Home Depot forecasts smaller drop in sales as hurricane demand boosts quarter

(Reuters) -Home Depot forecast a smaller drop in annual same-store sales on Tuesday, benefiting from resilient demand from professional contractors, as well as a lift from hurricane-related spending.

Shares of the top U.S. home improvement chain rose 2.7% in premarket trading as it also posted better-than-expected quarterly results, signaling a rebound in demand amid expectations of a drop in mortgage rates.

"As weather normalized, we saw better engagement across seasonal goods and certain outdoor projects as well as incremental sales related to hurricane demand," CEO Ted Decker said in a statement.

Parts of southeastern U.S., including Florida, were battered by hurricanes at the end of September and early October, prompting panic-buying among Americans.

Hurricane Helene, which tore through Florida and devastated large swathes of the U.S. Southeast in late September, was followed 14 days later by Hurricane Milton.

"As investors, we are cautiously optimistic on the near-term outlook for the category given hurricane rebuild demand, easing election uncertainties, and benefits from warmer weather," said Dave Wagner, portfolio manager at Aptus Capital Advisors.

Home Depot (NYSE:HD ) has battled choppy demand over the past two years, as sticky inflation and higher borrowing costs prompted customers to pause large-scale home remodels and focus on repair and maintenance activities around their existing homes.

Investors are likely to parse the post-earnings call for comments on the outlook for the industry after the U.S. Federal Reserve started its interest-rate cuts.

While easing pressure on mortgage rates, the cuts are expected to reduce borrowing costs for home-owners looking to renovate their properties to put them up for sale, benefiting Home Depot and its peers.

Home Depot has also doubled down on its investments to appeal to the "pro" customer, including its $18.25 billion deal for SRS in March.

The company posted a 1.3% decline in comparable sales, its eighth straight quarter of declines, compared with analysts' average estimate of a 3.25% drop, according to data compiled by LSEG.



It earned $3.67 per share, beating estimates of $3.64.

Comparable sales is expected to fall 2.5% for fiscal year 2024, compared with its prior range of a 3% to 4% drop.

Source: Investing.com