Home Depot will spend $1 billion more on employees' pay as sales in home tools, paint, and building materials surge during the COVID-19 pandemic

• Home Depot Inc said Tuesday it will spend around $1 billion more on employees' pay annually, as it benefits from a surge in demand for tools, paint, and building materials in the COVID-19 pandemic.
• Overall net sales increased 23.2% to $33.54 billion, beating analysts' estimate of $32.04 billion.
• Home Depot have provided staff with temporary weekly bonuses and more hours of paid time off. Some of these will now become permanent, it said.

Home Depot said on Tuesday it would spend about $1 billion more on employees' compensation annually, as the home improvement chain benefits from a sustained surge in demand for tools, paint, and building materials due to the COVID-19 pandemic.

With limited options for travel or leisure activities, Americans are spending more time at home and using their discretionary income on minor home remodeling and repair work.

"Despite elevated activity for most of 2020, [the home improvement] trend shows no sign of weakening and, if anything, is intensifying as we come into the winter months as consumers will be forced to stay inside more," said Neil Saunders, managing director of GlobalData Retail.

The elevated activity has, however, also led Home Depot to spend more on its staff working through the health crisis, by providing temporary weekly bonuses and more hours of paid time off.

The company said on Tuesday it would change some of those programs to permanent forms of additional compensation for frontline hourly employees.

"The Company is now transitioning from these temporary programs to invest in permanent compensation enhancements for frontline, hourly associates. This will result in approximately $1 billion of incremental compensation on an annualized basis," it said.

Home Depot's blue-chip stock, which has risen over 28% this year, fell 1.8% in premarket trading, despite the company beating quarterly sales and profit estimates.

The company, which on Monday said it would buy HD Supply Holdings Inc in a deal valued at about $8 billion, 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.

Net earnings surged 23.9% to $3.43 billion, or $3.18 per share. Analysts had expected a profit of $3.06 per share, according to IBES data from Refinitiv.

Overall net sales jumped 23.2% to $33.54 billion, beating analysts' average estimate of $32.04 billion.