(Reuters) – Home Depot forecast a decline in annual profit and a bigger drop in its annual comparable sales on Tuesday, as hopes of a recovery in demand for home improvement projects fall due to higher borrowing costs.
Big-scale projects such as flooring, kitchen cabinets and bath have been put on the back burner as customers tackled steep inflation.
Higher mortgage rates and home prices have also dented demand in the housing market and deterred customers from investing in big-ticket home renovation projects.
Weak new home sales in May and June led to foot traffic dropping 0.4% in July after a 4.3% rise in June, according to data from Placer.ai.
Comparable sales fell 3.3% in the second quarter, compared with expectations of a 1.98% drop, according to LSEG data.
“During the quarter, higher interest rates and greater macroeconomic uncertainty pressured consumer demand more broadly, resulting in weaker spend,” CEO Ted Decker said.
Home Depot expects annual comparable sales to decline between 3% and 4%, compared with its prior forecast of a decline of about 1%.
The world’s largest home improvement specialty retailer also expects diluted earnings per share to decline between 2% and 4%, compared with earlier forecast of a rise of about 1%.
In March, the company announced its purchase of building materials supplier SRS Distribution in an $18.25 billion deal, which is expected to close in the second half.
In the second quarter, the company reported adjusted earnings per share of $4.67, compared with market expectations of $4.49.
(Reporting by Juveria Tabassum in Bengaluru; Editing by Arun Koyyur)
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