Home improvement giant Home Depot reported a lower-than-expected sales growth, citing rising interest rates and consumer concerns about the economy. The company’s CEO, Ted Decker, attributed the decline to consumers spending less on home renovation projects due to increased pressure from high interest rates.
According to Decker, the heightened macroeconomic uncertainty has led to reduced consumer demand for home improvement products. Home Depot’s sales at stores open for at least a year fell 3.6% last quarter, lower than its previous estimate of a 1% decline.
The company attributes this trend to consumers spending less on large projects and shifting their focus towards experiences like travel or concerts. This shift in consumer behavior has resulted in decreased demand for home improvement products, including building materials, lumber, and construction equipment.
High interest rates have also slowed down home turnover, which is affecting the housing market. However, mortgage rates have declined in recent weeks, offering a glimmer of hope for the industry.
Home Depot’s business is closely tied to the housing market, making it one of the leading indicators of consumer spending. The company has been investing heavily in customer engagement and operational efficiency to adapt to shifting economic conditions.
Despite this, Home Depot’s shares fell less than 1% on Tuesday, indicating a mixed response from investors. Nevertheless, CEO Decker remains optimistic about long-term fundamentals supporting home improvement demand.
The acquisition of SRS Distribution, the largest deal in Home Depot’s history, has expanded its sales base to include professional customers who spend more at their stores. However, this shift towards capturing professional customers may not be enough to offset the decline in consumer spending on renovations.
Source: https://www.eladelantado.com/us/warning-problem-wallets-economy