Bad weather is usually good business for companies that help people repair and rebuild. On the flip side, sales can suffer when the skies remain clear.
So it was for Home Depot, which said Tuesday that October’s better-than-expected weather meant fewer shoppers came into its stores to spend in the third quarter.
“Our results were below our expectation, largely due to a lack of storms relative to historic norms,” the retailer’s head of merchandising, Billy Bastek, said on the third-quarter earnings call.
And not only has this year’s weather been better than normal, last year was slightly worse than normal, which gave last year’s numbers a lift and now makes year-over-year comparisons of Home Depot’s sales look even tougher.
“We don’t plan for storms per se, but there’s, there’s always some weather impact in the baseline,” Home Depot CEO Ted Decker said on the call.
The executives also warned investors that fewer storms in one quarter also means fewer post-storm repairs in the next, so this year’s fourth-quarter results could see a similar drag on sales.
“We’re going to see even more quarter-over-quarter pressure from the storm activity,” Decker said.
In addition to the hit to Home Depot’s core retail business, the company also said the decrease in repair projects is contributing to softer sales at its recently acquired subsidiaries, GMS and SRS, which are distributors of specialty building and roofing supplies.
“SRS is much more in the re-roof than new construction,” Decker said, “which is why it’s disproportionately impacted with storms, particularly in their home and biggest market, which is Texas.”
Setting aside the weather, Home Depot said the other pieces of the business continue to chug along as they have while the yearslong waiting game continues for a bounce-back in home improvement.
In short, some shoppers are still splashing out for higher-end appliances and tools, but many are deferring larger repair and renovation projects, especially if the project requires financing to complete.
Decker said that while contractors remain busy, job backlogs are starting to tick down, particularly for larger projects. And for many customers, factors like affordability, layoffs, and interest rates are still weighing on their decision to spend more.
“We still believe we have one of the healthiest consumer segments in the whole economy, but again, the economic uncertainty continues,” Decker said.
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