Dive Brief:
- The Home Depot’s Pro customer cohort continues to outperform DIY customers, with the segment posting positive comps in the second quarter.
- The home improvement retailer in Q2 saw strength in categories popular among Pros, including portable power, decking, dimensional lumber, hand tools and concrete, Billy Bastek, executive vice president of merchandising, said on a call with analysts Tuesday.
- The segment “remains Home Depot’s clearest opportunity to drive growth,” Emarketer senior retail analyst Arielle Feger said in emailed comments.
Dive Insight:
While consumers continue to engage in smaller projects, Home Depot executives said demand for larger home improvement projects remains pressured by ongoing consumer uncertainty and a soft housing market.
While the sector is showing early signs of improvement, with home sales up 2.2% in Q2, according to GlobalData research, consumers are still skittish to take on larger, more expensive projects. While smaller projects undertaken were up 1.5% year over year — representing “a step change from the declines of previous periods,” according to GlobalData Managing Director Neil Saunders — larger projects were down over 2% in Q2.
“Concerns around financing and a previous lack of moving activity both remain major drags on the bigger-ticket segment,” Saunders said.
Home Depot has been making investments in its Pro segment, which has historically outperformed the DIY segment. Last month, the retailer expanded its Pro Xtra rewards program, adding partner offers with companies like 7-Eleven, Tecovas and Rosie’s AI Answering Service.
Home Depot has also made a string of acquisitions geared toward Pros, including SRS Distribution and GMS Inc.
And despite the broader sector’s challenges, Home Depot beat its own expectations in the second quarter, with total sales increasing 5.7% year over year to $47.9 billion and comparable sales growing 1.7%. Comps within the U.S. increased 1.3%.
“Although a 1.7% uplift in comparable sales is not exactly exceptional, it is, nevertheless, Home Depot's best comparable growth rate since the third quarter of 2022,” Saunders said. “After such a long period of languishing in the doldrums of low growth, this represents real progress in the trajectory of the business.”
Profits improved in Q2, with operating income increasing 4.3% year over year to $6.8 billion and net income growing 4.7% to $4.8 billion.
The company reaffirmed its full-year guidance, expecting total sales to grow between 2.5% and 4.5% and comps to be flat to up 2%. Home Depot projects gross margin to be 33.1%, and it plans to open 15 new stores during the year.
