Aging housing will help drive Home Depot’s revenue this year, allowing company sales to grow much faster than the overall economy, according its chief financial officer.
The Atlanta-based company, which reported end-of-the-year results Tuesday, expects the U.S. economy will expand 2.6 percent, which is modest but sets the stage for Home Depot’s continued success, Chief Financial Officer Carol Tome told The Atlanta Journal-Constitution.
“Some forecasts are higher, some forecasts are lower,” she said. “We thought the middle of the pack seemed right. There will be a downturn at some point. But we don’t see a recession in 2019.”
The company reported sales of $108.2 billion in the last year, up 7.2 percent from the previous year. It finished strong: During the fourth quarter, sales were $26.5 billion, a 10.9 percent jump from the year before.
Despite that surge, the company has not been adding significantly to its workforce of 400,000, including 20,000 in metro Atlanta.
The company, which has 2,287 stores, has been focused for several years on improving productivity rather than extending its reach to new places.
Last year, Home Depot added just three stores. This year, the company plans five new stores — two in Florida, one in Texas, one in Mexico, Tome said. “We have enough stores in Georgia.”
Even without adding stores, the company sees sales rising about 5 percent this year, a projection that springs partly from growth of online business, but mostly from Home Depot’s belief that many homes are in need of repair.
“We are all about remodeling and repair,” Tome said.
The Joint Center of Housing Studies at Harvard University has forecast 5.1 percent growth in remodeling this year.
After years of frenetic construction, the housing market collapsed in 2006 and 2007 putting a stop to building. Even after the nation emerged from recession and the overall housing market improved, construction of new homes did not keep pace with population growth.
That shortfall is not reversing anytime soon: Housing starts in December tumbled 11.2 percent from a year ago, the third drop in four month and the largest since June, according to Mark Vitner, senior economist at Wells Fargo.
Now, more than half the nation’s housing stock is now more than 40 years old, she said. “That has never happened before. As a nation, we have always had young housing stock.”
Meanwhile, home prices have been decelerating, another dampener on the market.
Even so, home prices are up 4.7 percent nationally for the past year, with metro Atlanta posting a 5.9 percent increase, the third-highest among large metro areas, according to the Case-Shiller index released Tuesday.
One caveat: The number of condos listed for sale has been growing faster than the listings for single-family homes, said Daryl Fairweather, chief economist at Redfin. “That could put a damper on major renovations because you can’t add an extra room or a pool as a condo owner.”
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