Home Depot Q1 results sound vaguely similar to woes in the furniture industry

President, CEO Ted Decker said 3-year period of unprecedented growth was expected to be followed by a ‘year of moderation’ in 2023

ATLANTA — As readers will soon see, home improvement stores such as Lowe’s and Home Depot ranked fairly high in our latest HNN 125 ranking of Furniture and Bedding Retailers.

Thus we thought it made sense to take a look at some of the latest earnings of Home Depot, which bills itself as the “world’s largest home improvement retailer.” The fincancials, released this past Wednesday, give an indication of some of the dynamic affecting this important channel of distribution and how that may bode for any type of spending on the home — including home furnishings.

Note that much of Home Depot’s furniture sales are done online and fall in a line item it refers to as décor. In addition to paint, appliances, flooring, and kitchen and bath, this segment also includes storage items and other home furnishings. To see what types of furniture is sold at Home Depot, click here.

While the company doesn’t break out furniture sales specifically on its website, décor overall represented just over a third of its $157.4 billion in sales for 2022. The year before, the category represented a similar percentage of overall sales.

As with other retailers, Home Depot did relatively well last fiscal year, as its overall sales were up 4.1% from the $151.2 billion reported in fiscal 2021.

Not surprisingly, sales got off to a slower start this year, falling to $37.3 billion during the first fiscal quarter ended April 30, down 4.2% from the $38.8 billion reported in the first quarter of fiscal 2022.

It remains profitable, although net earnings decreased 8.5% to $3.9 billion, or $3.82 per share, compared to $4.2 billion, or $4.09 per share the same period last year. Meanwhile, operating income fell 6.4% to $5.6 billion, from $5.9 billion in the first fiscal quarter of 2022.

While the average ticket was up slightly at $91.92 from $91.72 last year, overall customer transactions were down 4.8% to $390.9 billion, from $410.7 billion in 2022, while sales per retail square foot declined 4.7% to $592.94 billion, compared to $621.99 billion in 2022.

Not surprisingly, the message from President and CEO Ted Decker regarding the slowdown during the first quarter sounds vaguely familiar.

“After a three-year period of unprecedented growth for our sector, during which we grew sales by over $47 billion, we expected that fiscal 2023 would be a year of moderation for the home improvement market,” he said in a release announcing the earnings this week, adding that the first-quarter sales were below expectations largely because of deflation in lumber prices and unfavorable weather in the West. This included extremely heavy rainfalls in California, which he said “disproportionately impacted our results.”

“We also observed more broad-based pressure across the business compared to when we reported fourth-quarter results a few months ago,” he added. “Despite a more challenging environment, our associates maintained their relentless focus on our customers, and I would like to thank them and our many partners for their hard work and dedication. While the near-term environment is uncertain, we remain very positive on the medium- to long-term outlook for home improvement and our ability to grow share in a large and fragmented market.”

We can all hope that spending on home improvement and renovations continues to rise, as this also potentially bodes well for furniture spending. Thus, how Home Depot and other competitors in the segment perform will be worth watching for the balance of the year, with the idea that furniture will continue to be an important part of the home improvement business moving forward.

Stay tuned as we continue to track the financials of Home Depot and Lowe’s, two emerging and important HNN 125 resources for home furnishings sales now and in the future.

Thomas Russell

Home News Now Editor-in-Chief Thomas Russell has covered the furniture industry for 25 years at various daily and weekly consumer and trade publications. He can be reached at tom@homenewsnow.com and at 336-508-4616.

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