Home Depot's second-quarter sales rose slightly as the nation's biggest home improvement retailer benefitted from an $18 billion acquisition this spring, but customers continued to rein in spending because of broadly higher costs and elevated interest rates.
Sales edged up to $43.18 billion, from $42.92 billion, beating the $42.57 billion that Wall Street had expected, according to a poll by Zacks Investment Research.
The quarterly performance was an improvement thanks in part to the acquisition of contract supplier SRS Distribution, which contributed $1.3 billion to Home Depot’s sales for the quarter. SRS provides materials for professionals like roofers, landscapers and pool contractors.
The performance helped Home Depot snap a sales slump. In the first quarter, Home Depot ’s sales dipped 2.3% to $36.42 billion as the Atlanta company dealt with high mortgage rates, inflation and a delayed start to spring. It was the third consecutive quarter of declining sales for the retailer, which saw sales skyrocket during the pandemic as millions spent more on their homes.
Customer transactions slipped 1.8% in the quarter and they also spent less, with the average ticket totaling $88.90 compared with $90.07 in the same three months last year.
In addition, sales at store open at least a year, a key metric of a retailer’s health, declined 3.3% in the quarter. In the U.S., the figure fell 3.6%.
The company is now expecting 2024 sales at stores open at least a year to decline between 3% and 4%. Its previous outlook was for a decline of approximately 1%. Home Depot expects full-year earnings per share to fall between 2% and 4%. Previously, the company predicted earnings per share growth of about 1%. Total sales for the year, the company said, are expected to be up 2.5% to 3.5%. Its prior guidance was for an increase of about 1%.
Shares of Home Depot slipped 4.7% before the opening bell on Tuesday.
"The underlying long-term fundamentals supporting home improvement demand are strong,” CEO and Chair Ted Decker said in a prepared statement Tuesday. “During the quarter, higher interest rates and greater macro-economic uncertainty pressured consumer demand more broadly, resulting in weaker spend across home improvement projects."
Home improvement retailers like Home Depot have been dealing with homeowners putting off bigger projects due to higher rates and lingering concerns about inflation.
Elevated mortgage rates, which can add hundreds of dollars a month in costs for borrowers, have discouraged home shoppers for a while, extending the nation’s housing slump into its third year.
Sales of previously occupied U.S. homes fell in June for the fourth month in a row. And sales of new single-family homes fell last month to the slowest annual 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.
Removing certain items, earnings were $4.67 per share. Wall Street was calling for $4.54 per share.