• by Sarah Mahoney  @mahoney_sarah, May 14, 2024

Consumers are still holding back on home-improvement spending, with the Home Depot reporting its sixth straight quarter of declining sales. While those results disappointed observers, the retailer did a bit better on profit targets and expects people to dive into spring soon, noting that it awaits “a new normal” in the sluggish real estate market.

For the first quarter of its fiscal year, the Atlanta-based company says sales dropped 2.3% to $36.4 billion, compared to $37.3 billion for the first quarter of fiscal 2024. On a comparable basis, sales dipped 2.8%, with a 3.2% decline in the U.S.

Net earnings fell 7% to $3.6 billion, from $3.8 billion in the year-ago period, a somewhat better performance than analysts expected.

“While the quarter was impacted by a delayed start to spring and continued softness in certain larger discretionary projects, we feel great about our store readiness, our product assortment in stores and online, and our associate engagement,” said Ted Decker, chair, president and chief executive officer, in the company announcement.

He noted that despite the downturn, Home Depot continued gaining market share in its DIY and Pro division.

Pro sales, aimed at contractors, were impacted by homeowners taking on smaller projects.

The company stuck by its earlier forecasts and believes it will return to positive growth with a sales gain of about 1% for the full year and a decline of about 1% for comparable growth.

Seth Basham, an analyst who follows the company for Wedbush, continues to expect the Home Depot to outperform competitors. In a note following Home Depot’s earnings, he points out that the average ticket declined only 1.3% "with increased units per basket.”

Slower housing sales and higher interest rates continue to pressure larger, and typically financed, projects such as kitchen and bath remodels. However, Basham is encouraged that sales of products like riding lawn mowers, which were pulled forward during COVID, are returning to normal.

And while sales are still choppy, “spring weather will eventually arrive,” he says. “Home Depot is not counting on improving housing market conditions this year but expects that there will eventually be a new normal even if interest rates stay high," noting that "the mix of mortgages with 3.5% or lower interest rates has peaked.”