Despite better than expected profits, Home Depot announced it's lowering its sales expectations due to declining lumber prices and trade war fears.
"We are encouraged by the momentum we are seeing from our strategic investments and believe that the current health of the U.S. consumer and a stable housing environment continue to support our business," CEO Craig Menear said in a statement. "That being said, lumber prices have declined significantly compared to last year, which impacts our sales growth. As a result, today we are updating our sales guidance to account primarily for continued lumber price deflation, as well as potential impacts to the U.S. consumer arising from recently announced tariffs."
The home improvement giant's fiscal second-quarter earnings surpassed estimates from analysts, but total sales didn't meet expectations. Still, analysts say the company is positioned well for the rest of 2019.
U.S. housing starts declined 4 percent in July with a large decline in construction of multi-family housing units, according to published reports. Housing starts fell to a seasonally adjusted annual rate of 1.191 million and the pace for June was revised downward, according to Department of Commerce.
“Not only was there a drop of 4 percent in July, but there was an additional drop of 1 percent in June from the reported drop a month ago,” said Gene Wengert, the Wood Doctor.
Home Depot doesn't appear to be alone in its fears. The U.S. Trade Representative's office announced this week that tariffs will be removed from some Chinese imports. Others will be delayed from September 1 to December 15. President Trump said the delay would help shield business and consumers from trade war fallout over the holidays.
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