Home Depot Navigates Shifting Market, Reports Modest Q3 Earnings

Home Depot

Home Depot (NYSE:HD) has observed a shift in consumer behavior, leading to smaller project engagements and impacting its earnings. The company announced its third-quarter earnings, revealing a 3.10% year-over-year decline in sales, slightly better than Wall Street’s 3.31% prediction.

The reported revenue was marginally above expectations at $37.71 billion, against a forecast of $37.70 billion. Adjusted earnings per share reached $3.81, surpassing the anticipated $3.76. Notably, digital sales increased by 5%.

The store saw a 2.4% decrease in foot traffic, more than the predicted 1.27%, but the average spending per customer decreased by only 0.30%, less than the expected 0.60% drop.

Ted Decker, CEO of Home Depot (NYSE:HD), highlighted the trend of customers focusing on smaller projects, while certain high-value, discretionary categories faced challenges. The company noted a 5.2% reduction in purchases exceeding $1,000 compared to last year’s third quarter, amidst a slowing housing market and cautious consumer spending.

Home Depot’s executive vice president of merchandising, Billy Bastek, indicated that areas like flooring, countertops, and cabinets experienced weaker engagement. Conversely, professional-heavy categories such as roofing and power tools maintained robust sales.

Decker mentioned a closing performance gap between professional and regular customers, and a record year in Halloween item sales, both in physical stores and online.

Home Depot’s (NYSE:HD) shares saw a significant pre-market surge of 6.3%, marking the most substantial intraday rise in 11 months and potentially the largest percentage increase since November 2022.

Despite a nearly 3.1% year-to-date decrease in shares, Home Depot has revised its fiscal 2023 forecast. Sales are now projected to fall by 3% to 4% compared to the 2022 fiscal year, a narrower range than the previously anticipated 2% to 5% decrease. Adjusted earnings per share are expected to drop by 9% to 11% year over year, a slight adjustment from the earlier 7% to 13% estimate.

Amid higher interest rates affecting customer financing capabilities and lower commodity prices reducing ticket sizes, Home Depot is adjusting its strategy. The company plans to maintain promotions on Black Friday appliances and seasonal garden items to attract customers, while scaling back on other home improvement product promotions, although this approach may change if the market downturn prolongs.

Featured Image – Freepik

Please See Disclaimer

About the author: A resourceful, enthusiastic, and organized content manager with over seven years of experience writing news (articles, stock updates and analysis, editorials, research reports), marketing content (landing pages, press releases, mailers, investor decks, creatives), website copy, interviewing, social media and SEO strategies, website design and copy editing.