Home Depot Reduces Sales Forecast for 2019 Due to Falling Lumber Prices and Tariff Impact

Home Depot Inc. beat Tuesday's quarterly earnings forecast by selling more expensive items to expensive builders and do-it-yourselfers, while highlighting the potential consumer impact of the current fight between US President Donald Trump and China .

The home improvement chain, which has moved away from the support provided by co-founder Bernie Marcus to Trump's re-election campaign, has blamed the impact of the trade dispute as well as the continued decline in wood prices. Work to a reduction in its sales forecast for the whole year.

The tariffs proposed by the United States on goods worth an additional $ 300 billion, which would in fact tax almost all that would be imported from China, caused fears on Wall Street, companies warning that prices of US buyers would likely increase, which could slow down economic growth.

"A tariff is a tax and it is probably safe not to know how the consumer will react. Given the current environment, "said Chuck Grom, an analyst at Gordon Haskett.

"It's more the impact on Home Depot's consumer spending than on spending."

Home Depot said it expects sales in 2019 to increase by about 2.3%, down from previous expectations of an increase of 3.3%.

The company's shares, however, grew by 2%, posting higher than expected earnings in the second quarter, selling more products to professional customers such as electricians, plumbers and builders, who typically make larger purchases. more frequent.

The home improvement chain, which is looking to expand its business beyond its main DIY customers, said the average amount of its bills increased from 1.7% to 67.3% in the current quarter.

However, lumber prices continue to weigh on the company's sales, with approximately 8% of its sales coming from the sale of the merchandise.

Lumber futures prices have fallen by about 16% since their peaks in 2019 to early February, as the shortage of labor and labor limited the ability of builders to build new homes, creating an overabundance of supply for the key building material.

This prompted Home Depot to also reduce its full-year comparable store sales growth forecast from 5% to 4%.

Home Depot net sales advanced 1.2% to $ 30.84 billion in the second quarter ended Aug. 4, slightly off the average analyst estimate of $ 30.98 billion, according to Refinitiv's IBES data .

It posted earnings of $ 3.17 per share, exceeding analysts' estimates of $ 3.08 per share.