Home Depot’s stock gained in early trading on Tuesday after the home improvement giant reported better-than-expected third-quarter earnings and raised its profit forecast for the year.
The increase in sales was partly driven by higher spending following severe weather in the southeastern US.
For the three months ending in October, Home Depot posted earnings of $3.78 per share, which was 1.8% lower than last year but still 13 cents above what analysts had predicted.
The company’s total revenue grew by 6.9% year-over-year to $40.22 billion, surpassing Wall Street’s estimate of $39.32 billion.
Sales at stores open for at least a year were down 1.3% from the previous year but were better than analysts’ expected 3.25% decline.
In the US, comparable sales dropped 1.2%.
The average spending per shopping trip decreased by 0.8% to $88.65, and the number of transactions fell by about 0.2%.
Looking ahead to the 2024 fiscal year, which ends in January, Home Depot expects earnings to be around 2% lower than last year’s $15.11 per share.
The company also anticipates comparable sales to decline by 2.5%, which is an improvement from its earlier prediction of a 3% to 4% drop.
“Despite ongoing economic uncertainty, our third-quarter performance exceeded our expectations,” said CEO Ted Decker. “As weather conditions stabilized, we saw improved sales in seasonal items, outdoor projects, and additional purchases related to hurricane recovery.”
Before the market opened, Home Depot’s shares rose 2.9% to $419.97, potentially extending its six-month gain to about 23.2%.
Home Depot consumers are still holding off on purchases
In an interview with CNBC, Chief Financial Officer Richard McPhail noted that Home Depot’s updated forecast reflects its stronger-than-expected performance in the last quarter.
However, he pointed out that many consumers are still holding off on purchases, hoping for lower mortgage rates and borrowing costs while remaining cautious about the economic outlook.
“There is a backlog of demand for home projects,” McPhail said.
“Our customers share that their circumstances are changing—families expanding or downsizing, relocating for new job opportunities. There is a need for home renovations, but they are delaying these projects until financing conditions improve. The demand exists, but the question is when it will be released.”
Despite their financial stability, many Home Depot customers are continuing to postpone projects. According to McPhail, around 90% of the retailer’s do-it-yourself shoppers are homeowners.
As of Monday’s close, Home Depot’s stock has risen roughly 18% this year, lagging behind the S&P 500’s gain of about 26%.
Shares closed on Monday at $408.29, giving the company a market capitalization of approximately $405.55 billion.
Customer visits to Home Depot stores and online platforms remained consistent compared to the same period last year.
On average, shoppers spent $88.65 per transaction, nearly matching the previous year’s average of $89.36.
These figures exclude contributions from the SRS acquisition and new store openings, which boosted overall sales growth.
Home Depot plans to open around 12 new stores during the current fiscal year, which concludes in early February.
McPhail also highlighted that weather conditions provided a short-term lift during the quarter. Extended warm and dry weather allowed customers to buy outdoor products like grills and supplies for painting projects.
Additionally, sales linked to hurricanes Helene and Milton accounted for about half a percentage point of the quarterly sales increase.
Customers purchased items for preparation, such as generators, batteries, and plywood, and later bought repair essentials like building materials.
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