A focus on smaller summer home improvement projects helped Home Depot deliver improved second-quarter results, even as the wider U.S. housing sector remains bogged down in a slump. Revenue climbed to $47.86 billion from $45.28 billion, topping the $47.24 billion anticipated by Wall Street analysts in a survey by FactSet. Globally, sales at stores open at least a year—a critical health indicator for retailers—increased 1.7%.
Comparable store sales in the U.S. rose 1.3%. "We saw broad based demand across the business as customers continued to engage in smaller projects," Chief Financial Officer Richard McPhail said in prepared remarks Tuesday. Customer transactions dipped 1% during the quarter, though average shopper spending increased to $92.50 per receipt from $90.01 recorded a year earlier.
Healthy spending on smaller projects during the quarter is encouraging, said Neil Saunders, managing director of GlobalData. "From our data, the number of smaller projects undertaken during the quarter increased by 1.5% over the prior year," Saunders said in an email. "This may sound unimpressive, but it represents a step change from the declines of previous periods." However, Saunders also highlighted an area of weakness currently affecting virtually all businesses where credit is sometimes required.
"The number of bigger-ticket projects undertaken remains down, falling by 2.1% over last year," he said. "Concerns around financing and a previous lack of moving activity both remain major drags on the bigger-ticket segment." Homeowners currently contemplating taking out loans using home equity are finding that it is considerably more expensive now compared with the ultra-low rates Americans could rely on in the early 2020s. A home project that seemed manageable at a 4% to 5% borrowing rate appears far more daunting at 8% or higher.
While the average long-term U.S. mortgage rate fell slightly for the first time in six weeks, it remains up from last year and overall borrowing costs stay steeper than they were a year ago. The U.S. housing market has been stuck in a slump dating back to 2022, when mortgage rates began climbing from historic lows that had sparked a homebuying frenzy early in the decade. Sales of previously occupied U.S. homes slowed again in July as record prices and the highest mortgage rates in a year created an insurmountable hurdle for many prospective buyers.
Existing home sales fell 1.7% last month from June, according to the National Association of Realtors last week. Home prices continue to climb, reaching unprecedented levels for the month of July, NAR reported. The U.S. median sales price increased 2% from a year earlier to $434,100.
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