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������ý Depot's quarterly performance was an improvement thanks in part to the acquisition of contract supplier SRS Distribution, which contributed $1.3 billion to ������ý Depot’s sales for the quarter. (The ������ý Depot)

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������ý Depot’s second-quarter sales rose slightly as the nation’s biggest home improvement retailer benefited from an $18 billion acquisition this spring, but customers continued to rein in spending because of broadly higher costs and elevated interest rates.

Sales edged up to $43.18 billion, from $42.92 billion, beating the $42.57 billion that Wall Street had expected, according to a poll by Zacks Investment Research.

The quarterly performance was an improvement thanks in part to the acquisition of contract supplier SRS Distribution, which contributed $1.3 billion to ������ý Depot’s sales for the quarter. SRS provides materials for professionals like roofers, landscapers and pool contractors.

SRS ranks No. 8 on the Transport Topics list of top building materials carriers.

Our team is celebrating the news of our acquisition by The ������ý Depot! 🎉

We are thrilled to have everyone on board as we embark on this journey of growth. Let's embrace the orange and a bright future for us and our customers! — SRS Distribution Inc (@SRSDistribution)

“The decision of ������ý Depot to deepen its expertise in specialist categories via the SRS Distribution acquisition is to be welcomed as this adds a new base of customers,” said Neil Saunders, managing director of GlobalData. “We believe the integration of SRS will bring sales and bottom-line benefits over time, as well as providing a major point of differentiation against rivals like Lowe’s which are trying to cash in on the pro space.”

The performance helped ������ý Depot snap a sales slump. In the first quarter, ������ý Depot's sales dipped 2.3% to $36.42 billion as the Atlanta company dealt with high mortgage rates, inflation and a delayed start to spring. It was the third consecutive quarter of declining sales for the retailer, which saw sales skyrocket during the pandemic as millions spent more on their homes.

Customer transactions slipped 1.8% in the quarter and they also spent less, with the average ticket totaling $88.90 compared with $90.07 in the same three months last year.

In addition, sales at store open at least a year, a key metric of a retailer’s health, declined 3.3% in the quarter. In the U.S., the figure fell 3.6%.

The company is now expecting 2024 sales at stores open at least a year to decline between 3% and 4%. Its previous outlook was for a decline of approximately 1%. ������ý Depot expects full-year earnings per share to fall between 2% and 4%. Previously, the company predicted earnings per share growth of about 1%. Total sales for the year, the company said, are expected to be up 2.5% to 3.5%. Its prior guidance was for an increase of about 1%.

Saunders said ������ý Depot’s revised outlook “suggests more negative sentiment around the consumer economy from management and reflects a more cautious rate cutting stance from the Fed than was expected earlier in the year.”

Shares of ������ý Depot slipped 3% before the opening bell on Aug. 13.

“The underlying long-term fundamentals supporting home improvement demand are strong,” CEO and Chair Ted Decker said in a prepared statement Aug. 13. “During the quarter, higher interest rates and greater macro-economic uncertainty pressured consumer demand more broadly, resulting in weaker spend across home improvement projects.”

������ý improvement retailers like ������ý Depot have been dealing with homeowners putting off bigger projects due to higher rates and lingering concerns about inflation.

Elevated mortgage rates, which can add hundreds of dollars a month in costs for borrowers, have discouraged home shoppers for a while, extending the nation’s housing slump into its third year.

Sales of previously occupied U.S. homes fell in June for the fourth month in a row. And sales of new single-family homes fell last month to the slowest annual pace since November.

“Interest rate decisions matter more to ������ý Depot than they do to an average retailer, if only because a large chunk of home improvement demand is tied to the housing market,” Saunders said. “High interest rates have, and still are, acting as a brake on house moves.”

For the three months ended July 28, ������ý Depot earned $4.56 billion, or $4.60 per share. A year ago it earned $4.66 billion, or $4.65 per share.

Removing certain items, earnings were $4.67 per share. Wall Street was calling for $4.54 per share.

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