Home Depot gives ‘mixed signals’ with quarterly beat, dim holiday view

Home Depot Inc (HD.N) tapped higher prices to override a drop in customer transactions for the third quarter and left its annual forecasts unchanged, signaling a weak holiday season amid a housing market slowdown.

The No. 1 U.S. home improvement chain still beat Wall Street estimates for sales and profit on Tuesday as consumers worried about rising mortgage rates stuck to renovating their existing homes instead of buying new ones.

The fourth quarter will be the weakest of the year for comparable sales, it said, amid mounting uncertainties around the housing market.

“There are definitely some mixed signals … and that’s why we’re cautious,” Chief Executive Ted Decker told analysts on a call, adding that customers have proven largely resilient so far.

Home Depot saw customer transactions fall 4.3%, but higher prices of lumber, copper and other building materials helped drive average ticket – or the average amount of sales per customer – 8.8% higher, offsetting some pressure. Robust demand for big-ticket items such as pipes and fittings also helped.

Wall Street analysts noted that the company’s reiterated outlook implied a full-year profit range of $16.15 to $16.46 per share and was below market consensus, but said that should not be “overly concerning”.

“The cautious approach in this uncertain environment makes sense and could prove conservative,” Telsey Advisory Group analyst Joe Feldman said.

Comparable sales rose 4.3% in the three months ended Oct. 30, beating estimates of a 3.1% increase, according to Refinitiv IBES data.

Net earnings increased to $4.34 billion, or $4.24 per share, while analysts on average expected a profit of $4.12 per share.

Shares of the company reversed course to gain about 2%, after Walmart Inc (WMT.N) raised its annual sales and profit forecasts, sending retail stocks higher.