Home Depot lowers forecast as contractors, homeowners grow concerned about broader economy

Home Depot’s second-quarter sales rose slightly as the nation’s largest home improvement retailer benefited from an $18 billion acquisition this spring, but customers continued to cut back on spending amid generally higher costs and higher interest rates.

Sales rose from $42.92 billion to $43.18 billion, topping Wall Street expectations of $42.57 billion, according to a survey by Zacks Investment Research.

Quarterly results improved partly due to acquisition of contract supplier SRS Distributionwhich contributed $1.3 billion in Home Depot sales in the quarter. SRS supplies materials to professionals such as roofers, landscapers and swimming pool contractors.

Efficiency Helps Home Depot Survive Sales Slump In First Quarter Depot House Sales fell 2.3% to $36.42 billion as the Atlanta-based company grappled with high mortgage rates, inflation and a delayed start to spring. It was the third straight quarter of declines for the retailer, which has seen sales surge during the pandemic as millions of people spent more on their homes.

Customer transactions fell 1.8% in the quarter, and customers also spent less, with the average receipt amount being $88.90 compared with $90.07 in the same three months last year.

In addition, sales at stores open at least a year, a key measure of a retailer’s health, fell 3.3% in the quarter. In the U.S., the figure fell 3.6%.

The company now expects sales at stores open at least a year to fall 3% to 4% in 2024. Its previous forecast was for a decline of about 1%. Home Depot expects full-year earnings per share to fall 2% to 4%. The company had previously forecast earnings per share to rise by about 1%. Overall sales this year, the company said, are expected to rise 2.5% to 3.5%. Its previous guidance was for growth of about 1%.

Home Depot shares fell 4.7% in pre-market trading Tuesday.

“The long-term fundamentals supporting demand for home improvements are strong,” CEO and Chairman Ted Decker said in a prepared statement Tuesday. “During the quarter, higher interest rates and greater macroeconomic uncertainty pressured broader consumer demand, resulting in weaker spending on home improvement projects.”

Home improvement retailers like Home Depot are having to deal with homeowners putting off larger projects due to higher interest rates and lingering inflation concerns.

High mortgage interest rates, which can add hundreds of dollars to borrowers’ monthly costs, discouraged homebuyers for a time, extending the nation’s housing slump into a third year.

Previously Occupied Homes for Sale in the USA fell in June for the fourth month in a row. Sales of new single-family homes fell last month, hitting their slowest pace since November.

For the three months ended July 28, Home Depot Inc. earned $4.56 billion, or $4.60 per share. A year ago, it earned $4.66 billion, or $4.65 per share.

After removing certain items, earnings came to $4.67 per share. Wall Street was expecting $4.54 per share.