Lumber deflation and a wet start to the spring season disproportionately impacted pro sales at home-improvement retailer The Home Depot during the fiscal first quarter. Following several recent quarters of strong comp performance, pro comps were negative in the first quarter and the customer segment was outperformed by DIY customers in the quarter, according to Home Depot.
During the company’s quarterly earnings call, executive vice president of outside sales and service Hector Padilla shared that the pro category did post positive performance on a two-year basis.
“All internal and external surveys suggest that pro backlogs are still healthy and elevated,” Ted Decker, chairman, president, and CEO of Home Depot, said on the company’s earnings call. “Relative to historical norms, they are lower than they were a year ago. Additionally, recent external data points suggest that the types of projects in these backlogs are changing from large-scale remodels to smaller projects.”
Despite the deflated sales performance among pro customers in the quarter, Padilla said Home Depot is “excited” by the volume of pros engaging in the company’s new supply chain assets and expanded pro capabilities.
“We’re gaining wallet share with [pros] and as they’re growing their spend with us [they are showing] a willingness to consolidate their purchases with The Home Depot, the lumber brand, the lower assortment, and our value proposition, and we’re seeing that across many markets,” Padilla said.
During the quarter, executive vice president of merchandising Billy Bastek said the company saw customers pulling back on big-ticket and discretionary purchases, a continuation of a trend that started in the fourth quarter of 2022. Home Depot experienced positive comps in its building materials, hardware, plumbing, and millwork merchandising departments and strength in several smaller-ticket outdoor project categories.
During the first quarter, the comp average ticket increased 0.2% and comp transactions decreased 5%. Big-ticket comp transactions, or those over $1,000, decreased 6.5% compared to the first quarter of 2022.
“We saw some big-ticket strength across pro-heavy categories like portable power, gypsum, and pipe and fittings,” Bastek said. “After a couple of years of unprecedented demand in the home improvement market, we continue to see softness in big-ticket discretionary categories like patios, grills, and appliances that likely reflects deferral of the single-item purchases in pull forward.”
Home Depot said online sales in the quarter decreased 2.9% compared to the first quarter of 2022 and DIY customers outperformed pro customers in the quarter for online sales.
During the quarter, Home Depot reported sales decreased 4.2% year-over-year to $37.3 billion, comp sales in the U.S. decreased 4.6%, and net earnings decreased $0.3 billion to $3.9 billion in the first quarter.
“While the near-term environment is uncertain, we remain bullish on the medium- to long-term outlook for home improvement and our ability to grow share in this large and fragmented market,” Decker said.
