Home Depot’s Warning About the Economy

Lower Guidance

As the world’s largest home improvement supplier, Home Depot (HD) has real insight into how Americans are feeling about spending money.

That’s why economists were concerned when the company lowered its sales guidance for the rest of the year. During the company’s latest earnings call, executives noted that while the company’s long-term fundamentals remain strong, higher interest rates and uncertainty about the economic outlook are putting serious pressure on consumer demand.

The translation? Americans aren’t feeling great about the economy, so they’re spending less.

Slowing Sales

Home Depot reported sales of more than $43 billion last quarter, a 0.6% year-over-year. So far, so good, but the company expects that comparable sales will decline some 3% to 4% in the remainder of the year, worse than previous estimates.

The retail giant is merely the latest major company to warn that today’s economy has left Americans much more conscious of how they spend their money they’re spending — and that it is weighing on sales and demand. Disney (DIS), Starbucks (SBUX), and McDonald’s (MCD) have all issued similar warnings about a consumer pullback.

Ripple Effects

Although Home Depot’s lagging sales are part of a larger trend, some of the company’s headwinds could be sector-specific. DIY retailers are largely tied to the housing market, for example. And with prospective homebuyers feeling the crunch of record-high home prices, limited supply, and high interest rates, it stands to reason that home improvement stores might feel it too.

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