Dive Brief:
- The Home Depot’s third quarter performance beat the company’s and analysts’ expectations, the retailer said on Tuesday. Net sales rose 6.6% from a year ago to $40.2 billion. Overall comparable sales fell 1.3% and U.S. comps declined 1.2%.
- Operating income was flat at $5.4 billion, while net earnings were $3.6 billion, down 4.3% year over year from $3.8 billion. Gross profit for the quarter was $13.4 billion, up 5.4% from $12.7 billion a year ago.
- Bolstering Home Depot’s results was the acquisition of SRS Distribution, which focuses on serving specialty trade professional customers, and is on track to add $6.4 billion in incremental sales to Home Depot’s top line for the 2024 fiscal year, CFO Richard McPhail said during an earnings call. Home Depot’s third-quarter results also reflected a net contribution of $200 million in sales related to Hurricanes Helene and Milton, McPhail said.
Dive Insight:
While Home Depot’s sales were up in Q3, that is largely attributable to the SRS acquisition, Neil Saunders, managing director of GlobalData, said in emailed comments. “In our view, this was a smart deal that allows Home Depot to strengthen its hand in the professional space and reach a new base of customers,” Saunders said.
Looking just at comps, Home Depot is still seeing declines. However, Saunders noted, that level of performance “is the shallowest rate of decrease in two years and sends a positive signal that Home Depot may finally be reaching the bottom of its long sales slump and will soon pivot its core business back into growth.”
Other external factors, like the weather, also contributed to Home Depot’s growth. Even for areas and people not affected by the hurricanes, the weather still positively influenced Home Depot’s financial performance, analysts with Telsey Advisory Group led by Joe Feldman said in a note shared ahead of the company’s earnings call.
“The better sales reflect favorable weather bolstering seasonal engagement — with warmer and dryer weather extending demand for summer categories like paint and outdoor grills — and benefits from the recovery process following Hurricanes Helene and Milton,” Telsey’s analysts said, noting that the storms increased spending on items like generators, batteries, plywood and building materials.
CEO Ted Decker said during the call that despite ongoing uncertainty in the macroeconomic environment, the company will focus on capturing more pro customer wallet share. As part of its strategy to do that, Decker said Home Depot recently expanded the number of products available for same-day and next-day delivery. Pro sales were positive and outpaced the DIY customer in Q3, Billy Bastek, the company’s executive vice president of merchandising, said on the call.
Home Depot has also enhanced its website to communicate the faster delivery options and launched a marketing campaign to build awareness of that service offering. Nearly half of online orders were fulfilled through stores in Q3, according to Bastek. Sales through the company’s digital platforms increased 4% from a year ago.
Comp transactions for items over $1,000 were down 6.8% from a year ago and Bastek said engagement remains soft for larger discretionary projects that customers usually tap into financing to pay for, such as kitchen and bath remodels.
Home Depot updated its full-year guidance on Tuesday as well. It now expects total sales to rise about 4% and a comparable sales decline of about 2.5% compared to a year ago. Previously, the company forecast a total sales rise of 2.5% to 3.5% and a comp sales decline of 3% to 4%. The company opened five new stores in Q3, bringing its store count to 2,345 as of Oct. 27.
