MICHELLE CHAPMAN, AP Business Writer
NEW YORK (AP) — Homes are getting a lot of TLC from their owners of late, which means better sales for businesses like Home Depot.
The world’s largest home improvement retailer reported second-quarter results on Tuesday that surpassed Wall Street expectations, thanks largely to consumers opening their wallets. But Home Depot knows it’s a change in mindset that is spurring homeowners to action.
“When consumers believe their home is an investment and not an expense, they spend differently,” Chief Financial Officer Carol Tome said during a conference call.
Americans definitely have reasons to start feeling better about their homes: home values are improving, mortgage rates remain low and the job market is healthy.
These factors are contributing to Home Depot’s customers walking through its doors more often – and spending more once they’re inside.
Home Depot said that the average receipt during the second quarter was $59.42, a 1.7 percent increase, and the number of transactions rose 2.6 percent.
Chairman and CEO Craig Menear said the consumer was the driver of the average receipt performance during the quarter, with it being the highest quarterly average receipt since 2006.
Sales at stores open at least a year, a key indicator of a retailer’s health, increased 4.2 percent in the period. In the U.S., these sales gained 5.7 percent.
Edward Decker, executive vice president of merchandising, said that some of the departments with the best performances during the quarter included appliances, tools, decor and lighting.
Transactions for receipts over $900 rose 6.3 percent in the quarter. Decker said that these receipts included items such as water heaters, windows, appliances and riding mowers.
The shift in the way Americans are choosing to spend their money is growing. Department stores, also reporting earnings this month, have largely been routed. Instead, shoppers are increasingly making purchases for the home or buying cars and electronics, rather than shoes, skirts and shirts.
U.S. data shows that rising retail sales are being driven by spending on furniture, cars and things like sporting goods. While Home Depot boosted its annual outlook for a second time this year on Tuesday, Wal-Mart reduced its expectations after missing second-quarter profit projections.
Home Depot’s upswing comes amid continued signs from the real estate market that conditions are getting better.
The Commerce Department reported Tuesday that construction of single-family homes shot up 12.8 percent in July to the highest rate since December 2007. Sales of new and existing homes have climbed in the first half of 2015. Purchases of new homes are 21.2 percent higher through the first six months of this year than the same period in 2014. Existing homes are selling at an annual rate of 5.49 million, the fastest pace since February 2007, according to the National Association of Realtors.
For the three months ended Aug. 2, Home Depot’s second-quarter revenue increased to $24.83 billion from $23.81 billion. That’s better than the $24.66 billion analysts had expected, according to Zacks Investment Research, and it was the sixth consecutive quarter of sales growth for the Atlanta company.
The chain earned $2.23 billion, or $1.73 per share, for the period. Stripping out the costs of a data breach the company suffered last year and a gain on the sale of the remaining part of its equity ownership in HD Supply Holdings Inc., earnings were $1.71 per share, a penny better than Wall Street had expected. It was also better than the $2.05 billion, or $1.52 per share, that Home Depot reported last year during the same period.
Home Depot’s shares hit an all-time high of $123.80 in morning trading.
Going forward, the company now expects 2015 sales will rise about 5.2 percent to 6 percent and profits will climb approximately 13 percent to 14 percent. Prior guidance was for sales to increase about 4.2 percent to 4.8 percent, with earnings up approximately 11 percent to 12 percent.
Same-store sales for the year are expected to rise about 4.1 percent to 4.9 percent, better than earlier projections of between 4 percent and 4.6 percent.
Rival Lowe’s Cos. will report its financial results on Wednesday.
Elements of this story were generated by Automated Insights (http://automatedinsights.com/ap) using data from Zacks Investment Research. Access a Zacks stock report on HD at http://www.zacks.com/ap/HD
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