Home Depot (NYSE: HD), the largest home improvement retailer in the United States, continued to face challenges in the first quarter of 2024 due to factors such as high mortgage rates, inflation, and a delayed start to spring.
Sales dipped 2.3% to $36.42 billion for the quarter, just below the $36.65 billion expected by analysts polled by Investment Research. This marked the third consecutive quarter of declining sales for the retailer, which experienced a surge in sales during the pandemic.
Customer transactions also fell by 1% in the quarter, with shoppers spending slightly less at an average of $90.68 per receipt compared to $91.92 a year earlier.
Sales at stores open for at least a year, a crucial metric for a retailer’s health, declined by 2.8% globally and by 3.2% in the U.S.
The recent slight decrease in the average rate on a 30-year mortgage provided some relief for home shoppers already grappling with rising housing prices and a shortage of homes for sale. However, when mortgage rates rise, they can significantly increase monthly costs for borrowers, limiting affordability.
Neil Saunders, managing director of GlobalData, noted that Americans are scaling back on major home remodeling projects like bathrooms and kitchens, impacting Home Depot. He cited financial constraints and the higher cost of credit as reasons for this shift, along with consumer hesitation among those planning to move in the future, who are less inclined to undertake large improvement projects in their current homes.
While consumers are still investing in less expensive home decor projects, Home Depot faces increased competition in this space from garden centers, paint specialists, and others. Consumers are also seeking out the best bargains and deals, contributing to the retailer’s challenges.
Despite these hurdles, Home Depot’s professional builder and contractor business remains strong. The company is focused on meeting the needs of these customers and enhancing customer satisfaction and store productivity.
In the first quarter, Home Depot earned $3.6 billion, or $3.63 per share, down from $3.87 billion, or $3.82 per share, in the same period last year. However, this exceeded Wall Street’s expectations of $3.61 per share.
The company maintained its fiscal full-year forecast for total sales growth of about 1%, including a 53rd week. It anticipates same-store sales to fall approximately 1% for the 52-week period.
Shares of Home Depot declined slightly in afternoon trading on Tuesday.