Tim Nwachukwu/Getty Images
A general view of the Home Depot branch on September 23, 2022 in Philadelphia, Pennsylvania. (Photo by Tim Nwachukwu/Getty Images)
new York
CNN
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Home Depot could no longer continue its long streak of strong sales. The home improvement chain had a dismal quarter as consumer spending on home improvement projects – which was buoyed by the pandemic stay-at-home lifestyle – came to a screeching halt.
The retailer posted disappointing sales for its first quarter and lowered its outlook for the year after customers slowed spending. Home deposit
(HD) said sales fell 4.5% at stores open for at least a year in its most recent quarter, and revenue fell 6.4% from the same period last year .
Total revenue for the quarter fell 4.2% from a year ago to $37.3 billion. The retailer also cited falling lumber prices and weather-related issues, including heavy rains in California during the period, as hurting its sales.
“After a three-year period of unprecedented growth for our industry, during which we increased our sales by more than $47 billion, we expected fiscal year 2023 to be a year of moderation for the market. home improvement,” Home Depot CEO Ted Decker said Tuesday.
The company also lowered its sales forecast for the year. He expects sales to decline between 2% and 5% in 2023 compared to the previous year.
The change in trend for Home Depot comes after a long period of being among the few big winners during the pandemic. Housing expenses have become a priority for families as many Americans suddenly find themselves living, working and studying from home.
But just as people have returned to some semblance of post-pandemic life, for Home Depot it has been less of a celebration. Money that may have previously been reserved for home repairs and beautification is now spent more freely on eating out, traveling, shopping, and other pleasures.
As a result, Decker told analysts in a call Tuesday to discuss the company’s earnings that activity from its DIY customers and professional contractors in the quarter was below expectations as consumers continue undertake small home improvement projects. In addition, rising interest rates and inflation have adverse consequences.
“What’s more recent in our observations this quarter is that while projects are still strong and the Pro project backlog is still high, project sizes are getting a bit smaller,” Decker said. during the call. “And it could be that the projects are postponed or the project is divided into several pieces. So rather than creating an entire room or an entire basement, you start working on it in small pieces. And that clearly has an impact on the items per cart in the overall business.
Neil Saunders, managing director of Global Data and retail expert, said in a note on Tuesday that Home Depot’s slowing pace of sales “is somewhat concerning as it reflects underlying weakness creeping into the market.” ‘economy”.
He said slowing activity in the real estate market, “to the extent that higher interest rates deter some from refinancing to move or taking out mortgages for their first home”, may have an effect deterrent to the home improvement industry.
“The second factor is the general deterioration in spending, even among those who are not moving,” Saunders said. “The number of households undertaking projects continued to decline this quarter as people rein in discretionary spending and postpone major renovations that sometimes require financing.”
Home Depot said shoppers are also refraining from buying larger, more expensive appliances.
“We saw a continuation of the trend seen in the fourth quarter as consumers retreated from big purchases and some discretionary purchases,” said Billy Bastek, executive vice president of merchandising for The Home Depot.
Bastek said demand during the quarter slowed in categories such as flooring, kitchen and bathroom. “After a few years of unprecedented demand, we continue to see a slowdown in expensive discretionary categories like patios, grills and appliances, likely reflecting the postponement of these single item purchases.”
The retailer said consumers are now heading into a transition period.
“Obviously people aren’t spending all their time at home like they did in years past,” Decker said. “And then a new dynamic that we’re seeing now is that last quarter is a more cautious consumer and that’s consistent with what we’re seeing in our business. And then finally, with the build up of inflation that we’ve seen, there’s definitely some price sensitivity, especially around the larger discretionary items… But despite all of that, we’re going through this transition period.
Target
(CBDY)walmart
(WMT)and other retailers are also releasing their results this week, giving investors and economists more data on US consumer sentiment.