Home Depot reverses early losses as CEO sees lower rates breathing life into DIYs

Shares of Home Depot (NYSE:HD) reversed early losses and were briefly in positive territory as the company’s earnings call with analysts allayed investors’ fears over sluggish consumer spending, reflected in expectations for comparable sales to contract more than expected in FY24.

The company’s skill at managing costs and delivering better-than-expected EBIT margins helped offset weakness attributed to consumer spending, added by assurances that the “long-term fundamentals in home improvement are strong,” said CEO Edward Decker on the company’s earnings call. With the expectation for mortgage rates to come back down to 6%, spending in kitchen and bathroom remodels, lighting and flooring will revert to earlier levels, Decker said.

And this morning’s producer price index provided further ammunition for the Federal Reserve to consider rate cuts, a development that is bullish for retailers, and more so for Home Depot (HD) which has historically outperformed during periods of Fed accommodation.

The company is equally bullish on the future of its recently acquired SRS Distribution segment.

“Growth in the [SRS Distribution] business is growing faster than competitors in all verticals,” Decker said on the call, adding that SRS will serve as an “accelerant” to growth for the parent company.

HD is straddling the flatline with shares of Lowe’s (LOW) moving off their early lows in tandem.