Dive Brief:
- Steady interest in home improvement projects and the increasing time consumers spend at home led retailer Home Depot to report record sales and profits for the most recent quarter, beat analysts' expectations and reaffirm its guidance for the year.
- The retailer reported $43.8 billion in sales for the quarter on its Aug. 16 earnings call, a $2.7 billion or 6.5% increase from the second quarter of fiscal year 2021, per its earnings release.
- The company is keeping an eye on macro-level pressures such as inflation and the housing market, with CFO and executive vice president Richard McPhail noting on the earnings call that Home Depot is operating in “a broad-based inflationary environment not seen in four decades, while managing through constrained global supply chain conditions, all against the backdrop of monetary policy shifts intended to moderate demand.”
Dive Insight:
Continuing demand for home improvement projects despite both rising mortgage and home prices could help the retailer successfully navigate through this period while still delivering on value and increasing market share, executives said.
“We also see engaged and resilient homeowners who have strong balance sheets, consumers spending more time in their homes and continued structural support for home improvement project demand,” McPhail said on Tuesday’s earnings call following his remarks on the current inflationary environment. “We feel confident that we will continue to manage with flexibility through a dynamic environment, while growing faster than our market and delivering exceptional shareholder value.”
The company expects homeowners’ interest in home improvement projects to continue in the long-term, according to CEO and President Ted Decker.
“Despite near-term uncertainties, we believe that the long-term underpinnings of demand for home improvement, remains strong and that we are well positioned to leverage our distinct competitive advantages to capitalize on compelling growth opportunities in our space,” he said on the call.
These strong balance sheets are contrasted against an increasingly pricey market for both current and prospective homeowners. Efforts by the Federal Reserve to curb inflation are contributing to more volatile fluctuations in mortgage rates as housing prices also creep upwards. Rates crested over 5% in the week ending Aug. 11, according to a report by CNN, after hitting a high of 5.8% in mid-June.
Meanwhile, data from the National Association of Realtors released Aug. 11 found the national median single-family home existing-home price rose by 14.2% annually to $413,500 — exceeding $400,000 for the first time, per the report.
Such pressures have not yet been seen in Home Depot’s business, however, Decker said in response to analyst questions; while the company did see some “seasonal weakness” in its DIY category, Decker stated, Home Depot has “not seen a broad-based fundamental demand pressure in the business.”
“…We are operating in a unique environment with many cross currents — inflation and interest rates and supply chain disruptions and the like,” he said. “But given all that, our customer in our markets has been incredibly resilient.”
Net earnings for the second quarter were $5.2 billion or $5.05 per diluted share, the company reported, compared to $4.8 billion in Q2 2021. Home Depot also confirmed its guidance for the full year, forecasting total and comparable sales growth of approximately 3% for the year.
