If you’re like many Americans, you might have considered doing a few things to your home over the past several years.
The early 2020s brought all kinds of uncertainty, and as Covid lockdowns forced many of us to stay home for months on end, it also gave us the opportunity to look around and notice a thing or two that needed work.
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For some of us, that might have meant some crucial repairs, like replacing the roof or the HVAC system. Others might have gone the cosmetic route, repainting rooms or putting up additions or decks to enjoy the outdoors a little more.
And some of us with flexibility relocated entirely, which meant entering the housing market during a period of uncertainty.
The Home Depot store in Hackensack, N.J. The chain is seeing customers defer major projects due to higher interest rates on loans required to finance the work.
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Home Depot has been doing well
Most of these new trends meant good things for home improvement retailers like Home Depot (HD) .
The retailer prides itself on accessibility for both do-it-yourselfers and contractors, and it had been making expansion moves to help pros specifically as the demand for big jobs ramped up.
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This has translated into good business for Home Depot, which managed to beat Wall Street revenue estimates in its fiscal Q4 earnings report this week.
Per-share earnings rose 7.1% to $3.02 from $2.82 in the year-earlier quarter.
Q4 revenue came in at $39.7 billion, an increase of 14% from the year-earlier period.
Comparable sales, those from stores open at least one year, were up 1.3%.
And the board declared a quarterly dividend of $2.30 a share, up 2.2%. The dividend is payable March 27 to shareholders of record March 13.
Home Depot CEO identifies a key trend
But just because business has been good doesn’t mean it’s guaranteed to stay that way.
Home Depot caters to many professional contractors, who often carry out larger projects like home remodels. These projects are pricey and often require folks to take on debt to cover the costs.
Persistently high interest rates can make the cost of debt even more expensive, which in turn can cause some customers to lose their appetite for expensive projects, Home Depot’s executive VP of merchandising, Billy Bastek, warned.
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“The higher interest rate environment continues to pressure larger remodeling projects,” Bastek said. “There’s just no denying the deferral that we’re still seeing,” he added.
Home Depot Chief Executive Ted Decker echoed those concerns, pointing out the “uncertain macroeconomic conditions and a higher interest rate environment that impacted home improvement demand.”
Home Depot management has pointed out a volatile housing market and high interest rates as potential risk points in past quarters, particularly as many people returned to work in person.
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