If Home Depot is a bellwether, the economy’s not too bad
If Home Depot is a bellwether, the economy’s not too bad
Home Depot reported financial results Tuesday. And if the home improvement store is any kind of proxy for consumers and the economy, then it seems like things aren’t superhot or supercold, but squarely lukewarm.
Third-quarter sales came in higher than expected, but the company is saying consumers are cautious.
John Talbott isn’t really a seasonal decor guy himself. “But I am married, and my wife enjoys decorating for Halloween,” Talbott said.
She’s more of the gourds-and-pumpkins type, not so much the 12-foot outdoor skeleton type, a Home Depot product that kind of went viral this year. Talbott, a retail marketing professor at Indiana University, said seasonal decor was a hit for the company.
“I think consumers will spend on things that will make them feel happy,” he said.
Happiness does have a price limit, though. Big-ticket transactions at Home Depot, ones over $1,000, were down nearly 7% compared to the same quarter last year.
“Consumers are still on the sideline,” said Jaime Katz, an equity analyst at Morningstar. She said people are still uncertain about inflation and when mortgage rates might fall. “And that has kept the housing market in limbo for now.”
Which, of course, impacts Home Depot’s revenue from what it calls DIYers — aka regular people. (Its other main customer cohort is professional contractors.)
“People are saying, you know, we want to do this project, but let’s wait and see if rates pull back a little bit before we tackle it,” said Drew Reading, a home building analyst at Bloomberg Intelligence.
Reading said big projects are on the back burner. “Kitchen remodels, bath remodels and the products associated with them. And one of the primary reasons for that is because those are projects that tend to be financed.”
But pent-up demand for those projects is building, he added. Home Depot just needs the housing market to pick up.
“We know that movers tend to spend more than nonmovers,” Reading said.
A study from the National Association of Home Builders shows that on average, buyers of existing single-family homes spend more than people who stay put — over $5,000 more in the first year.
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