But don’t tell that to Home Depot. The home improvement retail giant reported record profits and sales in the last quarter.
The numbers were strong across the board. In-store sales have been open for at least a year, up 5.4% from the same quarter in 2021 in the US and 5.8% in all locations worldwide. The company also confirmed its full-year earnings and forecasts.
“Our performance reflects continued strength in demand for home improvement projects,” Home Depot CEO and President Ted Decker said in the earnings statement. Decker added that these were the highest quarterly earnings and sales numbers in the company’s history, despite a “challenging and dynamic environment.”
Home Depot shares were up 5% at midday Tuesday, after initially falling in pre-market trading.
Investors may have initially been focusing on the downside in the Home Depot report: Customers didn’t make as many purchases as they did a year ago. The number of total trades decreased by 3%. But this downturn in activity was offset by the fact that customers spent more on what they bought. The average ticket sales were just over $90, up 9% from last year.
Much of this increase in spending is due to inflation. Jeffrey Kinneard, executive vice president of marketing at Home Depot, said in a conference call with analysts.
But Decker also said during the conference call that Home Depot does not see any physical signs of weakness in the housing market. He noted that demand was strong from both professional contractors as well as DIY consumers.
“With people spending more time in their homes, so repair and remodeling, the demand will increase due to wear. You will need more space and home improvements just because you are there more often,” Decker said during the call.
People want to fix their homes and have the money to do it. “Our client is in a really good place right now,” Chief Financial Officer Richard McPhail said during the conference call. He attributed much of this to the sharp rise in housing prices over the past few years.
Regardless of what happens to home sales, the trend of spending more on their homes could continue, especially if the economy continues to cool this year and into 2023.
“The home improvement sector tends to do well during recessions,” Shawky Azizat, an analyst at Third Bridge, said in a report on Tuesday. “We expect consumer demand to shift toward smaller scale remodeling projects, as individuals view their homes as stable investments during economic uncertainty.”