Home Depot Says Its Core Shopper Is Still Spending, Even as Gas Prices Climb

CNBC, Bloomberg, the Wall Street Journal, Market Watch, the Home Depot contributed to this report.

Home Depot says its main customer is still hanging in there.

The home-improvement giant beat Wall Street’s expectations on both revenue and profit in the fiscal first quarter, then stuck with its full-year forecast. That was enough to suggest that, for now, higher gas prices and shaky consumer confidence have not knocked its core homeowner shopper out of the game.

“We continue to see engagement,” finance chief Richard McPhail told CNBC, pointing out that the typical homeowner is, in relative terms, in a better financial spot than a lot of other shoppers.

Still, there is a clear line. People are buying, but they are not exactly rushing into massive remodels. McPhail said shoppers keep telling the company they are putting off bigger projects, and that has been the pattern for a while now.

The quarter itself was solid, if not spectacular. Home Depot posted adjusted earnings of $3.43 a share, just ahead of the $3.41 analysts expected, on revenue of $41.77 billion, slightly above estimates. Sales rose nearly 5% from a year earlier.

But the broader picture is still a little uneven. Comparable sales came in at 0.6%, softer than expected, and transactions fell again. Gross margin also missed expectations. In other words, people are still spending, but cautiously.

That caution fits the housing market. Fewer home sales mean fewer big renovation jobs. Add in higher borrowing costs, geopolitical jitters and renewed pressure on mortgage rates, and it is easy to see why homeowners are sticking to the smaller stuff.

Home Depot is trying to lean harder into professional customers to offset that. Contractors, roofers and other pros now make up about half of revenue, and the company has been bulking up in that direction with acquisitions like SRS Distribution and GMS. Last week, SRS added Mingledorff’s, a wholesale HVAC distributor, widening Home Depot’s reach in the pro market.

For now, the company says it still has room to grow. It just may come from a customer who is cautious, selective and not quite ready to tear down the kitchen wall.