Shoppers Are Still Abandoning Home Depot, New Data Shows—Here's Why
Comparable sales were down for the sixth quarter in a row.
Prices everywhere remain stubbornly high, which has us all tightening our belts where we can. Consumers are cutting back on non-necessities and spending less time out shopping, and retailers are certainly feeling that shift. Home Depot, in particular, has seen a dip in sales for several quarters now—and it doesn't seem like 2024 is off to a hot start. In fact, the latest data shows that shoppers are still abandoning Home Depot.
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Home Depot shared results from the first fiscal quarter of this year in a May 14 press release. During the quarter, which ended April 28, sales totaled $36.4 billion, marking a 2.3 percent decrease from the first quarter of 2023.
Home Depot's comparable sales (same-store sales) were down for the sixth consecutive quarter. Customers were simply shopping there less: As CNBC reported, shoppers made fewer trips to Home Depot during the first quarter—and when they did visit online or in-person, they didn't spend as much.
In the earnings release, Ted Decker, Home Depot's chair, president, and CEO, cited the "continued softness in certain larger discretionary projects" and the "delayed start to spring" for the declines.
Typically, spring is the busiest for home improvement retailers like Home Depot, but thanks to chillier weather sticking around for longer, customers haven't been as quick to spend on outdoor purchases, Home Depot's chief financial officer Richard McPhail told CNBC.
Bloomberg News team leader John J. Edwards III also noted different "macro factors" impacting Home Depot, including inflation and comparisons to the company's strong performance during the COVID pandemic.
According to Edwards, shoppers were "buying big-ticket items to improve their homes that they were stuck in" during the pandemic. But now that they already have those big-ticket items—which aren't old enough to need replacing—they don't need new ones from Home Depot.
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Home Depot's situation is further compounded by higher interest rates. Not only do higher rates make it harder for people to finance larger projects, but they also have them staying in their current homes rather than moving. According to CNBC, people are generally more inspired to invest in projects when in a new home.
However, McPhail asserted that the home improvement customer is "extremely healthy from a financial perspective." In reality, they have money to spend, but they're "deferring" due to the higher rates, and waiting for a more opportune time.
"When we have seen mortgage rates decrease slightly, as we saw at the beginning of this quarter, the housing turnover seems to respond quickly and sharply in a positive direction," McPhail told CNBC. "And so we think that's an indicator that there is a tremendous amount of pent-up demand for household formation and housing turnover and the larger projects that are associated with housing turnover."
While the retailer's total revenue failed to meet expectations, it did beat Wall Street's earnings predictions, per CNBC. For the remainder of the 2024 fiscal year, the company is sticking with its guidance, hoping to boost sales by opening additional stores and improving the shopping experience.
