Home Depot (HD -1.38%) posted a solid third quarter, reflecting steady demand for home improvement projects amid an economic slowdown. The retailer also reaffirmed its guidance for the year, reassuring investors that it's on track to finish 2022 as expected.

With plenty of homeowners still not back to the office five days a week and spending ample time at home, this consumer discretionary stock looks positioned to gain even more dominance in the home improvement market. But is it currently a buy?

Bringing in the revenue

The company delivered $38.9 billion in revenue for the third quarter, up 5.6% year over year. Same-store sales (comps) saw a 4.3% rise. CEO Ted Decker cited strength across most of Home Depot's departments and solid growth among pro and do-it-yourself customers.

Digital sales increased nearly 10% year over year, driven by unique product offerings and shorter lead times. Executive Vice President Jeff Kinnard said he was "very pleased" with online sales and expressed confidence in the company's ability to fulfill digital orders.

An improved online experience for Pro customers, a streamlined digital military program, and a new online "store mode" feature all contributed to the successful quarter, according to Decker. Combined with in-store efforts, a more-frictionless online experience largely fueled the third quarter's impressive sales.

Lumber aisle in a Home Depot store.

The lumber aisle at Home Depot. Image Source: Home Depot.

The home improvement chain opened three new stores during the third quarter, raising its total store count to 2,319. After record Halloween sales, Kinnard is optimistic about the holiday sales season, which includes Black Friday deals and special events like its "most compelling artificial tree assortment" to date.

Company headwinds

Despite robust sales, global supply chain disruptions continued to challenge Home Depot in the third quarter. Gross margin dropped roughly 10 basis points to 34%, due primarily to investments in the supply chain.

Although Hurricanes Fiona and Ian both affected sales during the third quarter, they only reduced them by what management called a "relatively minimal" $120 million. Chief financial officer Richard McPhail stressed that Home Depot was much less concerned about missed sales than the health and safety of its customers and employees affected by the storms.

Managing a difficult global supply chain while operating in a high-inflation environment, Home Depot has somehow managed to keep demand high. As McPhail said during the third-quarter earnings call, "To date, our customer has proven resilient."

While the macroeconomic picture remains uncertain, long-term demand in home improvement has stayed strong. 

Looking ahead

Reaffirming its previous guidance, management expects comps to grow 3% in fiscal 2022, including growth in this metric in the fourth quarter. The company now looks to build upon current sales momentum both in stores and online, where added functionality in the Home Depot app has already driven higher engagement.

In the current operating environment, Home Depot has remained flexible and competitive. It's already the largest chain with a 17% share of the home improvement retail market, and Decker said, "We look forward to taking share in any environment."  

While Decker expects inflationary pressures to continue into 2023, he also said he has observed an easing of costs, citing lumber as an example. If Home Depot can continue to maintain consistent demand while recovering its profit margins, then the stock should follow the company's success. 

Although supply chain woes continue to challenge Home Depot, I believe these are only temporary obstacles. With its resilient customer base and a healthy home improvement market, I consider the stock a buy at its current price level.