Home Depot beat quarterly profit estimates and posted a lower-than-expected drop in comparable sales on Tuesday, as the top US home-improvement retailer tapped into a switch by customers to small-scale projects and essential repair work.
US 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.
“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 per cent in the third quarter, declining for the 10th straight quarter, while average spending at stores also dipped slightly.
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Meanwhile, comparable sales declined 3.1 per cent for the three months ended Oct. 29, while analysts on average had expected a 3.31 per cent drop. Profit of $3.81 per share topped estimates of $3.76 (all US dollars).
The company’s shares, down 8.8 per cent this year to Monday’s close, were up about one per cent before the market opened.
“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 three per cent and four per cent, compared with its previous forecast for a two to five per cent decrease.
It now expects annual per-share profit to fall nine to 11 per cent, compared with a seven to 13 per cent slump previously estimated.
“I don’t really think it’s the type of (results) beat that would change any kind of investment viewpoint … for the home improvement retailers,” M Science analyst John Tomlinson said.
“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.