: Home Depot sees home-improvement market declining if consumer demand keeps shifting to services from goods

by | Feb 21, 2023 | Stock Market

Home Depot Inc. said Tuesday the home-improvement market could weaken this year, if consumer spending keeps shifting toward services from goods, and if inflation continues to affect demand. The home-improvement giant
expects fiscal 2023 net sales and same-store sales to be about flat with last year, however, because it will take market share from its competitors.

Sales could be hurt further if lumber prices, which have already fallen by more than 50% from a year ago, continue to decline. The average analyst estimate compiled by FactSet for sales at the time Home Depot reported results was $158 billion, which implied 0.4% growth, while the FactSet consensus for same-store sales was for a rise of 0.2%. Chief Financial Officer Richard McPhail said on the post-earnings conference call with analysts that for about the first five quarters postpandemic, the company saw significant growth in the value of the average ticket and number of transactions, because homeowners took on more do-it-yourself projects as they spent more time at home. Since about the fiscal second quarter of 2021, McPhail said sales continued to rise due to ticket growth, but the number of transactions “steadily normalized” toward prepandemic levels, “as the broader consumer economy shifted” from goods back to services. “We believe that if this shift continues at its current pace, the home-improvement market would be down low-single-digits [percentages],” McPhail said, according to a transcript provided by AlphaSense. Meanwhile, earnings per share for the year are forecast to decline in the “mid-single-digit” percentage range, as a higher expected tax rate and an investment in employee compensation weighs on operating margins. That was a surprise for Wall S …

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