Home Depot Inc.’s results beat estimates in the latest quarter, a sign that spending on improvement projects is holding up despite high borrowing and housing costs.
Comparable sales, which measure results at stores open for at least a year, rose 1.7 percent during the period ended August 2, better than the average of analyst estimates and the highest since late 2022. Adjusted earnings also surpassed expectations.
The stronger-than-expected report shows the company’s moves have helped to blunt the impact of a housing market that’s weighed down by high home prices and interest rates. The strategy includes expanding its fast-growing business serving professional contractors and building out its e-commerce offerings.
Home Depot is also appealing to consumers that are carrying out smaller projects-like repainting rooms or adding new plants to their gardens-instead of doing major remodels.
The company’s shares rose 0.8 percent in pre-market trading in New York on Tuesday. They’re down 1.8 percent this year through Monday’s close, compared with the 13 percent advance of the SandP 500 Index.
Home Depot experienced healthy demand across the US and product departments during the quarter, Chief Financial Officer Richard McPhail said in an interview. Portable power tools were especially popular. Live plants, patio products and grills sold well among everyday shoppers while demand for plumbing and electrical supplies and hand tools was strong among professional contractors. A heat wave in July boosted sales of air conditioners and fans.
While US households continue to spend on essentials, many are cutting back on discretionary and big-ticket items. The Iran War has exacerbated consumers’ challenges, sparking renewed inflation concerns and pushing up mortgage rates to the highest level in more than a year. Home prices have also been driven up by a supply shortage and higher material costs.
The broader housing market has not yet picked up due to concerns around affordability, borrowing costs and consumer uncertainty and the outlook remains uncertain, McPhail said. He added that ‘frozen conditions’ persist for large home improvement projects.
‘Our customer’s message to us has been consistent with respect to what they’re seeing in their world’ with more uncertainty and worries over inflation and fuel costs, he said.
Home Depot is confronting these challenges as Chief Executive Officer Ted Decker takes temporary medical leave for the next few months. McPhail and Senior Executive Vice President Ann-Marie Campbell are assuming Decker’s responsibilities on an interim basis.
Executives have previously said that they don’t expect to see notable improvements across the housing market in the near term unless mortgage rates decline and income levels rise more significantly. Still, they’ve touted their long-term growth prospects due to pent-up demand for home upgrades.
The Atlanta-based company maintained its full-year guidance, noting that tariff refunds are expected to partially offset ‘unplanned fuel, energy, and other product input costs’ during the current fiscal year.
Home Depot is the first of a group of big-box retail earnings this week that includes Target Corp. on Wednesday and Walmart Inc. the following day.