ATLANTA (AP) — Home Depot topped profit and sales expectations in its most recent quarter, but sales continued to decline as inflation and soaring interest rates play a larger role in the spending choices made by Americans.
Second quarter revenue was $42.92 billion, edging out Wall Street expectations for $42.25 billion, according to a survey of industry analysts by Zacks Investment Research. Yet that’s down 2% from the $43.87 billion that nation’s largest home improvement retailer reported during the same stretch last year, and sales have fallen 3.1% through the first half of the year compared with 2022.
Despite the stronger-than-expected sales figures, Home Depot on Tuesday stuck to previous guidance for the year, seeing sales decline between 2% and 5%, after lowering its forecast in the last quarter.
It’s the first time the chain forecast declining annual sales since 2009 when the U.S. economy was decimated by a massive housing bubble.
There are signs that consumers, after spending big on homes during the pandemic, are slowing their roll.
“While there was strength in categories associated with smaller projects, we did see continued pressure in certain big-ticket, discretionary categories,” said Ted Decker, chair and CEO. “We remain very positive on the medium-to-long term outlook for home improvement and our ability to grow share in a large and fragmented market.”
Americans spent big over the last several years on big purchases appliances and big-screen TVs, but that spending has cooled.
The Federal Reserve has, in effect, locked many homeowners into the places they own, rather than upgrading, after raising its benchmark rate 11 times since March 2022, most recently late last month.
Neil Saunders, Managing Director of GlobalData, said Home Depot faces increasing challenges ahead.
“Foremost among them is a more sluggish housing market where transactions remain suppressed and consumers more reluctant to move, mostly because of higher interest rates which makes taking on new mortgages or refinancing more challenging,” Saunders wrote Tuesday. “This puts a dampener on home improvement spending among consumers and professionals, especially for the bigger projects that people tend to do once they take possession of a new home.”
Another problem, Saunders said, is that even if homeowners are resigned to staying put, renovations are slowing because many of those projects require financing, which is also subject to the central bank’s war on inflation and rising interest rates.
Home Depot reported profits were $4.66 billion, or $4.65 per share, which was 19 cents better than expected.
Shares of The Home Depot Inc., based in Atlanta, slipped less than 1% before the opening bell Tuesday, but are up more than 4% for the year.
