Dive Brief:
- The Home Depot's second quarter net sales increased nearly 5% year over year to $45.3 billion, the company reported Tuesday. Comparable sales increased 1% and were up 1.4% in the U.S.
- The home improvement retailer’s operating income inched up 0.3% from last year to $6.6 billion, while net income was essentially flat at $4.6 billion.
- The company reaffirmed its full-year guidance, expecting sales growth of 2.8% and comp growth of 1%.
Dive Insight:
While Home Depot executives said its Q2 results were in line with the company’s expectations, the retailer missed analysts’ estimates for the quarter.
Both Telsey Advisory Group and Jefferies analysts predicted higher comp growth in the quarter, up 1.5% and 1.3%, respectively.
Executives on Tuesday said consumers are focused on smaller projects right now, while there's less engagement in larger discretionary projects, which carry a higher ticket amount.
That’s in part “thanks to a housing market that remains in decline,” according to GlobalData Managing Director Neil Saunders. Home sales were down 1.9% year over year in the quarter, per GlobalData research.
Home Depot, compared to smaller rivals like Lowe’s, will get “the lion’s share” of growth within smaller project categories right now as it “remains the number one destination for consumers due to strong customer service, a comprehensive range, and sharp pricing,” Saunders said in emailed comments. “The latter factor will serve it well as consumers become more price conscious.”
Home Depot has been building out its offering for its Pro customer base more recently. The retailer just over a year ago completed the $18.25 billion acquisition of SRS Distribution, which serves professional roofing, landscaping and pool contractors. And in June, Home Depot announced plans to acquire specialty building products distributor GMS Inc. through SRS Distribution.
“The GMS play helps on several fronts. It buys Home Depot more professional customers, it strengthens its distribution capabilities, and it helps expand the offer across many heavyside categories including things like steel framing and drywall,” Saunder said. “As Home Depot already understands these segments deeply and is a trusted name among professionals, we believe the GMS and SRS plays will work out well.”
