Home Depot Inc HD.N said on Tuesday it will spend about $1 billion more on employees’ wages annually as the home improvement chain benefits from a sustained surge in demand for tools and building materials due to the COVID-19 pandemic.
Home Depot’s blue-chip stock, up 28% this year, fell 2.5% in early trading, despite the company beating quarterly sales and profit estimates.
Demand for home improvement products have remained elevated since coronavirus lockdowns started in March, as Americans spending more time at home due to limited options for travel or leisure activities use their discretionary income on minor home remodeling and repair work.
The heavy activity has, however, also led Home Depot to spend $1.7 billion in temporary pay and benefits for staff working through the health crisis. The company said on Tuesday it will change some of those benefits to permanent wage increases for frontline hourly employees.
A strengthening U.S. housing market, owed in part to record low mortgage rates, also encouraged customers to invest more in their homes, Home Depot said, signaling strong sales in the holiday season.
Business has been unaffected by spiking virus cases, the company said, a day after it agreed to buy HD Supply Holdings HDS.O in a deal valued at about $8 billion.
The company posted a 24.1% rise in same-store sales for the third quarter ended Nov. 1, beating analysts’ average estimate of a 14.8% increase, according to IBES data from Refinitiv.
Home Depot earned $3.18 per share on net sales of $33.54 billion, while analysts had expected a profit of $3.06 per share on net sales of $32.04 billion.