Home Depot customers spend more, but that’s mostly due to inflation

New York
CNN business

Good news for home improvement retailer Home Depot: Sales rose nearly 6% from a year ago, beating Wall Street forecasts. Profits were also better than expected.

Now for the bad news: Home Depot lost customers again.

The DIY leader said in its third-quarter earnings report that the number of customer transactions fell more than 4% from a year ago. But those buyers are spending more, partly because of inflation. Home Depot reported that the average customer ticket was nearly $90, up about 9% from a year ago.

This is a continuation of this year’s trend at Home Depot. Overall transactions fell more than 5% in the first nine months of the company’s fiscal year, but shoppers spent nearly 10% more per visit.

“Despite the rising cost environment, consumers generally continue to view their homes as investment assets,” Shoggi M. Ezeizat, an analyst at research firm Third Bridge, said in an email to CNN Business after Tuesday’s earnings report.

However, Home Depot CEO Ted Decker noted in the earnings statement that it remains a “challenging and dynamic environment.”

Shares of Home Depot ( HD ) were down about 1% early Tuesday morning. Rival Lowe’s ( LOW ), which will report third-quarter results on Wednesday, rose slightly.

Both stocks have declined along with the broader market this year. Lowe’s is down nearly 20% and Home Depot is down about 25%. Concerns about a slowing housing market, rising mortgage rates and high home prices making it harder for first-time buyers to afford a home are weighing on stocks.

That may be the reason for Home Depot to leave its full-year outlook unchanged, as opposed to raising its guidance.

“Home Depot is not immune to the tightening economy,” GlobalData managing director Neil Saunders said in a report. Saunders noted that the DIY customer has “cut back to save money” and the housing market has “softened significantly”.

It’s likely to get worse, especially as the Federal Reserve seems intent on continuing to raise interest rates to combat inflation, even if that further squeezes the housing market.

“Going into 2023, the picture becomes more complicated and depends on the trajectory of the economy,” Saunders said. “The pressure on consumers will continue to rise and the backlog of home projects will reduce, so next year could be much smoother.”