Traders Selling Shares of Home Depot (HD) Despite Q1 Earnings Beat

After trading up as much as 2% in this morning's pre-market session, shares of Home Depot (NYSE: HD) are now trading well in negative territory. Traders are responding to the home improvement retailers Q1 earnings, which came in better than the Street had been expecting.

Home Depot's stock most recently traded at $24.92, down 4.3% from yesterday's closing price.

Taking a look at the results, GAAP EPS for the quarter rose 44% to $0.30. Excluding $117 million in charges related to the closing of its Expo home-design branch, however, earnings actually fell 14.6% to $0.35. Analysts had been looking for adjusted EPS of $0.29. Sales fell 9.7% to $16.18 billion during Q1, with same store sales down 10%.

Interestingly, Home Depot said the number of customer transactions at its outlets fell just 1.3% during the quarter, but, at the same time, the average amount spent per transaction fell 8.2%. Such a discrepancy suggests that while shoppers are still "hanging in there", they have shied away from big-ticket, higher margin products such as lawn mowers. On that note, Home Depot's gross margin fell 20 basis points to 33.7%.

Home Depot also reaffirmed its FY09 guidance for sales down 9%, with comps in the high single digit area. EPS from continuing operations for the year are expected to be down 7%.

UPDATE: Click here to see some highlights from the company's Q1 conference call.

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