As investors sift through retailers' earnings reports, some have been disappointing and others have been encouraging. But there's one area of retail that seems to be holding up nicely as 2022 progresses: home improvement. The nation's two largest home improvement retailers, Home Depot (HD -1.77%) and Lowe's (LOW -1.40%), just reported impressive results.

Home Depot's strong third-quarter results led management to reaffirm full-year guidance for positive comparable sales growth. Meanwhile, Lowe's better-than-expected third-quarter results led the company to raise its full-year outlook.

Here's a closer look at both companies' updates and why they're notable.

Home Depot

Home improvement juggernaut Home Depot reported third-quarter revenue of about $8.9 billion, up 5.6% year over year. This was ahead of the consensus analyst estimate for revenue of approximately $38 billion. Importantly, earnings per share increased even faster, rising 8.2% year over year to $4.24. This compares to an average analyst forecast for $4.13.

Looking ahead, management reaffirmed its guidance for fiscal 2022 comparable sales growth to increase 3% over fiscal 2021. Further, management said it expects earnings per share to increase at a rate in the mid-single digits.


Home Depot's competitor, Lowe's, saw slower growth. But the better-than-anticipated quarter and strong business momentum in the current quarter led management to increase its outlook for the full year. Even more, management was very upbeat about an improving supply chain and the optimism of its professional customers.

Third-quarter revenue increased 2.5% year over year to $23.5 billion and adjusted earnings per share came in at $3.27. Analysts, on average, were expecting revenue of $23.1 billion and adjusted earnings per share of $3.10. Its professional customers were a bright spot in the quarter, driving a 19% year-over-year increase in U.S. comparable store sales.

Looking ahead, management said it now expects total sales to be between $97 billion and $99 billion. Previously, it was expecting fiscal 2022 sales to be between $97 billion and $98 billion. 

Lowe's year-over-year sales growth reflects, in part, improving supply chains over last year, when builders and other professional customers faced numerous inventory constraints that delayed projects. As the global supply chain improves, these customers are "optimistic," Lowe's management said in the company's third-quarter earnings call.

Caution is still warranted

While both companies' year-over-year growth was solid in Q3, comments from Home Depot management during the company's third-quarter earnings call suggest that investors shouldn't get too upbeat just yet. There are "definitely some mixed signals," said Home Depot CEO Ted Decker when discussing sales trends in various categories across its business. These mixed signals have led the company to be cautious about its outlook.

Overall, it's encouraging to see both companies report sales growth and demonstrate evidence of a strong consumer amid improving supply chains and inventory levels. But investors should remain cautious about how inflation and an uncertain macro environment will ultimately impact these companies throughout the fourth quarter and in fiscal 2023. Home Depot and Lowe's target customers have remained resilient to date. The question, however, is whether this can persist during a period when monetary policy is aiming to dampen consumers' appetites.