Shoppers Are Turning Away From Home Depot, Data Shows—Here's Why
The popular home improvement retailer is seeing sales decline across the board.
Spring is a season of renewal, and that's something homeowners often take advantage of. Most years, shoppers flock to popular home improvement retailers like Home Depot during this time, looking for supplies and inspiration for in-home renovation or outdoor garden projects. This year, however, Home Depot has not been reaping the benefits, as new data shows that the retailer is experiencing a sales decline. Read on to find out why shoppers are turning away from Home Depot.
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Home Depot's sales have recently declined.
In a May 16 press release, Home Depot revealed that it saw sales of $37.3 billion for the first quarter of the 2023 fiscal year. That may sound like a lot, but compared to Home Depot's financial outcome this same time period last year, it represents a 4.2 percent decrease in sales for the chain.
Comparable sales for the first quarter of fiscal 2023 also fell by 4.5 percent, while comparable sales specifically in the U.S. decreased by 4.6 percent.
Best Life reached out to Home Depot about its recent financial report, and we will update this story with their response.
The company said it expected 2023 to be a "year of moderation" for home improvement.
This decline is a sharp contrast from last year, which was a "record year" for Home Depot. For the entire fiscal year, the retailer reported $157.4 billions in sales—an increase of $6.2 billion or 4.1 percent from the 2021 fiscal year.
And in its second quarter last year, Home Depot reported the "highest quarterly sales and earnings in our company's history," President and CEO Ted Decker said in an Aug. 2022 statement.
Despite these record-breaking numbers, Home Depot has been warning about the potential for its sales growth to flatten in 2023.
"After a three-year period of unprecedented growth for our sector, during which we grew sales by over $47 billion, we expected that fiscal 2023 would be a year of moderation for the home improvement market," Decker said in a statement for the May 16 press release.
Shoppers are shifting their habits this year.
Home Depot's sales for the first quarter of fiscal 2023 were below the company's expectations, Decker confirmed. According to the CEO, this dip was "primarily driven by lumber deflation and unfavorable weather," particularly for the retailer's western division due to extreme weather in California during the time period.
But it's not only bad weather. It appears that Home Depot's shoppers are turning away from large-scale repairs and remodels—which is something the retailer relied on last year for its record sales growth.
"The state of the homeowner is that they're very healthy," Richard McPhail, Home Depot's chief financial officer, told CNBC in a new interview. "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."
Consumer habits are changing once again as the pandemic phases out. When weighing where to spend their money, people are now more likely to choose things like travel, dining out, and other experiences than a kitchen renovation or new home appliances, according to CNBC.
McPhail told the news outlet that Home Depot sold fewer more costly discretionary items like new appliances in this last quarter. He said customers may be putting off these types of purchases—or they already bought them during the pandemic.
Home Depot says there is uncertainty going forward.
In response to its first-quarter results, Home Depot is changing its outlook for this year. The company says it now expects that sales and comparable sales for 2023 will decline between 2 and 5 percent compared to 2022. According to McPhail, Home Depot is uncertain about what its shoppers may do going forward.
"Given the negative impact to first quarter sales from lumber deflation and weather, further softening of demand relative to our expectations, and continued uncertainty regarding consumer demand, we are updating our guidance to reflect a range of potential outcomes," McPhail said in his statement.
But the retailer isn't planning to be down for long. "While the near-term environment is uncertain, 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," Decker said.