Home Depot’s sales rose in the third quarter, driven by seasonal and hurricane-related demand amid a sluggish home-improvement environment.
Meanwhile, management updated its guidance for fiscal 2024, seeing a mixed picture in an uncertain economic environment. Total sales will increase by approximately 4 percent, and comparable sales likely will decline by approximately 2.5 percent for the 52-week period compared to fiscal 2023.
“While macroeconomic uncertainty remains, our third-quarter performance exceeded our expectations,” said Ted Decker, chair, president, and CEO, in a statement following the release of third-quarter financial results.
“As weather normalized, we saw better engagement across seasonal goods and certain outdoor projects as well as incremental sales related to hurricane demand.”
But this engagement is temporary. It will fade as soon as the season and hurricane damage is over. Unless the macroeconomic environment improves, home sales will be revived, and consumers will regain confidence.
Home sales and the home-improvement industry are highly cyclical, influenced by factors that shape consumer sentiment, such as inflation, interest rates, employment stability, and personal income growth.
Declining consumer sentiment doesn’t bode well for spending on discretionary products and services related to home improvement.
In a statement accompanying the release of Home Depot’s second quarter of fiscal 2024 results in August, Decker described what it means for spending in its stores.
“During the quarter, higher interest rates and greater macroeconomic uncertainty pressured consumer demand more broadly, resulting in weaker spending across home improvement projects, he said. ”However, the team continued to navigate this unique environment while executing at a high level. “
The good news is that consumer sentiment has recovered slowly from the July lows to reach 74 points in November, as the Federal Reserve cut interest rates by 50 basis points and job growth remained robust for August and September.
“Home-improvement retail visits were down year over year for much of third quarter 2024,” R.J. Hottovy, head of analytical research at Placer.ai, told The Epoch Times in an email.
“However, we started to see a pickup during the quarter as consumers resumed home renovation projects due to moderating interest rates, robust Labor Day visit trends, and increased visits for preparation and recovery efforts following recent hurricanes.”
Hottovy sees Home Depot as well positioned for an industry recovery driven by lower interest rates.
“Home Depot’s third-quarter 2024 results showed improvement from year-to-date trends, driven by hurricane-related demand and seasonal product engagement,” he said.
“Hurricane preparation and remediation contributed to sales growth, with additional storm-related demand expected to boost fourth-quarter results. The high interest-rate environment continues to weigh on larger home improvement projects. Still, with rates trending down, Home Depot is investing in Pro services, supply-chain efficiency, and enhancing its physical store experience.”
“Home Depot has always had a great position in the market as it focused on the contractor,” he told The Epoch Times in an email.
“Yes, they do have DIYer appeal, but to the extent that these buyers want to feel like the contractors they see who truly know what they’re doing. Home Depot doesn’t focus on the facade like other options, but they still offer a great selection and aren’t covered in frills.”
Newman sees Home Depot taking a path similar to Costco’s.
“They are transparent brands that avoid outrageous mark-ups and are true to their customers,” he said. “This has allowed these brands to create a lasting trust that surpasses any marketing stunts.”
