Home Depot leans on small projects to top estimates as big-ticket spending wobbles By Reuters

© Reuters. FILE PHOTO: A Home Depot store is seen in Los Angeles, California March 17, 2015. REUTERS/Lucy Nicholson/File Photo

By Deborah Mary Sophia

(Reuters) – Home Depot beat quarterly profit estimates and posted a smaller-than-expected decline in comparable sales on Tuesday, as the top U.S. home improvement retailer benefited from a shift of customers toward small-scale projects. ladder and essential repair work.

U.S. consumers have put major renovations and discretionary home improvement projects on the back burner as they battle stubborn inflation, higher interest rates and continued caution about the economy .

“We have seen continued customer engagement with smaller projects and have experienced pressure in some high-cost discretionary categories,” CEO Ted Decker said.

Customer transactions fell 2.4% in the third quarter, recording their 10th consecutive quarterly decline, while average in-store spending also fell slightly.

Still, comparable sales fell 3.1% for the quarter ended Oct. 29, lower than the 3.31% drop analysts expected. Earnings per share of $3.81 beat estimates of $3.76.

The pace of sales has been “a sigh of relief,” said Sarah Henry, managing director and portfolio manager at Logan Capital Management.

Despite expectations of a drop in sales next year, investors are “willing to wait a few quarters to see Home deposit (NYSE:) resume growth,” Henry added.

The company’s shares, down 8.8% this year, were up about 3% premarket.

“With continued pressure on some expensive discretionary categories and a trend toward smaller projects, HD has taken a conservative approach – which we agree with,” said Evercore analyst Greg Melich.

Home Depot tightened its annual sales forecast range to a decline of between 3% and 4%, compared to its previous forecast of a decline of 2% to 5%.

It now expects annual earnings per share to fall by 9% to 11%, compared to a previously estimated decline of 7% to 13%.

“Unless real estate revenue improves, our expectations are muted going into 2024. I don’t know if you’re going to see the same level of decline that we’ve seen this year. “but overall consumption and sales will remain weak and under pressure,” said John Tomlinson, an analyst at M Science.

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