Home Depot expects smaller drop in annual sales as hurricane rebuild boosts quarter
12:37 pm Tuesday, November 12th, 2024
By Savyata Mishra
(Reuters) -Home Depot forecast a smaller drop in annual same-store sales on Tuesday, benefiting from resilient demand from professional contractors, as well as a lift from hurricane-related spending in the current quarter.
The top U.S. home improvement chain also posted better-than-anticipated third-quarter results, a stark contrast from the company’s performance in the first half when it struggled with cautious consumer spending.
Home Depot’s shares, up 18% this year through Monday’s close, rose about 2% before reversing course amid broader market weakness.
“We saw better engagement across seasonal goods and certain outdoor projects as a result of favorable weather as well as incremental sales related to hurricane demand,” CEO Ted Decker said on a post-earnings call.
Parts of southeastern U.S., including Florida, were battered by hurricanes Helene and Milton at the end of September and early October, prompting shoppers to stock up on items such as generators, batteries, plywood and other building materials.
The third quarter saw a $200 million bump in hurricane-related sales as comparable sales turned positive in October, company executives said on the call.
Major storms pulled forward a lot of materials spending and it will lead to more contractor work as well, said Brian Mulberry, client portfolio manager at Zacks Investment Management.
“This is a positive sign due to the strength of their PRO business connecting contractors to consumers and then providing the necessary materials for job completion,” he said.
Home Depot has battled choppy demand over the past two years, as sticky inflation and higher borrowing costs prompted customers to pause large-scale home remodels and focus on repair and maintenance activities around their existing homes.
While easing pressure on mortgage rates, the U.S. Federal Reserve’s rate cuts are expected to reduce borrowing costs for homeowners looking to renovate their properties to put them up for sale, benefiting home improvement retailers.
Still, executives were cautious about any immediate benefit from the rate cuts, citing a need for more stabilization to prompt Americans to start remodeling projects.
Home Depot has also doubled down on its investments to appeal to the “pro” customer, including its $18.25 billion deal for SRS in March.
The company posted a 1.3% decline in comparable sales, the smallest decline since the fourth quarter of 2022, compared with analysts’ average estimate of a 3.25% drop, according to data compiled by LSEG.
It earned $3.67 per share, beating estimates of $3.64.
Comparable sales is expected to fall 2.5% for fiscal year 2024, compared with its prior range of a 3% to 4% drop.
(Reporting by Savyata Mishra in Bengaluru; Editing by Sriraj Kalluvila)
