ATLANTA — Home Depot on Tuesday announced another quarter of declining sales, but it was a dip that was expected as the company works through what officials called a post-pandemic “settling.”
The retail behemoth reported sales of $42.9 billion for the past three months, down 2.0% from the same quarter during the previous year. Net earnings during the quarter were $4.7 billion, or $4.65 per share, down from $5.2 billion, or $5.05 per share, a year earlier.
“We look at 2023 as a year of moderation after the explosive growth we had in the last few years,” said Ted Decker, chief executive, during a teleconference with analysts and reporters.
Earlier this year, the company projected that its sales this year will be between 2% and 5% of the previous year’s revenue, while earnings per share drop between 7% and 13%. Officials Tuesday reaffirmed that prediction.
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At the core of the company’s business are homeowners, people hiring contractors to do improvements and repairs or performing the work themselves. During the pandemic, Home Depot’s business boomed as people stuck in their homes looked to make upgrades to their surroundings. Late last year, with interest rates rising, inflation high and talk in the air of an impending recession, many of those customers started to become less ambitious, trimming back or sometimes delaying big projects.
That dampened Home Depot’s dramatic growth.
Many concerns remain, including the Federal Reserve’s campaign to chill inflation with interest-rate hikes, so the company is not revising its relatively downbeat projections, Decker said.
“There’s just so much uncertainty,” he said. “Is the Fed going to keep raising rates? Can we get a budget deal passed?”
But inflation has dramatically dropped and recession fears have receded, while job growth has been strong and wages have been on the rise. There may still be some caution, but there’s no economic reason to panic, he said.
“The overall economy and the consumer in particular have remained incredibly resilient,” he said.
Still, the company hasn’t been able to sidestep the impact of higher rates on homeowners who need to pay more for loans when they borrow to make improvements, said Shoggi Ezeizat, an analyst at global research firm Third Bridge.
Spending on home improvement will be down overall this year, he said.
“Items with higher price tags, such as landscape gardening, appliances, barbecues and patio furniture, face the most significant risk of a decline in sales,” Ezeizat said.
Home Depot must also be mindful of its chief competitor, Lowe’s, Ezeizat said.
The smaller retailer has been aggressively trying to sell materials and services to the same contractors that are so important to Home Depot, he said.
“Lowe’s has been actively narrowing the price gap with Home Depot,” he said.
Home Depot has 2,326 retail stores, the vast majority in the United States. The company has more than 470,000 employees.
Company stock closed at $332.14 on Tuesday. It reached its high for the past year in February, cresting at $339.79 a share. The past year’s low came in October, when Home Depot shares bottomed out just under $270.
Company officials said they have seen results from the $1 billion set aside this year to raise pay for many employees, mainly a decline in the number of workers quitting.
The company has spent even more money rewarding shareholders. During the past quarter, Home Depot paid $2.1 billion in dividends and spent $2 billion buying shares of its own stock. The company’s board of directors recently authorized spending up to $15 billion buying back shares.