Home Depot Predicts Pent-Up Home Improvement Demand

At a certain point, just watching Home Improvement reruns on Hulu or Netflix isn’t enough; sooner or later, homeowners will need to channel their inner Tim Allen and take on long-delayed home improvement plans. Home Depot is betting sooner. 

The big box retail giant is sticking by its full-year guidance, executives said during its second-quarter earnings call on Tuesday, even after the company missed analysts’ sales estimates for the second straight time. Still, Wall Street noted the optimism from a firm that serves as something of a bellwether for both the American consumer and the American housing market.

It’s the Small Things

Sales at stores open at least a year increased 1% in Home Depot’s second quarter, below expectations but marking just the second time in eight quarters that the company reported growth at all. In the same quarter a year ago, Home Depot reported a sales decrease of 3.3%. And while the company has recently made significant moves to reorient its business around a professional clientele, it was the amateurs, accounting for roughly 45% of Home Depot’s business, who helped fuel its return to growth. In an interview following the company’s earnings report, CFO Richard McPhail said that do-it-yourself customers have been pushing forward with smaller home improvement projects — such as new lighting or garden upgrades — as they postpone larger projects that require financing.

Still, Home Depot says big home improvement projects are coming soon, one way or another:

• “Our customers are telling us they are putting projects on hold, they are not cancelling them,” McPhail added. CEO Ted Decker said that “some relief on mortgage rates, in particular, could help” spur demand for larger-scale home improvement projects.
• And while the market has largely kept new buyers out, existing home owners have seen a massive increase in home equity since 2019, which they can tap to finance home improvement projects. In fact, the Federal Reserve Bank of New York’s second-quarter household debt report found that home equity lines of credit had increased for the 13th consecutive quarter.

Tariff Time: Awaiting DIY customers whenever they do get around to big projects? “Modest price movement” [read: increases] “for some categories,” McPhail said. That comes after Home Depot said earlier this year that it would keep prices steady despite rising tariffs, though it comes as little surprise, too. A Goldman Sachs report earlier this month suggested US consumers have just started to bear the brunt of tariff costs, with much more likely to be passed down as the year goes on.