Sales growth at Home Depot slowed this spring from the torrid pace of the pandemic’s early days. But consumers’ willingness to pay for big-ticket items helped offset some of the slowdown.
The metro Atlanta-based retailer said Tuesday that net income for the three-month period ending Aug. 1 rose 11% to $4.81 billion compared with the same period a year ago. Total sales climbed 8.1% to $41.12 billion.
It was the first quarter since the pandemic that Home Depot’s sales growth didn’t reach double digits in percentage terms. The giant retailer has benefited from consumers spending more on home improvements as many ventured out less because of the coronavirus.
While the number of customer transactions fell 5.8% in the most recent quarter from the same period a year earlier, the average expenditure per transaction rose 11%.
That’s because consumers now are spending on pricier services like kitchen and bathroom renovations, CEO Craig Menear said in a conference call with investment analysts. Sales to professional contractors like electricians and plumbers, meanwhile, outpaced do-it-yourself sales for the second straight quarter.
“Consumers are still taking on projects, but they’re larger projects and they’re typically hiring a pro to do them,” Menear said.
Home Depot gets about 55% of its sales from DIY consumers and the rest from professional contractors, according to Bloomberg.
Consumers are also eager to upgrade their homes with the latest gadgets and designs, Menear said.
“Power tools … grills … riding lawn mowers, people are trading up because of innovation, things like longer running time” on tools due to improved battery performance, he said.
“Design aesthetic and new features on modern appliances, people are happily trading up,” he said.
Still, Home Depot’s share price was 4.6% lower at $319.77 in afternoon trading Tuesday on the New York Stock Exchange as investors worried about the company’s slowing sales volume growth. Same-store sales rose 4.5%, compared with the 5.6% average forecast of analysts surveyed by Bloomberg.
Executives did not specifically mention the delta variant of COVID-19 on Tuesday, but said it’s difficult to predict its business in the short term due to the pandemic. The company did not provide earnings guidance for the rest of 2021.
Home Depot leaders said they’re confident about the company’s business over the long haul.
“The housing stock in the U.S. is over 20% more valuable now than it was two years ago,” said Richard McPhail, chief financial officer. “As your home becomes more valuable, you’re more likely to spend more on it.”
Earlier this month Home Depot required all 500,000 employees to wear masks inside stores, regardless of vaccination status. It will encourage but not require shoppers to wear masks. Executives did not discuss the company’s pandemic store policies during the investor call.
