Latest Home Depot sales indicate a recession incoming
In this DML Report…
Home Depot reported earnings of $3.6 billion for the three months ending November 2, down slightly from $3.65 billion the previous year, with the company serving 1.4 percent fewer customers and experiencing a 0.4 percent decline in foot traffic. This marks the third straight quarter where Home Depot has fallen short of profit expectations. The retailer lowered its sales guidance for the remainder of the year while raising expectations for sales growth, citing impacts from fewer violent storms affecting U.S. shores, heightened consumer anxiety, and a stagnant housing market as key factors weighing on performance.
CFO Richard McPhail attributed the slowdown to customers remaining hesitant amid economic uncertainty, particularly homeowners facing declining home prices in more markets than those seeing increases, along with job security concerns. Investors are closely monitoring earnings reports from major retailers like Walmart, Target, TJ Maxx, and Home Depot to gauge U.S. consumer health. Despite recent interest rate cuts and modest growth in home construction during October, these developments have not translated into increased home improvement projects, as Americans continue to delay larger financial commitments.
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The housing market remains in a downturn, contributing to broader economic concerns, with Home Depot serving as a key indicator for both the U.S. economy and real estate sector. The company's reduced earnings forecast presents mixed signals, offering some optimism but also new worries about consumer spending weakness. U.S. investment analyst Bret Kenwell noted that earnings calls from these firms will provide critical insights into spending trends. Upcoming reports include Nvidia on Wednesday, Walmart on Thursday, and Target on Wednesday, where another 2 percent sales drop is anticipated. Wall Street has seen recent losses across major indexes amid waning investor confidence in AI, with Home Depot shares falling more than 4 percent pre-market on Tuesday and rival Lowe's declining over 2 percent ahead of its quarterly results on Wednesday.