Home Depot, the state’s largest company, expects the current round of tariffs to add nearly $300 million to the cost of what it sells, but views the amount as “manageable.”
In an interview after the Atlanta-based company announced a surprisingly robust set of results for the most recent quarter, Chief Financial Officer Carol Tome said the company remains uncertain about the ultimate impact of the tariff battle begun by the Trump administration in recent months.
“There’s a lot of the tariff talk that we don’t understand yet,” she told the Atlanta Journal-Constitution in an interview.
However, the tariffs imposed thus far are raising the costs of items the company sells, from laundry machines to anything containing steel or aluminum.
“But tariffs will add less than $300 million to the sales of those things,” Tome said. “Out of $100 billion in sales, so that is a manageable number.”
In fact, the company should end the year with well over that in revenues. In the second quarter, announced Tuesday, Home Depot reported sales of $30.5 billion, up 8.4 percent from the same period last year.
Net earnings during the most recent quarter were $3.5 billion, jumping 31 percent above the level of the same period a year ago.
Home Depot has more than 20,000 employees in Georgia and more than 400,000 overall. But it has managed to grow steadily without depending on new stores to bump up sales: The company has 2,200 stores but has built just one in the past year and that was in Mexico.
Instead of adding stores, Home Depot has grown increasingly efficient in the stores it has and has been aggressive in using the Internet.
Online sales last quarter accounted for 7.5 percent of the company’s total. And nearly half of Home Depot’s sales on the Internet were items that customers came to a store to retrieve – and 20 percent of those people also bought something in the store.
Last week, an executive at Redfin made news during a call with analysts, warning of a slowing in the nation’s housing market. But Home Depot doesn’t see the market the way builders do, Tome said.
“There are 137 million housing units in the United States and 123 million of them are occupied,” she said. “We sell to those occupied homes.”
The lack of homes for sale – a troubling imbalance in the metro Atlanta market – actually works in Home Depot’s favor, she said.
Homeowners tend to spend more on renovations and repairs when the value of their home is climbing.
“A housing shortage isn’t necessarily a good thing for the housing market, but for us, a housing shortage causes home prices to go up,” Tome said. “We think that’s good.”
Analyst Ken Leon of CFRA Research in Rockville, Md., said Americans have been less mobile in recent years – another reason to expect robust spending on materials for repair.
“We are positive on home improvement spending with home equity increasing from rising home prices for 96 percent of U.S. households that do not move,” he said.
Home Depot stock closed Tuesday at $194.14 a share, up from $150.17 a share a year ago.
Leon said he expects the company’s stock to rise within a year to a $227 a share.
Support real journalism. Support local journalism. Subscribe to The Atlanta Journal-Constitution today. See offers.
Your subscription to the Atlanta Journal-Constitution funds in-depth reporting and investigations that keep you informed. Thank you for supporting real journalism.