Home Depot (HD) earnings in the third quarter of 2024

house deposit‘s quarterly sales rose more than 6% year over year as it closed a newly acquired business and hurricane-related repairs and better weather in many parts of the country boosted demand for home improvement supplies, the company said. company on Tuesday.

The retailer also raised its full-year outlook to reflect its better-than-expected third-quarter results and an increase in hurricane-related demand in the current quarter. It now projects total sales to increase approximately 4%, including the impact of the SRS Distribution acquisition. It previously expected total sales to rise between 2.5% and 3.5% for the year. Both outlooks include an increase from the 53rd week of the fiscal year and a contribution of approximately $6.4 billion from SRS, which sells supplies to professionals in the roofing, landscaping and pool businesses.

The company expects comparable sales to decline approximately 2.5% over the 52-week period. Home Depot previously projected that industry metrics, which include the company’s website and stores open more than a year, would fall 3% to 4% compared to the previous fiscal year.

In an interview with CNBC, Chief Financial Officer Richard McPhail said consumers are still putting off purchases while they wait for lower mortgage rates and borrowing costs and Express caution about the economy.

“There is pent-up demand for projects,” he said. “Our clients tell us that their lives are changing. Their families are growing. They are upsizing and downsizing. They need to move to look for work. There is demand for remodeling and they are putting it off until they see a more favorable financial environment. Therefore, the demand is there; The question is when it will be unlocked.”

Home Depot customers have continued to postpone projects, even though they are in good financial shape, he said. Around 90% of the company’s DIY customers are homeowners.

Here’s what the company reported compared to what Wall Street expected for the three-month period ending Oct. 27, according to a survey of analysts by LSEG:

• Earnings per share: $3.67 vs. expected $3.64 per share
• Revenue: $40.22 billion vs. $39.32 billion expected

Home Depot shares fell slightly in morning trading.

Home Depot’s sales have been hit by economic factors, as higher interest rates slow home turnover and more than two years of high inflation make homeowners less willing to make discretionary purchases and DIY projects. The company had lowered its full-year comparable sales forecast in August, citing consumer uncertainty.

That dynamic persisted in recent months, McPhail said.

Home Depot’s net income for the fiscal third quarter fell to $3.65 billion, or $3.67 per share, from $3.81 billion, or $3.81 per share, in the same period a year earlier. Revenue rose 6.6% from $37.71 billion in the year-earlier period.

Comparable sales fell 1.3% in the quarter across the business. That’s better than the 3.3% drop analysts were expecting, according to StreetAccount. The metric fell 1.2% in the US.

It marked the eighth consecutive quarter of negative comparable sales at Home Depot., although the smallest drop since the series of drops began. That performance hasn’t weighed on the stock this year.

As of Monday’s close, Home Depot shares had risen about 18% this year, trailing the S&P 500’s gains of about 26%. The company’s stock ended Monday at $408.29 per share, which which raises its market value to 405.55 billion dollars.

Shoppers visited Home Depot stores and shopped online almost as much as they did in the same period a year earlier. On average, customers spent $88.65 during those transactions, about the same as the average ticket of $89.36 in the prior-year quarter.

Those figures do not include the acquisition of SRS or the new stores, which contributed to the company’s overall sales increase. Home Depot expects to open about 12 new stores this fiscal year, which ends in early February.

The weather had a short-term benefit for Home Depot in the quarter, McPhail said. As warmer, drier weather extended the summer season, customers bought outdoor items like grills or bought paint for projects, he said.

Sales related to Hurricanes Helene and Milton contributed approximately half a percentage point to sales growth for the quarter. Customers They purchased items for preparation, such as generators, batteries, and plywood, and then purchased items for repairs, such as building materials.

Even as Home Depot reports modest growth, some investors have bet that the company will see higher sales in the near future. The Federal Reserve approved its second straight interest rate cut last week, a move that determines what banks charge for consumer debt, such as mortgage rates and the loan a homeowner could take out for a construction project. remodeling. Housing prices remain high and the age of the US housing stock continues to drive repair and maintenance projects.

Additionally, Home Depot has sought larger business from home professionals, such as contractors and roofers, to boost sales. Earlier this year, Home Depot acquired SRS Distribution, a Texas-based company, in an $18.25 billion deal, the largest acquisition in the home improvement retailer’s history.

Still, McPhail added, it’s difficult to predict when consumer mindsets will change and lead to greater housing turnover. And he noted that mortgage rates have actually increased since the September meeting in which the Federal Reserve cut rates for the first time since the early days of the Covid pandemic.

“The good news is that housing turnover may not get worse,” he said. “The worst of the decline in housing turnover is probably behind us. Now the question is, ‘What unfreezes it and when will it happen?'”

Next year could also bring pricing pressures for Home Depot, just as inflation cools. It would be one of the retailers that could face higher costs if President-elect Donald Trump goes ahead with his plans to impose tariffs on imported goods, especially those from China.

McPhail declined to say what percentage of Home Depot’s products come from China, but said most of its supply comes from North America. He said Mexico is “a great source of goods for us.”

“We source from several Asian countries, so we are following it closely,” he said. “We have been focused on diversifying sourcing for years and will continue to evaluate sourcing decisions in the future.”

Some retail leaders, including the CEO of Elf Beauty, have said they may have to raise prices because of the tariffs. Footwear maker Steve Madden said it will reduce the goods it imports from China by up to 45% over the next year.

Along with the weather, the holiday season has boosted sales for Home Depot. It sells a wide range of decoration, including many different artificial Christmas trees.

Since the company’s 12-foot skeleton, Skelly, became a viral sensation during Halloween, Home Depot has introduced other eye-catching, and often oversized, decorations, including an 8-foot Santa Claus and a large animated reindeer.

“I don’t think there are many neighborhoods in the U.S. that don’t have our giant Home Depot exterior decor,” he said. “So let’s go to your neighbor’s front yard and you don’t want to be left behind.”