A Home Depot store is seen in Los Angeles, California March 17, 2015. REUTERS/Lucy Nicholson/File Photo Acquire Licensing Rights
Nov 14 (Reuters) – Home Depot (HD.N) sales were better than expected in the third quarter, bolstered by customers spending on plumbing and hardware for repair work and smaller projects, sending its shares up about 7% on Tuesday in a “sigh of relief” rally.
Americans have put big renovations and discretionary home-improvement projects on the back burner after months of elevated inflation and interest rates.
That hurt sales of items like flooring, countertops and cabinets at the top U.S. home improvement retailer, driving big-ticket purchases, or transactions over $1,000, down 5.2% in the quarter.
However, strong performance in categories like building materials, plumbing and hardware, as well as demand for new products like portable power stations, helped prop up spending at stores.
The sales beat was “a sigh of relief,” said Sarah Henry, managing director and portfolio manager at Logan Capital Management, which holds shares in Home Depot.
Despite expectations for sales declines next year, investors are “willing to wait a few quarters to see Home Depot resume growth again,” she said.
Comparable sales declined 3.1% for the three months ended Oct. 29, smaller than the 3.31% drop analysts expected, according to LSEG data.
Home Depot tightened its annual sales forecast range to a decline between 3% and 4%, compared with its prior forecast for a 2% to 5% decrease.
Customers’ average ticket, excluding the impact from lower lumber and copper prices, grew in the quarter, said Billy Bastek, Home Depot’s executive vice president of merchandising. Transactions were down 2.4%.
Some big-ticket items like roofing and insulation typically sought after by “Pro-customers” like professional builders and contractors were also strong, executives said.
The company’s shares, which have underperformed the S&P 500 index (.SPX) this year with a 9% decline through Monday’s close, also got a boost from cooling inflation data that sparked a broad-market rally. Shares were last up 6.7% at $307.55.
“With continued pressure in certain big-ticket discretionary categories and a trend to smaller projects, HD took the conservative approach – which we agree with,” Evercore analyst Greg Melich said.
Home Depot now expects annual per-share profit to fall 9% to 11%, compared with a 7% to 13% slump estimated previously.
Reporting by Deborah Sophia in Bengaluru; Editing by Sriraj Kalluvila
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