February, YouTube became the most-watched streaming application for 12 consecutive months, according to Nielsen.
Amazon will hold its Upfront presentation on Tuesday in New York City, with Netflix and YouTube following a day later.

Legacy lags

Tom Hiddleston stars as Loki in the Disney+ series “Loki.”

The vibe may not be as positive among some of the traditional media players.
Domestic advertising for Comcast’s NBCUniversal was flat in the first quarter at about $2 billion, but streaming service Peacock was lifted by ad revenue. NBCUniversal will kick off upfronts week Monday at Radio City Music Hall.
Disney reported a first-quarter decline in advertising revenue for its traditional cable networks and at Hulu, though ESPN domestic ad sales increased by more than 20% in the quarter versus the prior year. Disney will hold its presentation Tuesday.
“The challenge, obviously, in the advertising market right now is there’s a lot more supply in the market, largely as a result of one of our competitors entering the ad tier,” said Disney CFO Hugh Johnston during this month’s earnings call. “But that said, I think generally speaking we feel like we’re in a better place than we were a year ago.”
Warner Bros. Discovery, which is holding its presentation at Madison Square Garden on Wednesday, reported traditional TV advertising revenue fell 11% last quarter from a year earlier to about $2 billion. Streaming advertising revenue jumped 70%, but the overall number is much lower — just $175 million.
Warner Bros. Discovery and Disney announced last week they would offer their streaming services — Max, Disney+ and Hulu — together, marking the first streaming bundle of major services. The two companies, along with Fox, are also working on a sports streaming joint venture. It remains to be seen what other companies join the fray in bundling.

Sports draw interest

Sports remain the glue of the TV bundle, still beckoning the largest audiences. And in the background of conversations during Upfronts week is the future of the NBA rights.
While Warner Bros. Discovery owns them until the end of the 2024-25 season, the next owner is currently being sorted out. NBCUniversal has emerged as an apparent top contender while Warner Bros. Discovery mulls if it’ll match NBC’s offer.
The future of the regional sports networks also remains a question, and broadcasters have been slowly snapping up rights to local games.

Los Angeles Lakers forward LeBron James, #23, during the NBA game between the Los Angeles Clippers and the Los Angeles Lakers at Crypto.com Arena in Los Angeles on Jan. 7, 2024.
Jevone Moore | Icon Sportswire | Getty Images

EMarketer Senior Analyst Ross Benes noted that in order for Warner Bros. Discovery to add value to its sports joint venture with Disney and Fox, it needs to retain its NBA rights.
“Without NBA rights, WBD will become a weak third leg on the sports JV tricycle…If it loses the NBA, many WBD’s customers will be left wondering what all the cost-cutting was for,” he said.
Fox Corp., which holds its Upfront on Monday, said first-quarter ad revenue was down compared to the prior quarter when it aired the Super Bowl on its broadcast network. CEO Lachlan Murdoch said on last week’s earnings call that ad trends are “clearly moving in the right direction” in early Upfront discussions, thanks in large part to Fox’s sports slate.
Like last year, Paramount Global skipped holding an Upfront presentation this year. Instead, the media company held nine events beginning in April in Los Angeles, Chicago and New York.
Although there wasn’t a big presentation at Carnegie Hall, the events still included sneak peaks of upcoming content and featured A-listers like Nicole Kidman, Demi Moore, Stephen Colbert, Tony Romo, and others.
Paramount is grappling with an ongoing sale process and is also currently without a singular CEO.
Disclosure: NBCUniversal is the parent company of CNBC. More