Home Depot leans on small projects to top estimates as big-ticket spending wobbles

By Deborah Mary Sophia

(Reuters) -Home Depot beat quarterly profit estimates and posted a lower-than-expected drop in comparable sales on Tuesday, as the top U.S. home-improvement retailer tapped into a switch by customers to small-scale projects and essential repair work.

The company’s shares jumped about 6% in an upbeat broader market as executives said average customer spending grew in the quarter, excluding the impact of lower lumber and copper prices.

Americans have put big renovations and discretionary home-improvement projects on the back burner as they battle sticky inflation, higher interest rates and lingering caution around the economy. That dented sales of items like flooring, countertops and cabinets.

Big-ticket transactions, or those over $1,000, fell 5.2% in the third quarter, but categories like plumbing, hardware, appliances and tools performed well.

“We see great (customer) engagement… with smaller projects,” CEO Ted Decker said on an earnings call.

Comparable sales declined 3.1% for the three months ended Oct. 29, smaller than the 3.31% drop analysts expected. Per-share profit of $3.81 topped estimates of $3.76.

The sales beat was “a sigh of relief,” said Sarah Henry, managing director and portfolio manager at Logan Capital Management.

Despite expectations for sales declines next year, investors are “willing to wait a few quarters to see Home Depot resume growth again,” Henry added.

“With continued pressure in certain big-ticket discretionary categories and a trend to smaller projects, HD took the conservative approach – which we agree with,” Evercore analyst Greg Melich said.

Home Depot tightened its annual sales forecast range to a decline between 3% and 4%, compared with its prior forecast for a 2% to 5% decrease.

It now expects annual per-share profit to fall 9% to 11%, compared with a 7% to 13% slump estimated previously.

(Reporting by Deborah Sophia in Bengaluru; Editing by Sriraj Kalluvila)