By Patrick Thomas
Home Depot Inc.'s third-quarter results fell short of Wall Street expectations, as the expected benefits of an online overhaul are taking longer than planned to materialize.
The home-improvement retailer trimmed its sales forecast for the year and now expects fiscal 2019 sales growth to increase by 1.8%, down from its previous guidance of 2.3%. Same-store sales are projected to grow by about 3.5%, lower than its previous forecast of 4%.
Third-quarter sales at the Atlanta company rose 3.5% from a year ago to $27.22 billion, slightly lower than the $27.53 billion Wall Street was expecting, according to FactSet. Sales at stores open at least a year were up 3.6% for the period, below the 4.7% analysts were anticipating.
Home Depot and its followers were betting in the latest quarter that its investments in technology to better align its online business with its 2,290 brick-and-mortar stores would have resulted in greater sales gains. The company now says that it is going to take more time.
"Our sales performance was below our expectations," Chief Executive Craig Menear said on a call with analysts. "Our rollout is largely on track and we are realizing benefits, it's just taking a little longer than our original assumptions."
Shares of the company were off about 5% to $226.43. The company's stock has rallied more than 30% this year.
Finance Chief Richard McPhail said in an interview that while the company is taking its time with its re-engineering efforts, overall consumer spending is still healthy. "The consumer is alive and well," he said. "It was one of the most balanced quarters we've had in a long time."
The number of customer transactions during the third quarter was up 1.5% from a year ago, while the amount of money customers spent per visit rose 1.9%. Big-ticket transactions, or the number of comparable transactions over $1,000, climbed 4.8% from a year earlier.
Lower lumber prices continued to weigh on the company in the third quarter, resulting in about $175 million in lost revenue from a year ago, Mr. McPhail said. In August, the company reported weaker than expected second-quarter results and cut its sales outlook as a result.
"The numbers are much stronger than last quarter's rather anemic growth which shows both that Home Depot is returning to a better trajectory and, most importantly, that the consumer economy is not in a state of distress," said Neil Saunders, a managing director of GlobalData Retail, a research firm.
Overall, the company posted net income of $2.77 billion, or $2.53 a share for the period ended Nov. 3, compared with $2.87 billion, or $2.51 a share, a year ago. Analysts surveyed by FactSet were expecting earnings of $2.52 a share.
Write to Patrick Thomas at Patrick.Thomas@wsj.com