Home Depot CEO cites “macroeconomic uncertainty” in earnings report
Home Depot CEO cites “macroeconomic uncertainty” in earnings report
If you eavesdropped on the Home Depot’s earnings call Tuesday morning, you heard a version of the word “uncertainty” at least seven times. That uncertainty is from consumers, and Home Depot expects it to affect sales for the rest of the year.
The company said that customers are deferring big renovation projects, both because interest rates make them expensive to finance and because consumers are feeling unsure about the economy as a whole. So, is this a Home Depot problem or an economy-at-large problem?
A lot of Home Depot shoppers are homeowners who’ve grown wealthier in the past few years because their home values have shot up. This earnings report shows that even they are worried, said Steven Zaccone, a research analyst at Citi.
“So it feels like you’re seeing more widespread weakness amongst the consumer,” he said. “I think that’s what’s really new within the last couple of months.”
And when consumers spend less because they’re concerned the economy might not do so well, that can actually cause the economy to not do so well.
“This loss of confidence can produce its own business cycle, and it’s not a good business cycle. And that’s what the Home Depot folks are talking about,” said Anirban Basu, chief economist for Associated Builders and Contractors.
Professional builders are feeling this too.
Shiloh Travis designs, builds and renovates houses in Austin, Texas — he spends a lot of money at Home Depot. In the past eight months, he’s had two clients postpone big projects indefinitely because of concern about interest rates. He’s also just seeing a kind of hesitancy in the market overall.
“I think that there is a general uneasiness about the future of life in general,” he said. And this makes him feel a bit uneasy as a business owner. “Like, I’m literally right now considering whether I’m going to have to downsize one of my staff,” he said.
For his part, Travis said when he was younger, he would have done what he’d had to do to bring in more work. But now that he’s approaching 50, he’s a little more hesitant to take risks. And that means he’s not sure if growing his business is the prudent thing to do.
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