Home Depotquarterly sales ‘s rose more than 6% year over year, as folded in the newly acquired business and repair-related hurricanes and better weather in many parts of the country boosted demand for home improvement supplies, the company said Tuesday.
The retailer also raised its full-year outlook to reflect better-than-expected results. It now expects total sales to increase by about 4%, including the impact of acquiring SRS Distribution. Previously expected total sales to increase between 2.5% and 3.5% for the year. Both prospects include a lift from the 53rd week of the fiscal year and an estimated $6.4 billion contribution from SRS, which sells supplies to professionals in the roofing, landscaping and swimming pool businesses.
The retailer expects comparable sales to decline about 2.5% for the 52-week period. Home Depot previously projected that the industry metric, which includes the company’s website and stores open more than a year, would decline 3% to 4% compared to the previous fiscal year.
In an interview with CNBC, Chief Financial Officer Richard McPhail said the retailer’s forecast showed stronger results last quarter. But he said consumers are still delaying purchases as they wait for lower mortgage rates and borrowing costs and be careful about the economy.
“There is a demand for jobs,” he said. “Our customers tell us that their lives are changing. Their families are growing, getting bigger, downsizing, having to move to work. There is a demand for remodeling, and it is on hold until they see a better financing environment, so the demand is there, they ask, when it is not locked.
Home Depot customers continue to postpone projects, even though they are in good financial shape, he said. About 90% of the company’s do-it-yourself customers are homeowners.
Here’s what the company reported compared to what Wall Street expected in the three months ended Oct. 27, according to a survey of analysts by LSEG:
- Earnings per share: $3.67 vs $3.64 per share expected
- results: $40.22 billion vs $39.32 billion expected
Shares of Home Depot rose more than 2% in pre-market trading.
Home Depot’s sales have been affected by economic factors, as higher interest rates have slowed home sales and more than two years of high inflation has made homeowners less willing to buy discretionary and do-it-yourself projects. The company has cut its one-year forecast for like-for-like sales in August, due to consumer uncertainty.
That dynamic has persisted in recent months, McPhail said.
Home Depot’s net income for the fiscal third quarter fell to $3.65 billion, or $3.67 per share, from $3.81 billion, or $3.81 per share, in the year-ago period. Revenue increased 6.6% from $37.71 billion in the year-ago period.
Comparable sales were down 1.3% in the quarter at the business. That was better than the 3.3% decline that analysts had expected, according to StreetAccount. The metric fell 1.2% in the US
This marks the eighth straight quarter of negative comparable sales at Home Depot, although the smallest drop began a string of declines. That performance hasn’t weighed on the stock this year.
At Monday’s close, Home Depot shares were up about 18% this year, trailing the S&P 500’s about 26% gain. The company’s stock closed Monday at $408.29 per share, bringing its market value to $405.55 billion.
Shoppers are visiting Home Depot stores and shopping online as much as they did last year. On average, customers spent $88.65 during the transaction, almost the same as the average ticket of $89.36 in the year-ago quarter.
These numbers do not include the acquisition of SRS and new stores, which contributed to the company’s total sales. Home Depot expects to open about 12 new stores this fiscal year, which will be completed by early February.
The weather was a short-term benefit for Home Depot in the quarter, McPhail said. As warmer, drier weather extends into summer, customers buy outdoor items like grills or buy paint for projects, he said.
Sales related to Hurricanes Helene and Milton contributed about one and a half percentage points of sales growth for the quarter. Customers buy things to prepare, such as generators, batteries and plywood, then buy things to repair, such as building materials.
Although Home Depot reported modest growth, some investors believe the company will see stronger sales in the future. The Federal Reserve approved its second consecutive cut in interest rates last week, a move that made banks pay more on consumer debt — such as mortgage rates and loans that homeowners can take out for remodeling projects. Home prices remain high and the age of the US housing stock continues to drive repair and maintenance projects.
In addition, Home Depot has been chasing larger business from home professionals, such as contractors and roofers, to drive sales. Earlier this year, Home Depot acquired SRS Distribution, a Texas-based company, in an $18.25 billion deal, the largest acquisition in the home improvement retailer’s history.
Still, McPhail added, it’s hard to predict when consumer mindsets will change and lead to higher home turnover. And he noted mortgage rates have increased since the September meeting where the Fed cut rates for the first time since the start of the Covid pandemic.
“The good news is that housing turnover may not get worse,” he said. “The worst of the decline in housing turnover is probably behind us. Now, the question is, ‘What unfreezes and at what point will it happen?'”
Next year could also bring price pressure for Home Depot, as could cooling inflation. It will be among the retailers that could face higher costs if President-elect Donald Trump follows through on plans for tariffs on imported goods, especially those from China.
McPhail declined to say what percentage of Home Depot’s goods come from China, but said most of them are sourced from North America. He said Mexico is a “good source of goods for us.”
“We source from several Asian countries, so we’re watching it closely,” he said. “We have focused on various sources for years, and we will continue to assess the decisions of the sources moving forward.”
Some retail leaders, including the CEO of Elf Beauty, said they had to raise prices because of the tariffs. Footwear manufacturer Steve Madden says it plans to cut its imports from China by 45% next year.
Along with the weather, the holiday season has taken a toll on sales for Home Depot. Sells a variety of decorations, including a variety of artificial Christmas trees.
Since the company’s 12-foot skeleton, Skelly, became a viral sensation over Halloween, Home Depot has debuted other eye-catching – and often oversized – decorations, including an 8-foot Santa Claus and a large animated reindeer.
“I don’t think there are many neighborhoods in the U.S. that don’t have home decor giants Home Depot,” he said. “So we came in front of the neighbor’s house, and you don’t want to lose.”
