Home Depot’s Q3 results beat Wall Street as the decline in consumer spending eases somewhat

Home Depot continued to struggle with a decline in customer spending in its fiscal third quarter, but it was less severe than in the past and its performance beat Wall Street expectations. The hardware retailer also raised its sales forecast for the full year.

The Atlanta-based company’s revenue rose 6.6% to $40.22 billion in the quarter. That beat analysts polled by FactSet forecast $39.31 billion.

Sales at stores open at least a year, a key indicator of a retailer’s health, fell 1.3%. In the USA the number fell by 1.2%. Still, that’s a significant improvement from the second quarter, when sales fell 3.3% at stores open at least a year and 3.6% in the U.S

Neil Saunders, managing director of GlobalData, was encouraged by some of the data.

“Home Depot is still seeing a slight 1.2% decline in sales in its U.S. business. Although this reflects a decline last year, it is the smallest decline in two years and a positive signal that Home Depot may finally be reaching the bottom of its long sales slump and will soon shift its core business back to growth,” he said in an email statement.

Customer transactions remained nearly flat in the third quarter compared to the same period last year, while shopper spending fell slightly to $88.65 per average ticket from $89.36 a year ago.

Home improvement stores like Home Depot are struggling with homeowners putting off major projects due to higher interest rates and ongoing inflation concerns.

While mortgage rates have begun to decline recently, so has the US housing market in a decline in sales Mortgage rates date back to 2022, when mortgage rates began to rise from pandemic-era lows.

The National Association of Realtors reported on it last month Selling existing homes fell 1% in September from August to a seasonally adjusted annual rate of 3.84 million. This was the second consecutive monthly decline and the slowest annual sales pace since October 2010, when the housing market was still in deep crisis following the housing crash of the late 2000s.

Home Depot Inc. earned $3.65 billion in the period ended Oct. 27, or $3.67 per share. A year earlier, the company earned $3.81 billion, or $3.81 per diluted share.

Adjusted for certain items, earnings were $3.78 per share. Wall Street was asking for $3.65 per share.

“While macroeconomic uncertainty remains, our third quarter performance exceeded our expectations,” Ted Decker, chairman, president and CEO, said in a statement on Tuesday. “As the weather normalized, we saw better engagement in seasonal goods and certain outdoor projects, as well as increasing sales related to hurricane demand.”

Home Depot now expects full-year sales to rise about 4%. The previous forecast was that sales would rise 2.5% to 3.5%. The chain now expects sales at stores open at least a year to decline by about 2.5%. It previously forecast full-year sales would decline 3% to 4% at stores open at least a year.

Additionally, Home Depot forecasts a decline in earnings per share of approximately 2% and a decline in adjusted earnings per share of approximately 1%. The previous forecast was for earnings per share to fall between 2% and 4%.

Home Depot shares rose 2.5% in premarket trading.