Home Depot sales continue to slide as Americans wrestle with persistent inflation and the company narrowed its outlook for the year. But the nation’s biggest home improvement retailer topped expectations for the quarter.
Home Depot now expects a earnings per share to decline between 9% and 11% in 2023 and same store sales to fall 3% to 4%. The company previously anticipated an earnings per share drop between 7% and 13% and a same-store sales decline of 2% to 5%.
It’s the first time that Home Depot has projected a decline in annual sales since 2009, when the U.S. economy was decimated by a massive housing bubble.
Third-quarter revenue slipped 3% to $37.71 billion, Home Depot Inc. said Tuesday, which is better than the $37.52 billion that Wall Street was expecting, according to a survey of analysts by Zacks Investment Research.
Sales at stores open at least a year, a key gauge of a retailer’s health, dropped 3.1%. In the U.S., they declined 3.5%.
Customers, compared with several years ago when they were taking on major renovations at home, focused instead on smaller, less expensive projects.
“Similar to the second quarter, we saw continued customer engagement with smaller projects, and experienced pressure in certain big-ticket, discretionary categories,” Chair and CEO Ted Decker said in a prepared statement.
Big-ticket items include appliances that many customers buy through credit, which has grown very expensive as a result of the fight by the U.S. Federal Reserve to rein in inflation. The Fed has raised its benchmark interest rate 11 times in the past year and a half, to about 5.4%, the highest level in 22 years.
That has raised the cost of mortgages, credit cards typically used to acquire refrigerators, and loans for home improvement. The Fed is trying to achieve a “soft landing” — raising borrowing costs just enough to curb inflation without tipping the economy into a deep recession.
Home Depot earned $3.81 billion, or $3.81 per share, topping the $3.76 per share that industry analysts had expected, but it’s down from last year when the Atlanta company earned $4.34 billion, or $4.24 per share.
Shares rose more than 2% before the opening bell Tuesday. Shares of competitor Lowe’s, which releases quarterly earnings a week from today, rose slightly.