Homeowners remain ‘hesitant’ on big-ticket projects: Home Depot

Home Depot on Tuesday released its fiscal second-quarter earnings report, showing that U.S. same-store sales rose 1.3 percent year-over-year amid what CFO Richard McPhail called a “frozen housing market.”

What’s happening: Over the three months ended August 2, the company’s number of customer transactions fell roughly one percent year-over-year, while its average ticket rose 2.8 percent. 

• Meanwhile, transactions over $1,000 grew 2.4 percent year-over-year; however, “larger discretionary projects remain under pressure,” Billy Bastek, executive vice president of merchandising, said on the company’s earnings call. 

What they’re saying: “[Customers have] told us they have the means to spend; they’re just hesitant,” McPhail told CNBC on Tuesday. “While we’re happy with their level of engagement in the first half, they do tell us they’re worried about inflation, about fuel costs, and about general uncertainty, and so there is a little bit of hesitancy there as the project gets bigger.”

Zoom out: According to Carrier estimates, U.S. sales of existing homes result in HVAC system changes “usually” 20 to 25 percent of the time. 

What we’re watching: Housing turnover — driven largely by existing home sales — “has never been lower as a percentage of the housing stock,” McPhail said. 

• “We do know that when we see step-downs [in mortgage rates], we begin to see a little bit of life come into housing, but there is just no sign of an inflection point at this moment,” he added.
• “When we look out at the broader market [and] what we hear from other constituents… is that there remains tremendous pressure on our sector and on anyone connected with housing.”

Between the lines: While the company expects that pressure to remain, it plans to continue investing in its contractor segment — which “outperformed DIY” during the quarter, Bastek said — including by expanding its distribution platform.

• Subsidiary SRS Distribution announced last week that it will acquire Colorado-based HVAC distributor Lohmiller & Company, as Homepros reported — its second HVAC deal, following its acquisition of Mingledorff’s, the Southeast’s largest Carrier and Bryant distributor, earlier this year. 

Of note: Home Depot also announced on Tuesday the nationwide rollout of Express Delivery, a service that promises to deliver contractor- and homeowner-facing products in three hours or less, with no subscription or membership. 

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