Customers have delayed big projects such as flooring, kitchen cabinets and bath due to higher borrowing costs and steep inflation, even as higher mortgage rates and home prices hurt new homes sales.
Shares of the Dow component, which had dropped after the results, struggled for direction after softer U.S. producer prices lifted expectations of an interest-rate cut in September, which could boost home sales.
"Everyone's expecting rates are going to fall. So they (the customers) are deferring those (larger) projects," said CEO Ted Decker on a post-earnings call.
Comparable sales fell 3.3%, steeper than expectations of a 1.98% decline, according to LSEG data, while customer transactions, an indicator of traffic at Home Depot, slipped for the 13th straight quarter.
Home Depot expects annual comparable sales to drop between 3% and 4%, compared with its prior view of a nearly 1% decline, while diluted profit per share is expected to drop 2% to 4%.
The updated forecast "appears reasonable—if not conservative—and should de-risk the outlook and the stock from here," said Wedbush analyst Seth Basham in a note.
Following the completion the deal for building materials supplier SRS Distribution in June, Home Depot is investing more in business for professional builders as well as roofers, landscapers and pool contractors to offset weak demand from individual customers.
The company said the deal is expected to add about $6.4 billion to its sales for the year.
