Shoppers Are Abandoning Home Depot, Data Shows—Here's Why
The retailer said consumers are changing their behavior, and it's affecting sales.
Home improvement retailers are used to seeing an influx of shoppers in stores throughout the warmer months. In the spring, you have homeowners looking for the right products to give their space a much-needed refresh, and when the summer heats up, those same shoppers might be seeking air conditioners and fans to keep themselves cool. But Home Depot didn't see its usual turnout in the spring, and now, it seems to have missed out on the summer rush, too. Data appears to show shoppers abandoning Home Depot—read on to find out why.
Home Depot's sales have dropped again.
Back in May, Home Depot revealed a 4.2 percent decrease in sales for the first quarter of the 2023 fiscal year. And now, the retailer is sharing that the trend has continued.
In an Aug. 15 press release, Home Depot reported sales of $42.9 billion for the second quarter. Compared to the same time period in the 2022 fiscal year, this represents a 2 percent drop in overall sales for the company.
Shoppers are no longer buying more expensive products from the retailer.
Home Depot's comparable sales for the second quarter, and in its U.S. stores, both declined by 2 percent as well. This was likely driven by a fall in customer transactions. Compared to the first six months of 2022, Home Depot experienced 3.2 percent less customers transactions for the first six months of 2023.
In an Aug. 15 earnings call with analysts, Home Depot CEO Ted Decker said that the retailer is continuing to see "pressure in certain big-ticket, discretionary categories." According to Billy Bastek, Home Depot's vice president of marketing, comparable transactions for products over $1,000 were down 5.5 percent this quarter, compared to the second quarter of the 2022 fiscal year.
"After three years of unprecedented demand in the home improvement market, we continue to see softer engagement in big-ticket discretionary categories like patio and appliances that likely reflects both pull-forward of these single item purchases and deferrals," Bastek explained.
Customers are focusing on smaller projects instead.
Shoppers aren't abandoning Home Depot entirely, however. Instead, Decker told analysts that customers appear to be engaging with home improvement in terms of projects that are "generally smaller in scale and scope" right now. Home Depot is seeing strength across smaller projects in the "live goods, hardscapes, and landscapes" categories, according to Bastek.
The overall decline is something Home Depot CFO Richard McPhail warned about earlier this year in an appearance on CNBC, saying that many homeowners have pulled back from more expensive buys because they either made those bigger purchases during the pandemic, or they're deferring them because of higher interest rates.
"The state of the homeowner is that they're very healthy," McPhail told CNBC in May. "They have healthy balance sheets. They have healthy incomes. But I do think—and our professional customers tell us they hear this from their customers—there is that shift, even if it's temporary from larger projects into smaller ones."
Home Depot is still feeling positive about the future.
Despite a decline in sales, Home Depot topped Wall Street profit expectations in the second quarter of the 2023 fiscal year, the Associated Press reported.
"We were pleased with our performance in the second quarter," Decker said in a statement accompanying the company's press release. "We remain very positive on the medium-to-long term outlook for home improvement and our ability to grow share in a large and fragmented market. Our associates did an outstanding job delivering value and service for our customers throughout the quarter, and I would like to thank them for their dedication and hard work."
During the earnings call, Bastek said that the company is also "extremely excited" about some of its new plans for the products it will have in-stock and available for customers.
"This fall, we are excited to grow our faucet lineup to include innovative functionalities, such as touchless and spring neck designs, add to our assortment of sinks and shower heads, while also expanding into new categories like disposals," he told analysts.
Bastek added that Home Depot is also banking on its Halloween lineup, which includes an expanded assortment of fan favorites as well as new collections.
"These products bring excitement to our stores and help drive traffic," he noted.