Home Depot officials had warned of the ongoing shifts in the market, and the quarter’s results were slightly better than the earlier company forecast. Shares of the company’s stock rose in early trading before settling back during the day.
In early afternoon, Home Depot shares were trading at $306.60 per share, up $5.07.
After three years of often-rapid growth, this year has been a period of moderation, said Ted Decker, the company’s chief executive. “Our quarterly performance was in line with our expectations.”
The trajectory will continue, the company said, with earnings for the year likely to be between 9% and 11% below last year. That is slightly worse than the 7% to 13% decline that officials had previously forecast.
The company has 2,333 stores and about 470,000 employees.
While Home Depot business is typically split between professional contractors and do-it-yourself homeowners, sales are closely entwined with the housing market.
Recent years have seen home sales fall, while home values have risen robustly. And in the first years of the pandemic, interest rates on credit cards and loans were historically low. So many homeowners had an incentive to stay put, putting money into renovations or other improvement projects.
But this year that surge began to recede, partly because the Federal Reserve had so aggressively been raising interest rates in an effort to turn back inflation. Those higher rates made borrowing more costly, a reason to avoid either using credit cards or taking out loans.
The number of transactions at Home Depot during the quarter was down 2.4% from a year ago. Moreover, do-it-yourselfers in recent months have been shying away from “big-ticket” purchases, the company said: The average receipt has shrunk by 0.3% from last year.
With the sales slowdown, the growth potential for Home Depot stock is not as strong, said Ana Garcia, an analyst from CFRA Research.
Consumers still face headwinds, including “depleted pandemic savings, student loan payment resumption, and increasing household debt,” she said.
She sees Home Depot shares hitting $311 in the coming year, which is $12 lower than CFRA’s previous expectation.