Home Depot executives maintained their bullish view that housing market trends would remain favorable and continue to boost sales at the home-improvement retailer. And the election of Republican President-elect Donald Trump did little to alter the sturdiness of the retail market for Home Depot.
During a conference call, Wall Street analysts asked executives a few times what a Trump presidency would mean for futures sales—both here in the U.S. And also in Mexico and Canada, where the retailer has store operations as well. Home Depot’s (HD) management team in general punted on those questions.
In a post-earnings interview, Coins2Day asked Chief Financial Officer Carol Tome about the election results. Her response? “Elections come and go and we are always focused on our customers and doing the right thing for our customers.”
Tome said that of course, Home Depot will take future economic data into consideration as they internally plan sales and ordering of goods—but the news of a Trump presidency didn’t seem to be an immediate factor in those changing models. And as it relates to interest rates—which forecasters are projecting will rise under Trump—Tome said that Home Depot doesn’t see any statistically significant correlation between rates and the retailer’s sales.
Tome instead touted other metrics that look favorable. Specifically, she pointed to the Joint Center for Housing Studies of Harvard University’s LIRA (Leading Indicator of Remodeling Activity), which suggests accelerated growth into the fourth quarter of this year and also throughout 2017. Meanwhile, interest rates have inched up but mortgage affordability today is actually more favorable than the mid-to-late 1990s. Even with a bigger increase, that affordability index wouldn’t top those historical figures.
Home Depot enters the final quarter of 2016 with another strong sales quarter in the book. Total sales increased 6.1% to $23.2 billion, while overall same-store sales increased 5.5%. By category, sales growth was strongest for appliances, with demand also strong for lumber, tools, gardening items, decor and flooring.
Chief Executive Craig Menear told analysts that Home Depot enjoyed balanced growth: all merchandising departments reported sales increases, while there was growth among both the professional customer and the casual do-it-yourself crowd. Online sales grew by over 17%. And looking ahead, Menear said the macro environment looks favorable: he said home price appreciation, housing turnover, household formation and an aging housing stock in the U.S. Should continue to support sales growth.
Weather was also favorable in the third quarter, as a warm fall helped inspire customers to continue to work on outdoor projects. Meanwhile, Hurricane Matthew and the flooding in Louisiana resulted in a storm-related sales boost of about $100 million.
Home-improvement retail has been a bright spot in recent years, as department stores, affordable luxury brands, restaurants and others exposed to the discretionary spending habits of American shoppers face sales slumps or slowdowns. Because the housing market has been resilient and even improving, it gives consumers incentive to spend on their homes if they think they are an asset that is increasing in value.
The only small misstep that Home Depot likely made was that executives didn’t raise their sales targets for the year, news that sent shares a tad lower in Tuesday trading. But executives were bullish about their ability to build on last year’s impressive 8.9% same-store sales increase in the U.S., in particular touting some merchandising decisions that made earlier this year to bulk up on holiday goods.
