The Home Depot Inc. reported a 0.6% increase in net sales in its Q2 earnings results. The company credited its recent acquisition of SRS Distribution for its growth. However, the home improvement giant also grappled with economic headwinds that dampened consumer spending.

The company’s revenue rose to $43.2 billion for the quarter ending July 28. While the acquisition of SRS, a building materials supplier, contributed $1.3 billion in sales, overall same-store sales declined as customers tightened their belts amid elevated interest rates and higher costs.

The Home Depot Inc., which sells to both professional contractors and consumers through its online and brick-and-mortar stores, ranks No. 4 in the Top 1000, Digital Commerce 360’s database of the largest online retailers in North America. It’s also the top-ranked retailer in the Top 1000’s Hardware & Home Improvement category. Digital Commerce 360 projects that Home Depot’s web sales in 2024 will reach $23.6 billion.

Home Depot addresses challenges in Q2 earnings

In the post-earnings call, Home Depot CEO Ted Decker attributed the slowdown to a complex mix of factors, including the geopolitical environment, unemployment, persistent inflation and general economic uncertainty. He suggested that consumers are adopting a wait-and-see approach as they navigate challenging conditions.

“We’re largely working our way through that,” Decker said. “And then the higher interest rates started to impact the housing market and housing turnover, in particular, which is down some 40%.”

In stores, these challenges manifested in a 3.3% drop year over year in comparable sales. Nevertheless, that decrease was balanced out in part by growth in Home Depot’s online sales.

Home Depot online sales in Q2

“Turning to total company online sales, sales leveraging our digital platforms increased approximately 4% compared to the second quarter of last year and for those customers that chose to transact with us online during the second quarter, nearly half of our online orders were fulfilled through our stores,” said Billy Bastek, executive vice president, merchandising at Home Depot, during the earnings call.

Home Depot web sales by year

Additionally, Bastek updated investors about Home Depot’s partnership with Instacart, which he said was performing well.

“In addition, during the second quarter, we expanded our partnership with Instacart to improve the interconnected shopping experience nationwide,” Bastek said. “While we are still in the early days of our expanded partnership, we are encouraged with the results we are seeing.”

Despite the recent sales bump, the company is adopting a more cautious outlook for the rest of the year.

CEO cites macroeconomic headwinds

Still, Home Depot’s same-store sales continued to slide in Q2, marking the seventh consecutive quarter of decline since the retailer’s pandemic-driven growth. While comparable sales fell 3.3% year over year, they took a sharper hit in the U.S. specifically, which saw a 3.6% drop at Home Depot stores.

The retailer’s net earnings slipped slightly to $4.6 billion, down from the previous year’s $4.7 billion. Customer transactions declined for the 13th consecutive quarter, falling 1.8%. Home Depot’s big-ticket transactions over $1,000 were down 5.8% compared to the same quarter last year.

The retailer’s customer base is mostly evenly split between DIY homeowners and professional contractors, known as Pros. Despite stronger performance from contractors, both groups saw sales decline this quarter. DIY customers pulled back on large-scale projects, with some opting to wait for more favorable economic conditions, including lower interest rates.

“Everyone is expecting rates are going to fall, so [they are] deferring those projects,” Decker said. “But again, what more recently has happened is a broader concern with the macroeconomy.”

Home Depot cuts forecast, but eyes growth in digital and Pro markets

On a bright note, Home Depot’s digital sales continued to climb, increasing 4% year over year and accelerating from the previous quarter’s 3.3% growth. The retailer’s focus on in-store fulfillment is paying off, with nearly half of online orders now processed in stores.

Home Depot’s June acquisition of SRS Distribution, its largest ever, also positions the company for growth in the professional contractor market and B2B digital commerce.

SRS, which operates an ecommerce site at RoofHub.pro, contributed $1.3 billion in second-quarter sales during its six weeks as part of Home Depot.

During the quarter, Home Depot also expanded its same-day delivery with Instacart to a nationwide scale, boosting its ecommerce offerings. Customers can now order nearly any Home Depot product via Instacart, with delivery in as little as an hour from about 2,000 locations.

Looking ahead, Home Depot lowered its sales forecast for the year. The retailer now expects full-year comparable sales to decline by 3% to 4% from the prior year, worse than the previous estimate of 1%. The company still expects total sales growth of 2.5% to 3.5%, factoring in the SRS Distribution acquisition and a 53rd week, which should add about $6.4 billion and $2.3 billion in sales, respectively.

Key numbers from Home Depot earnings highlights

For its fiscal second quarter ended July 28, 2024, Home Depot reported:

• Total sales grew 0.6% year over year to $43.2 billion.
• Home Depot’s online sales grew 4%.
• Comparable sales fell 3.3%, with a 3.6% drop in the U.S.
• Net earnings totaled $4.6 billion, down from $4.7 billion.

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