Home Depot reported lower third-quarter profit and trimmed its full-year outlook as an extended downturn in home-improvement activity shows little sign of ending.
“Our customers tell us that they remain on the sidelines due to uncertainty and perhaps the hesitation to make larger financial commitments amid an uncertain economic environment,” Chief Financial Officer Richard McPhail said in an interview.
Home Depot said a lack of storms in the third quarter weighed on its sales for roofing, power generation and plywood compared with the previous year, during which multiple strong fall storms led to greater home preparation and repair activity. And more broadly, a weak housing market and consumer uncertainty continued to hurt demand.
“Our customers are homeowners. They are seeing home prices now decline in more markets than rising, and we know they have job concerns,” McPhail said. “This all comes together in the form of hesitation to take on larger financial commitments.”
Shares were down 4% in premarket trade.
For the third quarter, Home Depot’s comparable sales rose 0.2%, missing analysts’ forecast of 1.3%. The company lowered its full-year comparable sales-growth outlook to be slightly positive, down from its previous forecast of up 1%.
It also cut its adjusted earnings-per-share guidance to be down 5% from the previous year. It had previously expected adjusted earnings per share to be down 2%.
Home-improvement activity has sagged amid a stagnant housing market, high interest rates and general uncertainty among consumers about the economic environment.
Home Depot has said that an aging housing stock and surging home-equity values will eventually lead to a turnaround in home-improvement demand. But so far, the market has shown few signs of picking up even as interest rates have crept lower. According to Placer.ai, foot traffic at Home Depot in the third quarter slipped 0.4% from the previous year.
“We’re watching movements in mortgage rates closely. So far we have not seen them catalyze demand in home improvement,” McPhail said. “While we don’t see a near-term catalyst for acceleration of home-improvement demand, we’re also bullish on the long-term fundamentals of housing.”
