Skip to Content

Big spenders boost sales at Home Depot

Shoppers on their way to a Home Depot store in the suburban Chicago area, Bartlett, Illinois.Shoppers on their way to a Home Depot store in the suburban Chicago area, Bartlett, Illinois.
Shoppers on their way to a Home Depot store in the suburban Chicago area, Bartlett, Illinois.Bruce Leighty

Home Depot brought in impressive sales during the summer months as the home-improvement retailer said big spenders significantly boosted results with the purchase of pricy appliances, riding mowers, and water heaters.

Roughly one out of every five dollars spent at Home Depot (HD) stores in the U.S. were for products that cost at least $900. Sales from those customers jumped 6.8% in the quarter, far better than the 3.2% increase for sub-$50 purchases, which represents about 20% of the pie.

“We were pleased with the performance in our big-ticket sales,” said Chief Financial Officer Carol Tome in an interview with Fortune. Tome explained that the smaller transactions faced pressure from the drought in California, where customers spent less on garden plants and smaller outdoor items.

Home Depot has been a strong performer in the retail sector, as the company’s latest quarterly results show. Earlier on Tuesday, Home Depot reported better-than-expected sales growth for the fiscal second quarter, including a 5.7% increase in same-store sales in the U.S. Total sales climbed 4.3% to $24.8 billion, while net earnings increased 14% on a per-share basis. The company also raised its financial targets for the full year.

Home Depot’s robust results are partly due to improved performance within the economy overall and in the housing market in particular. So far this year, home price appreciation and household formation data is a bit ahead of what Home Depot had originally hoped for, trends that tend to genderate a sales tailwind for the company. That’s because homeowners are more likely to invest in their house when they view it as a more valuable asset.

Home Depot’s big ticket success can be attributed to both investments it has made as well as some weakness from a key rival. Sears Holdings (SHLD) has posted sharp sales declines as the department-store operator has shuttered stores and suffers from weak demand at its existing locations. Sears is a major appliances seller, so as it exits neighborhoods and suffers from poor traffic trends, others stand to benefit.

But Home Depot hasn’t just depended on its rival’s dwindling performance to notch growth. Tome told Fortune that Home Depot has expanded its product lineup in recent years, adding more appliances from General Electric (GE) and Samsung. Roughly 1,000 locations offer a wider range of appliances than what you can find at a typical Home Depot.

“Some sellers of appliances are gaining and losing share and we happen to be gaining,” said Tome, who wouldn’t comment on any specific rival’s performance. “We couldn’t gain share without the right product and we’ve spent a lot of time bringing the right product into our stores.”