Home Depot is boosting hourly wages as housing market booms

A customer wearing a protective mask views power drills for sale at a Home Depot Inc. store in Daly City, California on Nov. 16, 2020. Home Depot Inc. is scheduled to release earnings figures on November 17.

(CNN) -- The housing market is booming. That's great news for Home Depot -- and its workers.

Home Depot reported better-than-expected sales and earnings Tuesday, and the company is planning to invest $1 billion annually on increased worker benefits. That's on top of the $1.7 billion in benefits the company has already granted this year in response to Covid-19.

Home Depot unveiled temporary programs during the coronavirus pandemic such as expanded paid time off and weekly bonuses. But the company has decided to give hourly workers a permanent pay increase as the housing market continues to thrive.

Sales at stores that have been open for at least one year surged 24% in the third quarter. And Home Depot reported a net profit of $3.4 billion, an increase of more than 20% from a year ago.

"[T]he investments we have made in the business as well as our associates' focus on customers...are critical in enabling market share growth in any economic environment," CEO Craig Menear said in the company's earnings release.

Shares of Home Depot fell 3% in early trading Tuesday following the news, but the stock is up nearly 25% this year.

Home Depot is thriving during the pandemic as many consumers focus on home improvements at a time when they may be less willing (or able) to spend on leisure activities such as dining out or taking a family trip.

"Spending on the home continues to be a priority," Neil Saunders, managing director of retail research firm GlobalData, said in a report.

"Savings from lower outlays on commuting, eating out and not taking vacations have given consumers a pool of cash which they have diverted into home projects and activities," Saunders said. "Improvement continues to be at the forefront of spending."

Home Depot chief financial officer Richard McPhail echoed that sentiment during a conference call with analysts Tuesday.

"We are encouraged by consumer sentiment and consumption trends, which show home improvement receiving more than its historical share of consumer spending," he said. "Housing metrics are significantly stronger than when we entered this crisis."

Home Depot's results come one day after the company announced plans to buy back HD Supply, a former subsidiary that focuses on selling construction materials to homebuilders, apartment managers and the hospitality industry, for more than $8 billion.

Home Depot sold the business to private equity firms in 2007, and there had been recent chatter that Home Depot rival Lowe's, which will report its latest results Wednesday, was interested in purchasing HD Supply.

Recommended for you