What's going on?
If at first you don’t succeed… US home improvement retailer Home Depot fell off the horse in the first quarter, but it got back on and galloped into the sunset – its second quarter results beat expectations on Tuesday and its stock rose. Yeehaw!
What does this mean?
Home Depot’s results were positive across the board: its sales and earnings were both better than expected and better than this time last year. The company also raised its own expectations going forward – it says it’ll grow its sales faster and generate higher profits than it had previously predicted this year.
While some retailers are suffering from the Amazon effect, home improvement seems impervious to Amazon’s superpowers. When it comes to big-ticket purchases, consumers aren’t as trigger-happy buying online as they are with food and clothing (expensive items can be riskier, and talking to a real person in a real store might help purchase anxiety), which gives the likes of Home Depot a nice protective layer of blubber.
Why should I care?
For markets: Hey big spender.
The National Retail Foundation (kind of like a union for retail companies) raised its forecast for US retail sales for the rest of the year. It cites higher wages (partly thanks to low unemployment), more disposable income (partly thanks to tax reform) and a strong job market as the main causes behind consumers’ likely-continuing rise in spending. Consumer spending was better than expected in the first half of the year – shoppers are probably feeling confident given the strength of the US economy.
The bigger picture: It’s a good day to be a retailer.
American luxury company Tapestry – parent of Coach and Kate Spade New York – also reported quarterly results on Tuesday that beat expectations. The passing of the real Kate Spade in June stoked nostalgia for the brand, boosting its top and bottom lines (a.k.a. its revenue and profit) to unexpectedly-high levels.