Cautious consumers and hurricane spending dominate Home Depot’s third quarter

The Home DepotThe company’s focus remains on the professional market, even as U.S. consumers curb spending on home improvement businesses.

That was the latest from executives at the Atlanta-based retailer as they reported on the company’s third quarter of 2024 Merit Tuesday (November 12).

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

He added on an earnings call that “large deals fell 6.8%.” year after yearand we continue to see lower engagement in discretionary projects where customers seek financing, such as kitchen and bathroom remodels.”

With these fiscally cautious homeowners in mind, the home improvement retailer has turned its attention to steady B2B demand from tradespeople, which has proven more resilient in the face of economic uncertainty.

Over the last half decade, Home Depot has invested billions of dollars to improve its professional offerings, including new distribution centers, improved supply chain logistics and targeted online platforms for professionals. With consumer spending declining, these investments seem particularly prescient now.

Home Depot’s quarterly sales rose 6.6% year-over-year to $40.2 billion, and the company raised its full-year forecast due to better-than-expected results.

Also read: Home Depot is looking for a B2B buffer against slacking consumers Spend

The pro market is inherently more stable

Unlike individual consumers who may hold off on renovations or repairs, commercial customers and construction professionals are subject to contract deadlines to complete their projects, keeping demand relatively stable.

The key to Home Depot’s Pro strategy is digital revision. The company has tailored its website and app to provide professionals with a faster, more seamless shopping experience, including features that enable local delivery, tiered pricing and personalized accounts. This digital focus meets the professional segment’s need for efficiency – a necessity when every minute counts on a construction site.

To ensure professionals get the support they need, Home Depot executives said Tuesday that the company has also ramped up training for its employees.

“We focus on building relationships with our key professionals, including from “Allocate more resources during peak times,” executives told investors.

Associates in high-volume stores receive additional training on professional product lines and services so they can answer technical questions and recommend customized solutions.

“We are excited about the growth and strength of our professional ecosystem across 17 markets… delivering the best shopping experience for all professional experiences,” executives said, noting that “lumber, plumbing and hardware all outperformed the company average in the most recent quarter lay.” .”

Home Depot’s focus on professional customers is not without risks. Building a professional-focused business requires investment in supply chain capabilities, as bulk and special orders can put a strain on logistics. Home Depot has addressed this issue by improving its supply chain through a network of flatbed distribution centers that are specifically designed for this purpose to professional orders, allowing the company to fulfill more orders more efficiently.

Earlier this year, Home Depot spent $18.2 billion acquire SRS, that works as a distributor for roofing companies and construction projects. The company has 760 locations, thousands of trucks on the road and has completed more than 100 acquisitions of roofing and construction suppliers.

Still, last quarter marked Home Depot’s eighth consecutive quarter of negative comparable sales. The retailer expects to open about a dozen new stores this fiscal year, which ends in early February.

“This is a market, and markets eventually return to equilibrium,” Decker said on the call, referring to the state of consumer demand for home improvement supplies. “We just don’t think we’re there yet.”