Home Depot Inc. cut its outlook for the year after first-quarter sales dropped more than expected, a sign that economic uncertainty is leading to a pullback in home improvement spending.
Comparable sales are now forecast to decline as much as 5 per cent this year, following a bad start to the year affected by lumber deflation and poor weather, the company said Tuesday. Home Depot, which previously predicted sales would remain flat this year, said demand is softening more than it had expected.
The first-quarter results — where the comparable sales decline of 4.5 per cent was much worse than the 1.4 per cent drop analysts had expected — show the company’s performance is starting to lag after several years of soaring home-improvement spending that was sparked by a booming housing market and stimulus payments that let consumers invest in their homes during pandemic restrictions. That binge has now begun to slow amid rising inflation and interest rates.Earnings per share, at US$3.
Analysts largely see Home Depot as resilient in the long term due to still-high home prices and ongoing remodeling activity as many continue to work from home. Unfavorable weather in the U.S., which delay home-improvement projects and outdoor equipment purchases, and lumber deflation may have negatively impacted sales in the first quarter, the company said.
Home Depot is the first of the major U.S. big-box retailers to report first-quarter earnings. Target Corp. and TJX Cos. will release results on Wednesday, followed by industry benchmark Walmart Inc. on Thursday.
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