The Home Depot experienced a significant boost in sales, primarily attributed to the acquisition of contract supplier SRS Distribution. This acquisition alone contributed $1.3 billion to Home Depot’s sales in the second quarter. Prior to this recovery, the company had reported three consecutive quarters of declining sales.
In the second quarter, consumer transactions fell by 1.8 percent, with customers spending less on average. The average ticket price declined from $90.07 in the year-ago quarter to $88.90. Additionally, big-ticket comp transactions for purchases over $1,000 were down by 5.8 percent compared to the second quarter of last year. Billy Bastek, the company’s executive vice president of merchandising, highlighted softer engagement in larger discretionary projects, such as kitchen and bathroom remodels, where customers typically rely on financing.
Consumer demand across various sectors has been negatively impacted by elevated borrowing costs due to the Federal Reserve’s fight against inflation. These higher interest rates, reaching the highest levels since the financial crisis of 2008-2009, have cooled the economy and softened consumer demand, particularly in credit-dependent areas.
During the second quarter, Home Depot experienced a 3.3 percent decline in comparable sales, reflecting the weakened consumer demand. As a result, the company has revised its comp sales decline forecast from 1 percent to between 3 and 4 percent. Home Depot CEO Ted Decker emphasized the need for a more cautious sales outlook due to the performance in the first six months of the year and ongoing uncertainty surrounding consumer demand.
Despite the downward revision in sales forecasts, Decker expressed confidence in eventual demand recovery. Bank of America data showed that consumer spending growth in July and August hovered around 3 percent, approximately half the pace compared to the same period last year. Consumer spending, accounting for roughly 70 percent of the U.S. economy’s gross domestic product, remains a crucial driving force.
Home Depot’s shares were up around 1.5 percent as the market closed on August 13.
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