Record high sales by Home Depot show that the US housing market is still strong
But don’t tell Home Depot. The home improvement giant reported record revenue and sales for its most recent quarter.
The numbers were strong across the board. Sales at stores open at least one year rose 5.4% from the same quarter in 2021 in the US and 5.8% in all locations worldwide. The company also reiterated its earnings and outlook for the full year.
“Our performance reflects continued strength in demand for home improvement projects,”[ads1]; Home Depot CEO and President Ted Decker said in the earnings release. Decker added that these were the highest quarterly results and sales figures in the company’s history, despite “a challenging and dynamic environment.”
Shares of Home Depot rose 5% in midday trading Tuesday, after initially falling in premarket trading.
Investors may have initially focused on the one negative in Home Depot’s report: Customers weren’t making as many purchases as they were a year ago. The number of total transactions fell 3%. But this decline in activity was offset by customers spending more on what they bought. The average sale ticket was slightly more than $90, up 9% from last year.
Much of this increase in spending was due to inflation. Jeffrey Kinnaird, Home Depot’s executive vice president of merchandising, said on a conference call with analysts.
But Decker also said during the conference call that Home Depot saw no significant signs of weakness in the housing market. He noted that demand was strong from both professional contractors as well as do-it-yourself consumers.
“With people spending more time in their homes, so repairing and remodeling, the demand is going to increase from wear and tear. You want more space and just improvements in the home because you’re there more often,” Decker said on the call.
People want to fix up their homes and have the money to do it. Chief Financial Officer Richard McPhail said during the conference call that “our client is in a very good place right now.” He attributed much of this to the rise in house prices in recent years.
And regardless of what happens with home sales, the trend of spending even more on their houses could continue, especially if the economy continues to cool this year and into 2023.
“The improvement sector tends to perform well during recessions,” Shoggi M. Ezeizat, an analyst at Third Bridge, said in a report Tuesday. “We expect consumer demand to shift to smaller remodeling projects as individuals view their homes as stable investments during economic uncertainty.”
