Transcription
Unfortunately, Home Depot just issued what I consider to be a stunning update. That's a warning not just for their company, but for the entire US economy. Let's jump in.
This is an article on Yahoo Finance by Benzinga. And the article's title is "Home Depot Navigates Traffic Decline." And and let's just see how bad this traffic decline is.
For the first six months of fiscal 2025, net cash provided by operating activities was $8.9 billion compared to $10.9 billion for the same time period last year. So they're down $2 billion in operating cash flows over a six-month period. So if this continues, that's four or five billion dollar difference. And so what's causing this and what can we learn from it?
The article goes on to say comparable customer transactions declined almost a half a percent on a same-store basis, while total customer transactions fell almost 1% to 447 million. The average ticket price increased 1.4% to a little over $90, offsetting some of the decline in traffic. So that's the good news.
But it's not just Home Depot. It's other players like them in the industry, and it's anybody that's selling goods that come from overseas.
Let's continue, uh, with thestreet.com. Their article is "Home Depot and Lowe's Sound the Alarm for Homeowners" by Daniel Klene. And you can see both Lowe's and Home Depot have admitted during the most recent earnings calls that they will be impacted by tariffs. They've also noticed that tariffs have caused price increases. And then the article goes on to highlight how these price increases are going to be impacted.
They say modest price, uh, hikes are expected that the tariff, uh, impacts are balanced by the supply chain strategy, and there's signs of pre, uh, of pre-transaction spending. About 1.4% 4% of comparable average ticket growth in recent quarters suggests that price changes, along along with fewer promotions, may be nudging up per-transaction totals. We saw that in the previous article.
And then Lowe's pricing strategy is to avoid broad-based hikes. They have about half of their, um, uh, goods and services come from overseas, and about 20% of those, uh, come from China. And so they have supply chain diversification as a buffer.
And the article goes on to say, and I think this is important. Now, my channel is not political. I'm going to share my thoughts here. I will share before we get into these quotes by economists that, you know, economists predicted that, uh, during President Trump's first term, that the tariffs were going to put the US into a recession. That did not happen. 2019 was a very, very strong year until, uh, the beginning signs of COVID began to to, uh, show up.
So the article goes on to say, "This is from an economist. Virtually all economists think that the impacts of the tariffs will be very bad for America and for the world," said Joseph Stiglitz, who's an economics professor at Columbia University and he was the winner of the Nobel Memorial Prize in Economic Science, uh, Sciences. He goes on to say, "They will almost surely be inflationary. I think we all know unless the companies absorb these price increases, that they're going to result in at least somewhat higher prices."
And then, um, another economist says, "The impact of imposing these tariffs will have the effect of depressing US economic growth, contributing to a higher rate of inflation, and those effects will be worse for countries, um, re, um, that retaliate in, in kind." And that's by Marcus Nolan, executive vice president of the Peterson Institute for International, uh, Economics.
So my view, I want to share what, what all of this means for me. But first, I want to just say, you know, the world has a way of changing. And when the world changes, our financial plan needs to change. And so whether you're, you're 5 months from retirement, 5 years, or 25 years away, I think it's important to have a financial plan, a roadmap for where we want to go, how much we need to save, how much we can spend if we're in retirement. And things like this just highlight how quickly the world can change.
And I urge you to have software for putting together a financial plan that can do scenario planning. As the world changes, you can update your plan. You can do what-ifs. The software that I like is called Bolden. You can find it in the QR code here below or in the description. Um, you know, it's just too much work to build your own financial plan in Excel. A, it's too important to have a financial plan, and B, it's just too much work to build your own, and you're likely to make a mistake. So, why do that? There's, uh, affordable software available again, of the choices, uh, that are out there. The software I like is Bolden. You can find it at that QR code. I am an affiliate, and so if, if you use that code, you'll be supporting the channel.
Now, what are my views? My views are, you know, I do think it's going to be somewhat inflationary. I don't know how bad it's going to be. Um, and I, I think that, uh, there's other factors that are contributing to the US economy that might bring down some of these inflationary pressures we're seeing. Uh, and as I recorded this, Jerome Powell just, uh, had a press conference in Jackson Hole where he shared that, you know, the risk to unemployment going up has increased. So, um, that is going to be a natural buffer on decreasing demand for goods and services. As people either get laid off or as we see our neighbors get laid off, it's just common for us to be a little more cautious with our spending.
And on, on the other side of the equation, Jerome Powell hinted that there's soon going to be some rate decreases potentially. I don't have a crystal ball, but that was certainly my take of it. And if rates start to decrease, that's going to give the average consumer a lot of breathing room because almost 80% of people 65 and older own a home, and about 40% still owe a mortgage on, on their home. So for those that are in high-interest mortgages that can reduce their rate, that's going to give additional breathing room for the consumer. And the consumer represents about 70% of all spending in the United States. So, so lower rates, I think, is going to help.
We're already seeing, um, potential for increased layoffs, potential for unemployment to go up. Plus, we have artificial intelligence, AI coming into play. I think that's going to be a headwind for employees as well. So, it's going to be a tailwind for companies, which hopefully will give companies some room to, um, increase the salaries of the people that are on board as we can all do our work better, faster, and cheaper.
And if you like this video, the next video I'd like you to think about watching is a video on the decision on when to retire. And that's why I made this video here, "Why Waiting to 65 to Retire Might Be a Big Mistake." Thanks for watching this one. I'll see you in the next one.