Home Depot sales drop more than expected as wary customers delay big projects
By Savyata Mishra
(Reuters) -Home Depot posted a bigger-than-expected drop in quarterly same-store sales on Tuesday as cautious Americans shelled out less for big-ticket items while focusing on small-scale home repair and maintenance tasks.
Customers have slashed discretionary spending and put pricey renovations on hold as they adjust to higher borrowing costs and elevated inflation, leading to a turbulent 2023 for home improvement retailers like Home Depot and Lowe's Cos.
"We continue to see softer engagements in larger discretionary projects where customers typically use financing to fund the projects such as kitchen and bathroom models," CEO Ted Decker said on a post-earnings call.
Big-ticket transactions for products over $1,000 were down 6.5% in the first quarter from a year earlier, company executives said.
Still, the top U.S. home improvement chain reaffirmed its fiscal 2024 targets on hopes of a recovery in the back half that against the backdrop of an uncertain economic environment and choppy housing market trends.
"Home improvement is still a coiled spring," Truist analyst Scot Ciccarelli said, adding if the Federal Reserve cuts interest rates there could be a significant re-acceleration in home improvement or maintenance activity as people focus on improving their existing homes.
Shares of the Atlanta-based firm were swung between gains and losses and were last flat in early trading.
Meanwhile, Home Depot is bulking up its Pro business segment catering to professional builders and contractors by agreeing in March to buy SRS Distribution in an $18.25 billion deal.
Customer transactions, or the number of purchases made by Home Depot shoppers at its stores or online, fell 1% in the first quarter, but less than a steep 4.8% drop last year.
Comparable sales fell for the sixth straight quarter, down 2.8%, compared with analysts' estimates of a 2.09% drop, according to LSEG data.
First-quarter profit of $3.63 per share edged past estimates of $3.60.
(Reporting by Savyata Mishra in Bengaluru; Editing by Sriraj Kalluvila)