New York CNN —
Home Depot says consumers are feeling more pessimistic about the economy and are spending less on major home-improvement projects.
The home-improvement giant, a bellwether for consumer spending and the housing market, lowered its sales forecast for this year, saying rising interest rates and concerns about a worsening economy are causing customers to spend less on home improvements.
Home Depot’s business is closely tied to the housing market, and high interest rates are putting a brake on home sales and consumer financing for large projects.
“During the quarter, rising interest rates and increased macroeconomic uncertainty put broad-based pressure on consumer demand, resulting in lower spending on home improvement projects overall,” Home Depot CEO Ted Decker said in a news release.
Home Depot said Tuesday that sales at stores open at least a year fell 3.6% last quarter. The company now expects sales at stores open at least 12 months to be down 3% to 4% this year compared with last year, a downward revision from its previous forecast of sales declining about 1% on the same basis.
Consumer demand for home improvement has been weak for about a year, and the company said it hasn’t seen a significant change in the situation. But Mr. Decker remains optimistic, saying “the longer-term fundamentals supporting home improvement demand remain strong.”
Home Depot (HD) shares fell less than 1% on Tuesday.
The company’s sales soared during the peak of the pandemic as millions of people spent more time at home and turned to remodeling and other home improvement projects. But since then, many consumers have shifted away from buying physical goods and toward experiences like travel and concerts, while others simply cut back on spending overall. The shift has hurt Home Depot. Consumer brands like McDonald’s, Starbucks and Disney have also noticed people staying indoors.
Home Depot executives said on the company’s earnings conference call that while consumer demand is strong, orders for large projects are declining, which has led to weaker sales of building supplies, lumber and construction equipment.
Home prices are soaring across the country, with demand for housing outstripping supply in most markets.
The average price of an existing U.S. home rose 4.1% from a year ago to $426,900 in June, according to the latest data from the National Association of Realtors.
But mortgage rates have been steadily declining in recent weeks since hitting a 2024 high of 7.22% in early May. Rates are down from the 20-year high they hit late last year.
Home Depot made its largest acquisition of all time this year, spending $18.3 billion to buy SRS Distribution, a large construction project supplier whose main customers are professional roofers, landscapers and pool builders.
The company currently gets about half its sales from home-related professionals, who spend more money in its stores than do-it-yourself homeowners who buy lawnmowers and power tools, and both Home Depot and Lowe’s are trying to attract more professional customers.
