Home Depot 3Q Sales Continue Slide on Weaker Big-Ticket - Modern Distribution Management

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Home Depot 3Q Sales Continue Slide on Weaker Big-Ticket

The company said Pro customers outperformed DIY in the quarter, but by the narrowest margin in quite some time.
Credit: The Home Depot

Do-it-yourself retail giant The Home Depot reported its 2023 third quarter financial results on Nov. 14, showing continued modest year-over-year sales and profit declines as its customers shifted more towards smaller project purchases instead of big ticket ($1,000+) transactions.

The company posted total 3Q sales of $37.7 billion, down 3.0% year-over-year, with comparable sales down 3.1% (down 3.5% in U.S.). Meanwhile, net profit for the quarter was $3.8 billion, down from $4.3 billion a year earlier. The results follow 2Q23’s year-over-year sales decline of 2.0%.

The Home Depot’s 3Q23 gross margin of 33.8% fell about 20 basis points year-over-year, while operating margin fell 150 bps to 14.3%.

Premium: Home Depot’s HD Supply Eyes Deeper MRO Market Penetration (August 2023)

Company data showed that 3Q customer transaction volume decreased 2.4% year-over-year, and was down 3.0% through the nine months ended Oct. 29. Meanwhile, average transaction ticket was $89.36 in 3Q, down 0.3% year-over-year, while sales per retail square foot fell 3.7% to $595.71.

Big ticket comp transactions fell by 5.2% year-over-year, as the company saw softer demand from categories of flooring, countertops and cabinets. However, it noted big-ticket strength in Pro-heavy categories like roofing, insulation and portable power.

“Similar to the second quarter, we saw continued customer engagement with smaller projects, and experienced pressure in certain big-ticket, discretionary categories,” The Home Depot President and CEO Ted Decker said in the company’s 3Q earnings conference call. “In addition, lumber and copper wire deflation and storm-related overlaps negatively impacted results in the quarter.”

Premium: Home Depot’s Plan to Serve the Untapped Contractor Market (July 2023)

“We saw a continuation of a trend that we have been observing throughout the year, with softness in certain big-ticket, discretionary-type purchases,” added Billy Bastek, Executive Vice President of Merchandising. “Instead of engaging in larger projects, customers continue to take on smaller projects.”

The company noted that its Pro customer base outperformed its DIY customers during 3Q. However, in the earnings call, Chief Financial Officer Richard McPhail noted that the performance margin between the two was the narrowest it’s been “in quite some time,” and that when normalized for commodity impact, Pro was essentially flat for the quarter. Decker added that while internal and external company surveys suggest that Pro backlogs are lower than they were a year ago, they are still healthy and elevated relative to historical norms.

The Home Depot’s considerable contractor supplies distribution network — The Home Depot Pro Institutional — ranked No. 7 on MDM’s 2023 Top Industrial Distributors List.

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