US retailer Home Depot sales drop for fifth quarter on weak demand

American home-improvement retailer Home Depot reported a fifth straight comparable sales decline, underscoring a drop in demand for house improvement due to high mortgage rates and a slowdown in construction.

While mortgage rates have come down from October’s 23-year high, they continue to impact home sales and construction. In January, new-home construction sank by the most since the onset of the pandemic, indicating that any pickup in housing demand will be delayed until borrowing costs come down further.

Comparable sales fell 3.5 per cent in the fiscal fourth quarter, Home Depot said Feb 20. That was slightly better than the 3.6 per cent decline analysts had forecast before the report. The sales decline in the quarter is in line with a report last week from the United States Commerce Department, which showed a pronounced drop in retail sales at building materials stores.

“Some of this is down to a continued reset as consumers turn away from spending on the home, but much is now being driven by an unfavourable economic backdrop,” GlobalData analyst Neil Saunders said in a note. “Fortunately, there is some evidence that the housing market will pick up slightly in 2024.”

The Home Depot shares were down 2 per cent in early trading in New York. The stock has gained 4.6 per cent since the start of the year.

In November, Home Depot said narrowed its guidance for 2023 same store sales, pointing to weakness in sales of big-ticket items. In 2024, the retailer expects comparable sales to decline about 1 per cent, an improvement from 2023 but below what analysts had estimated.

“2023 was a year of moderation,” chief executive officer Ted Decker said in a statement. BLOOMBERG