Home Depot, often viewed as a gauge for consumer spending and housing market health, is warning of a shift in customer behavior.
The home improvement giant has lowered its sales forecast for the year, pointing to a decrease in spending on home renovation projects, according to report from CNN.
“Higher interest rates and greater macro-economic uncertainty pressured consumer demand more broadly, resulting in weaker spend across home improvement projects,” said Ted Decker, Home Depot’s CEO, in a recent news release.
This downturn isn’t new. Home improvement demand has been sliding for about a year.
In the last quarter, Home Depot saw a 3.6% drop in sales at stores open at least a year.
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The company now expects a 3% to 4% decline in comparable store sales for the year, down from its earlier 1% decline forecast.
Several factors are driving this trend. Higher interest rates are slowing housing turnover and making it harder for consumers to finance big projects.
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Economic worries are also making shoppers more careful with their spending.
There’s also been a noticeable shift from buying goods to spending on experiences like travel and entertainment.
The impact is clear in Home Depot’s business. While consumers are still financially healthy, they’re taking on fewer large projects.
This has led to slower sales in building materials, lumber, and construction equipment.
It’s a big change from the pandemic boom when people stuck at home poured money into renovations.
Now, the tide seems to be turning.
But it’s not all bad news for the housing market or Home Depot.
Home prices are still rising, with the median price of a previously owned home in the U.S. hitting $426,900 in June, up 4.1% from last year.
Mortgage rates have also been falling recently after peaking in early May.
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Home Depot is adapting to these changes.
The company recently made its biggest-ever purchase, buying SRS Distribution for $18.3 billion. This move aims to attract more professional contractors, who typically spend more than regular homeowners.
Despite current challenges, Home Depot remains positive about the future.
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As Decker stated, “The underlying long-term fundamentals supporting home improvement demand are strong.”