Home Depot beat quarterly profit estimates and posted a lower-than-expected drop in comparable sales on Tuesday, as the top U.S. home-improvement retailer tapped into a switch by customers to small-scale projects and essential repair work.
U.S. consumers have put big renovations and discretionary home-improvement projects on the back burner as they battle still-high food prices, lingering caution around the economy and higher interest rates.
HOME DEPOT CO-FOUNDER: MY CUSTOMERS ARE ‘GETTING KILLED’ BY BIDEN’S INFLATION
“Similar to the second quarter, we saw continued customer engagement with smaller projects, and experienced pressure in certain big-ticket, discretionary categories,” CEO Ted Decker said in a statement.
Customer transactions fell 2.4% in the third quarter, declining for the 10th straight quarter, while average spending at stores also dipped slightly.
WALMART RAISES OUTLOOK AS FOOD, ONLINE SALES BOOM
Meanwhile, comparable sales declined 3.1% for the three months ended Oct. 29, while analysts on average had expected a 3.31% drop. Profit of $3.81 per share topped estimates of $3.76.
The company’s shares, down 8.8% this year to Monday’s close, were up about 1% premarket.
HOME DEPOT CUSTOMERS GO BIG ON SMALLER PROJECTS
“With continued pressure in certain big-ticket discretionary categories and a trend to smaller projects, HD took the conservative approach – which we agree with,” Evercore analyst Greg Melich said.
Some investors, however, might be disappointed by the narrowing of full-year forecasts despite the slight results beat, he added.
Home Depot tightened its annual sales forecast range to a decline between 3% and 4%, compared with its prior forecast for a 2% to 5% decrease.
TOP HOME IMPROVEMENT PROJECTS TO BOOST VALUE
It now expects annual per-share profit to fall 9% to 11%, compared with a 7% to 13% slump estimated previously.
“I don’t really think it’s the type of (results) beat that would change any sort of investment viewpoint … for the home improvement retailers,” M Science analyst John Tomlinson said.
GET FOX BUSINESS ON THE GO BY CLICKING HERE
“Unless housing turnover improves, we have muted expectations going into 2024. I don’t know if you’re going to see the same level of decline that we’ve seen this year … but the general consumer and sales will remain soft and under pressure,” he added