7 months ago • 2 mins
What’s going on here?
Home Depot didn’t quite nail its results update on Tuesday.
What does this mean?
Home Depot had a wild ride during the pandemic, but all parties – even outdoor ones – must eventually come to an end. As inflation and interest rate hikes nibble away at household budgets, it seems folk are trading their hammers for plane tickets and beachside mojitos. And sure, building materials and plumbing are still holding the homeware fort, but big-ticket items like patio sets and grills are feeling the cold shoulder (along with the actual cold, wet weather last quarter). Add plummeting lumber prices to the mix, and you get Home Depot’s most underwhelming revenue performance in over 20 years. And the company isn’t bursting with optimism about its future either, slashing its yearly sales target and bracing for an even steeper profit dive. Shares, predictably, dropped 5% at first.
Why should I care?
For markets: Spring hasn’t sprung.
Spring usually brings a home improvement bonanza, with DIY amateurs and pros alike itching to kick off projects in the warmer weather. But Home Depot’s outlook suggests it hasn’t spotted any silver linings this quarter. That doesn’t bode well for its smaller rival, Lowe’s, which saw its share price wobble after the news. And this hiccup might be even bigger than the home improvement sector too: Home Depot’s results are casting a shadow over the entire US retail sector just as heavyweights like Target and Walmart gear up to share their own results.
The bigger picture: Receipts aren’t looking like phone numbers.
Fresh data revealed that retail sales inched up 0.4% last month, marking the first growth spurt in three months. But this modest comeback is more of a two-step than a whole tango, falling short of economists’ predictions. And it could be hard to maintain too: credit card balances saw one of the biggest spikes on record in March, hinting that consumers may be nearing their spending limits.
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