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On the surface, the picture looks bright – but dig a little deeper and you’ll uncover warning signs. On Tuesday, Home Depot posted Q1 sales rising 9% year-over-year to total nearly $40 billion. However, comparable sales – what existing stores actually brought in – fell 0.3% overall, with only a tiny 0.2% bump in the U.S.
Compare that to inflation, which topped 3% for the same period, and you’ll see Home Depot store sales essentially fell instead of growing. Store traffic and real spending power effectively declined.
The takeaway?
Home Depot is effectively selling less volume. That’s a classic sign of consumer pullback.
CEO Ted Decker’s commentary subtly acknowledged these dynamics. He praised “continued customer engagement across smaller projects,” which is another way of saying big-ticket spending went soft. Think mulch and paint season, not kitchen gut jobs. Decker also pointed to spring events as a driver, suggesting the quarter relied on typical seasonal boosts, not an uptick in spending.
So why are customers holding back? The problem appears to lie with an even bigger-ticket item than a new dishwasher or dining-room light fixture: Houses.
$400,000 houses at 7% rates — in this economy?!
As usual, Home Depot’s results reflect the broader housing picture. Mortgage rates have shot back to 7%, chilling homebuying activity just as peak season begins. In March, the median existing-home price once again circled $400,000, while sales fell nearly 6% year-over-year according to the National Association of Realtors. April numbers are due this Thursday, but early signs point to continued malaise.
When home sales stall, so does demand for major renovations and furniture overhauls. It’s no wonder Home Depot’s earnings mix shows consumers opting for DIY touch-ups, not full-blown upgrades. Until affordability returns to the housing market, that trend is unlikely to change.
Blip or reset?
The bigger question now is whether Home Depot’s pain is a blip or a longer-term reset. With Lowe’s reporting Wednesday and mortgage affordability worsening, housing-linked retail is under the microscope. If consumers stay on the sidelines, “do it yourself” may give way to “don’t do it at all.”
Investors, for their part, seem to see the glass half full: Home Depot stock is rising around 2% before the bell. Maybe Wall Street expected worse, or the gloom surrounding consumer spending was already baked in. More likely, in this environment, results that are disappointing without being disastrous count as a win.