NILES, Ill. – Home Depot’s sales rose slightly in its fiscal second quarter as the country’s biggest home improvement retailer saw gains from a recent acquisition, but it continues to be squeezed by customers watching their spending due to prolonged high 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 Home Depot’s sales for the quarter. SRS provides materials for professionals like roofers, landscapers and pool contractors.

“The decision of Home 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,” Neil Saunders, managing director of GlobalData, said. “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 Home Depot snap a sales slump. In the first quarter, Home 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.

Related Story: The Next Month in the Economy Could be Crucial for the Presidential Election

Consumer Spending Trends and Weather Impact

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.

Chairman and CEO Ted Decker said during the company’s conference call that Home Depot experienced ongoing softness in spring projects, which was hurt by extreme weather changes during the quarter.

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%.

Revised Outlook for 2024

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%. Home 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 that Home 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 Home Depot rose slightly in morning trading on Tuesday.

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

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

Related Story: Dow Drops 1,000 Points, and Japanese Stocks Suffer Worst Crash Since 1987 on ...

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 Home 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, Home Depot Inc. 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.