Less foot-traffic as second-quarter earnings underwhelm
Earnings for home improvement company Home Depot have lagged in the second quarter and industry watchers are concerned it could be an ominous sign for the housing market.
Same-store sales growth rose only 3.4% in the U.S. during the quarter, a number below analysts’ estimates and a significant dropoff from the company’s first quarter gains.
Fewer people are also shopping in the store. Home Depot’s total reported transactions dipped to 481.7 million, a drop off of almost 6% from the same time a year ago.
Shares of the company stock have increased more than 25% so far in 2021, but were down more than 3% on Tuesday. Lowe’s, one of Home Depot’s main competitors in the home improvement retail space, similarly had a 2% drop in stock price on the eve of their second-quarter result unveiling.
On the bright side, Home Depot customers have been breaking open the piggy bank with more expensive purchases, with the average transaction total more than 11% higher than what it was a year ago.
Home Depot CEO Craig Menear touted the company’s gains while focusing on the positives in the second-quarter earnings report.
“I am very proud of our associates, who continue to demonstrate a relentless focus on serving our customers,” Menear said. “As a result of their efforts, we achieved a milestone of over $40 billion in quarterly sales for the first time in company history. I would like to extend my sincere appreciation to our team, as well as our supplier and supply chain partners, as they continue to operate in this dynamic and challenging environment.”
Industry watchers, however, remain concerned that the increasingly expensive housing market is a troubling sign. Demand continues to outweigh supply and bidding wars have become commonplace, pricing out many prospective home buyers.
At the same time, construction on new homes has stalled on account of supply shortages and other pandemic-related issues.
Home Depot had also been making a profit from soaring lumber prices — which played a role in the construction slowdown — but they have since fallen back down to earth.