Day labourers milled outside a Home Depot in Las Vegas this week, offering their services to contractors stocking up at the leading US home improvement store before heading out on remodelling projects.
But as painters, carpenters and plumbers left for job sites in their pick-up trucks, none stopped to hire the men.
The scene in Home Depot’s parking lot is a cautionary sign for a $350bn company viewed as a bellwether of the US economy. In an era of higher-for-longer interest rates, many homeowners have held off big-ticket projects that require financing. With mortgage rates hanging above 6.5 per cent, homeowners who locked in cheaper loans have been less likely to move, slowing the pace of housing turnover that historically prompted renovations.
“There was more work in years past,” said one idle labourer in a work coat and paint-spattered jeans, speaking Spanish. “More construction. People remodelling their homes.”
Existing-home sales fell 1.2 per cent in February from a year before to a seasonally adjusted annual rate of 4.26mn, according to data released on Thursday. And the Federal Reserve kept rates steady this week and projected only one or two more cuts by the end of the year.
Home Depot’s revenue rose by double digits in the pandemic years 2020 and 2021 as homebound property owners poured billions of dollars into kitchens, basements and decks. The result was a “pull-forward of demand”, said Joe Feldman, a retail analyst at Telsey Advisory Group.
That demand faltered in 2023, when Home Depot began to report what would be eight straight quarters of declining comparable sales. This year the company predicts a 1 per cent rise in comparable sales, well short of their pre-pandemic pace. Executives who once assumed lower rates and faster turnover are dealing with them being higher and slower.
But they argue that with an ageing US housing stock and trillions of dollars in home equity built up in the past few years, property owners are ready to start spending again.
Customers “had this deferral mindset — I’m going to wait to spend until I see rates come down”, Richard McPhail, chief financial officer, said in an interview. “That outlook has changed for many of them. And so what we are now beginning to hear is, life goes on and the need to improve my home persists.”
Established in 1978, Home Depot rose to the top of the hardware industry with no-frills warehouses that carried more than 30,000 individual products, offering a broader assortment at cheaper prices than most others. Executives remain devoted to the culture set down by founders Bernie Marcus and Arthur Blank, from store clerks’ orange aprons to a relentless competitive zeal. Marcus died last year.
As they wait out the housing downswing, Home Depot executives are pinning growth on three strategies. They are adding dozens of locations to the company’s 2,300 stores in the US, Canada and Mexico. They’re expanding an online business that accounts for 15 per cent of sales. They are also pursuing more business with professional contractors, an increasingly important market for a company founded to serve do-it-yourself customers.
Professional customers account for about half of Home Depot’s business, said Ted Decker, chief executive. Capturing more of their spending means competing harder in a fragmented market that includes large distributors such as New York-listed Builders FirstSource and plumbing vendor Ferguson, he said, not to mention countless lumberyards and supply houses. Last year Home Depot paid $18.25bn to acquire SRS Distribution, a roofing supplier.
“If we can reduce the number of people they have to deal with, we make their lives easier and simpler to do business,” said Decker, 62, who joined Home Depot in 2000 and became chief executive in 2022.
Inside a Las Vegas convention hall this week, Home Depot hosted thousands of store managers to show off new lightbulbs, power tools, cleaning agents and cement mixes at the start of its peak spring season — and reinforce the company’s competitive culture.
“Our job, independent of the economy, is to take market share from everybody else,” said Ann-Marie Campbell, senior executive vice-president in charge of stores, who gave rousing remarks to new store managers.
Home Depot’s shares have fallen 18 per cent from a December record as fears over US President Donald Trump’s tariffs on trading partners, including China, Mexico and Canada, grip the stock market.
Home Depot executives say a majority of its products sold are sourced domestically. Yet the company ranks among the top three importers to the US, having shipped 475,000 20-foot-equivalent container units in 2023, according to the latest data available from S&P Global’s Journal of Commerce.
Among the products demonstrated for store managers this week were electric lawnmowers, string trimmers and chainsaws from Ryobi and Milwaukee, brands owned by Hong Kong-based Techtronic Industries. Most of the Milwaukee products are manufactured in Mexico, with some made in Vietnam and China, said Rick Gray, president of Milwaukee’s outdoor power equipment business.
Decker said Home Depot’s manufacturers had diversified their supply chain in the past seven years after the first Trump administration imposed sweeping tariffs on China, moving to south-east Asia, Mexico and the US.
But he did not rule out price increases to offset cost increases caused by tariffs.
“We’ll work appropriately with our supplier base, and at the end of the day, try and keep the sharpest value on shelf for our customers and be relatively better off than the rest of our industry,” Decker said.
