Home Depot Inc. on Tuesday left its annual forecasts unchanged even as quarterly results topped Wall Street expectations, raising concerns about demand heading into the holiday season amid a slowing housing market.
Shares in the largest U.S. home improvement chain slipped in early trade, with the number of transactions falling in the quarter as surging inflation deterred do-it-yourself customers.
Mortgage rates have more than doubled since the start of 2022, cooling the housing market that boomed in the pandemic.
Home Depot reiterated its full-year outlook, which Jefferies analysts said implied its fourth-quarter earnings would come in below Wall Street.
Although demand from contractors, builders, and other professional customers remained strong, DIY customers who had splurged on paint, tools, and gardening equipment last year cut back on spending in the third quarter of this year.
“Home Depot is not immune to a tightening economy,” said Neil Saunders, managing director of GlobalData, adding that a weakening housing market was reducing demand for its products.
Home Depot, like other retailers, has had to raise prices across the board to shield its margins from commodity inflation and higher costs of freight and labor.
The price increases helped the company post an 8.8 percent jump in average ticket—or the average amount of sales per customer—helping offset a 4.3 percent fall in customer transactions in the quarter.
Comparable sales at Home Depot rose 4.3 percent in three months ended Oct. 30, beating estimates of a 3.1 percent increase, according to Refinitiv IBES data.
Net earnings increased to $4.34 billion, or $4.24 per share, while analysts on average expected a profit of $4.12 per share.
The company reaffirmed its fiscal 2022 comparable sales growth forecast of about 3 percent.
