Home Depot Inc. (NYSE:HD) core business is thriving even as the pandemic continues to take a toll on various sectors. A boom in home renovations in the aftermath of the epidemic explains the stellar results for the home improvement supplies stores in the recent quarter.
Home Renovation Boom
Home Depot is enjoying an increase in sales fuelled by increased spending on DIY projects as well as larger remodels. A booming U.S real estate sector, affirms the company’s prospects amid the pandemic ravaged economy.
The company reported better than expected third-quarter earnings, supported by a blowout of same-store sales attributed to a boom in home improvement. Home renovations are on a roll attributed to low borrowing costs that have fuelled spending on DIY projects.
Earnings amid a challenging business environment jumped to $3.18 a share against $3.08 a share expected. Revenues were up 23% to $33.54 billion, helped by a 24% increase in same-store sales. The number of transactions was up 13% to 53.2 million, with the average price edging higher 10% to $72.98.
Surging Costs Concerns
Amid the impressive quarterly results, the stock fell by more than 2% as concerns about spiraling costs groped the market. The home renovation supplier has announced plans to invest up to $1 billion annually on increased worker benefits. In the first half of the year, the company added $1.7 billion in benefits.
A spike in labor costs comes on the heels of Home Depot unveiling temporary programs such as expanded paid time off and weekly bonuses in response to the pandemic. Likewise, the company has opted to give workers a permanent pay increase buoyed by the booming house market.
Likewise, Home Depot has confirmed plans to repurchase HD Supply, a former subsidiary that focuses on selling construction materials. The company is to pay $8 billion for the former subsidiary affirming its confidence about the housing market's long-term prospects.
Housing prices are expected to continue rising as the economic outlook improves. People moving from cities into suburbs for more space are another development that affirms long term prospects.