Home Depot reported a slight increase in second-quarter sales, reaching $43.18 billion, up from $42.92 billion in the previous year. This exceeded Wall Street’s expectations of $42.57 billion. This growth was partly attributed to the acquisition of SRS Distribution, a contract supplier that contributed $1.3 billion to Home Depot’s sales for the quarter. SRS Distribution provides materials for professionals such as roofers, landscapers, and pool contractors.
The performance in the second quarter helped Home Depot recover from a sales dip in the first quarter, where sales decreased by 2.3% due to various factors like high mortgage rates and inflation. However, in the second quarter, customer transactions dropped by 1.8%, and the average spending per customer decreased from $90.07 to $88.90 compared to the previous year.
Sales at stores open for at least a year, a crucial indicator of a retailer’s health, declined by 3.3% in the quarter, with a 3.6% fall in the U.S. market. As a result, Home Depot revised its outlook, expecting a decline of 3% to 4% in 2024 in comparable store sales, in contrast to the previous forecast of about a 1% decrease. Earnings per share for the year are projected to decrease by 2% to 4%, compared to the initial prediction of a 1% growth, while total sales are estimated to rise by 2.5% to 3.5%.
CEO Ted Decker acknowledged that consumer demand for home improvement projects weakened during the quarter due to higher interest rates and economic uncertainties, impacting spending across the sector. Home improvement retailers like Home Depot have been facing challenges as homeowners postpone significant projects because of increased rates and concerns about inflation.
The current housing market conditions, including elevated mortgage rates, have deterred potential home buyers, leading to a prolonged housing slump. This has influenced the demand for home improvement products and services, as indicated by the decrease in home sales in recent months.
Despite grappling with these challenges, Home Depot remains optimistic about the long-term outlook for the home improvement industry, emphasizing the enduring demand for such products and services. The company reported earnings of $4.67 per share for the quarter, surpassing Wall Street’s expectations of $4.54 per share. As a result of the revised outlook and the challenging market conditions, Home Depot’s shares fell by 3% before the opening bell on Tuesday.