Home Depot (HD) Q3 2024 results

Home DepotQuarterly sales rose more than 6% from a year ago as the company brought in a newly acquired business and hurricane-related repairs and better weather in many parts of the country boosted demand for home improvement supplies, the company said Tuesday.

The retailer also raised its full-year outlook to reflect better-than-expected third-quarter results and partially increased hurricane-related demand in the current quarter. Total revenue is now expected to increase by approximately 4%, including the impact of the SRS Distribution acquisition. Previously, an increase in total sales of 2.5 to 3.5% was expected for the year as a whole. Both forecasts include an increase from the 53rd week of the fiscal year and a contribution of about $6.4 billion from SRS, which sells supplies to roofing, landscaping and pool professionals.

The company expects comparable sales to decline approximately 2.5% over the 52-week period. Home Depot had previously forecast that the industry metric, which includes the company’s website and stores open for more than a year, would fall 3% to 4% compared to the previous fiscal year.

In an interview with CNBC, Chief Financial Officer Richard McPhail said consumers are still putting off purchases as they wait for lower mortgage rates and borrowing costs express caution about the economy.

“There is a backlog of projects,” he said. “Our customers tell us that their lives are changing. Their families are growing. They downsize, they downsize A more favorable financing environment. So the demand is there, the question is when it will be activated.

Home Depot customers continued to put off projects even though they were in good financial shape, he said. About 90% of the company’s do-it-yourself customers own their own homes.

Here’s what the company reported compared to Wall Street’s expectations for the three-month period ended Oct. 27, according to an LSEG analyst survey:

• Earnings per share: $3.67 versus expected $3.64 per share
• revenue: $40.22 billion versus expected $39.32 billion

Home Depot shares fell slightly in late morning trading.

Home Depot’s sales have been hit by economic factors, as higher interest rates slow housing sales and more than two years of high inflation make homeowners less willing to commit to discretionary purchases and do-it-yourself projects. The company had lowered its full-year comparable sales forecast in August, citing consumer uncertainty.

That momentum has continued in recent months, McPhail said.

Home Depot’s net income fell to $3.65 billion, or $3.67 per share, in the fiscal third quarter, compared with $3.81 billion, or $3.81 per share, in the year-ago period. Revenue rose 6.6% from $37.71 billion in the year-ago period.

Comparable sales fell 1.3% companywide in the quarter. That’s better than the 3.3% decline expected by analysts, according to StreetAccount. In the USA the key figure fell by 1.2%

It was Home Depot’s eighth consecutive quarter of negative comparable sales, However, the smallest decline since the beginning of the downward series. This performance has not weighed on the stock this year.

As of Monday’s close, Home Depot shares were up about 18% this year, lagging the S&P 500’s roughly 26% gains. The company’s stock ended Monday at $408.29 per share, increasing its market value to $405.55 billion.

Shoppers visited Home Depot stores and shopped online about as much as they did in the same period last year. On average, customers spent $88.65 in these transactions, almost as much as the average ticket price of $89.36 in the year-ago quarter.

These figures do not include the SRS acquisition and new stores, which contributed to the company’s overall sales growth. Home Depot expects to open about 12 new stores this fiscal year, which ends in early February.

According to McPhail, the weather had a short-term advantage for Home Depot in the quarter. As warmer and drier weather extended the summer season, customers bought outdoor items like grills or bought paint for projects, he said.

Sales related to Hurricanes Helene and Milton contributed approximately half a percentage point to the quarter’s sales growth. Customers purchased items for preparation, such as generators, batteries, and plywood, and then purchased items for repairs, such as building materials.

Even though Home Depot is reporting modest growth, some investors expect the company to post higher sales in the near future. The Federal Reserve approved its second straight interest rate cut last week, a move that affects what banks charge for consumer debt, such as mortgage interest and the loan a homeowner might take out for a home improvement project. Home prices remain high and the age of the U.S. housing stock continues to drive repair and maintenance projects.

In addition, Home Depot has poached larger orders from home improvement professionals such as contractors and roofers to boost sales. Earlier this year, Home Depot acquired SRS Distribution, a Texas-based company, for $18.25 billion, the largest acquisition in the home improvement retailer’s history.

Still, McPhail added, it’s difficult to predict when consumer mindsets will shift and lead to higher real estate sales. And he noted that mortgage rates have actually increased since the September meeting where the Fed cut rates for the first time since the early days of the Covid pandemic.

“The good news is that housing sales may not get any worse,” he said. “The worst decline in housing sales is probably behind us. Now the question is: ‘What will resolve the decline and when will that happen?'”

The coming year could also bring pricing pressure for Home Depot as inflation cools. It would be among retailers facing higher costs if President-elect Donald Trump follows through on his plans for tariffs on imported goods, particularly those from China.

McPhail declined to say what percentage of Home Depot’s inventory comes from China, but said the majority of its supply comes from North America. He said Mexico is “a great source of goods for us.”

“We source our products from several Asian countries and are therefore closely monitoring developments,” he said. “We have been focused on diversifying procurement for years and will continue to evaluate procurement decisions in the future.”

Some leading retailers, including the CEO of Elf Beauty, have said they may have to raise prices because of the tariffs. Shoe maker Steve Madden said it would cut its imports of goods from China by up to 45% next year.

Along with the weather, the holiday season boosted sales at Home Depot. It sells a wide range of decorations, including many different artificial Christmas trees.

Since the company’s 12-foot skeleton, Skelly, became a viral sensation on Halloween, Home Depot has released other eye-catching – and often oversized – decorations, including an 8-foot Santa Claus and a large animated reindeer.

“I don’t think there are many neighborhoods in the United States that don’t have our giant outdoor decorations from Home Depot,” he said. “So we’re coming into your neighbor’s front yard, and you don’t want to be outdone.”