Home Depot has a brighter second quarter

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Things are looking good the future of Home Depot. After an unsettling first quarter in which sales dropped 4.2 percent, the company was more profitable than anticipated in the second quarter. It posted sales of $42.92 billion in the quarter, which was higher than the $42.23 billion it forecast prior to the start of. Earnings per share were $4.65 more than the anticipated $4.45.

However, the company has maintained its forecast for the entire year, and expects a 2%-5 percentage drop in sales for the year. In the company’s earnings conference the Chief Executive Officer Ted Decker struck a cautious note, saying that the market for home improvement is now in a state which is characterized by “moderation” after the pandemic-era DIY boom.

Consumers are putting off major purchases of discretionary value, including outdoor furniture and appliances, Billy Bastek, executive vice director of merchandising, said. The sales of more than $1,000 are down 5.5 percent YoY. The shift away from big purchases continues a trend which started in Q4 2022.

The company is seeing its customers move to smaller projects rather than larger ones. While the average of sales per client decreased the volume of transactions grew. “In the second quarter, as we saw weather improve across the country, most notably in our Western division, we saw an increase in spring sales and strength in smaller-ticket projects,” Bastek stated.

However, Home Depot’s customers remain financially sound, Decker said. The company is seeing its home equity increase and profiting from the labor market’s tightness and wage increase.

The prices are “settling” after a period of high inflation, Decker said. “We are encouraged that the cycle of inflation is essentially behind us.” The deflation in the core commodities, however, and especially lumber, was a weakening of the average growth of ticket prices. Prices for lumber are over 40 percent lower than at this time last year, Bastek stated. Lumber makes up about 8.7 percent of the sales at Home Depot each year.

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