What's going on?
Home Depot looked built on Tuesday: the US home improvement retailer reported better-than-expected sales and profit in its first quarter.
What does this mean?
A big seller of DIY products, Home Depot provides a window to the world of the American consumer. Sales typically grow when consumers are feeling flush and want to invest in their homes – either for a better quality of life or to tap into a lively resale market. The number of Home Depot transactions grew 4% last quarter, and their average price increased 2%. Crucially, however, sales at established stores grew at their slowest rate in three years.
Those slow same-store sales may have been due to DIY-unsuitable weather in some regions. But then again, data on Tuesday showed US home sales unexpectedly fell in April – decreasing for the 14th month in a row. Relatively steep prices and short supply at the lower end of the market may have put would-be buyers off, but economists are forecasting a reversal of the trend soon: American mortgage rates are at historic lows and demand is at historic highs.
Why should I care?
For markets: Can Home Depot keep running with the bulls?
Home Depot’s stock fell slightly on Tuesday – although it’s risen 27% a year on average over the past decade, mirroring most US stocks’ bull run since the 2008 financial crisis. As the US-China trade war rolls on, however, increased tariffs are driving up home renovation costs – and Home Depot’s stock may end up a casualty. Other retailers saw their shares fall on Tuesday too: department stores JCPenney and Kohl’s both reported weak results, sending their stocks down 9%.
The bigger picture: Tesco’s renovating.
British grocery retailer Tesco is moving out of the mortgage business, announcing on Tuesday that it won’t make any new loans and is looking to sell existing ones. Slowing housing sales across the Atlantic look like green grass compared to the rough patch the UK housing market is currently experiencing, with stagnant prices discouraging property sales.