Home Depot Lowers Annual Forecast After Tepid Third-Quarter Results

Home Depot reduced its full-year sales and profit guidance after reporting a muted third quarter, underscoring an extended downturn in consumer spending on home improvement projects in the United States.

The Atlanta-based retailer said comparable sales in the three months ended Nov. 2 inched up 0.2 percent from the same period a year earlier. Wall Street analysts had anticipated a gain of roughly 1.3 percent, according to consensus estimates compiled before the results were released.

Net earnings declined from the prior-year quarter, reflecting softer demand for big-ticket items and lower volume in several storm-related categories such as roofing materials, portable generators and plywood. Management attributed a portion of the weakness to an unusually calm Atlantic hurricane season, which reduced emergency preparation and repair purchases compared with last year’s more active fall.

Home Depot now expects comparable sales for fiscal 2025 to be “slightly positive,” down from its earlier projection for growth of about 1 percent. Adjusted earnings per share are projected to fall roughly 5 percent year over year; the company had previously forecast a 2 percent decline.

Consumer caution weighs on projects

The retailer said homeowners remain reluctant to commit to sizable renovation jobs amid persistent economic uncertainty. Executives pointed to several factors influencing shopper behavior, including flattening or declining home prices in many metropolitan areas, questions about job security and elevated interest rates.

Industry data support that assessment. Foot-traffic analytics firm Placer.ai reported that visits to Home Depot locations slipped 0.4 percent during the quarter, suggesting that incremental gains in transaction size were not enough to offset slightly lower store traffic.

The broader housing environment has also been challenging. Existing-home sales are on track for their weakest year since the global financial crisis, and 30-year fixed mortgage rates hovered near two-decade highs for much of the third quarter, according to the Federal Reserve Bank of St. Louis. While borrowing costs have eased marginally in recent weeks, Home Depot said the shift has not yet translated into a noticeable pickup in remodeling demand.

Pricing actions and tariff offsets

To protect margins, the company raised prices in select product categories earlier this year to offset the impact of tariffs on imported goods. Management said the increases have not materially dampened consumer interest, helping the retailer preserve profitability despite volume pressure.

Even so, the drag from weaker discretionary spending outweighed those benefits. High-margin products linked to large renovation projects—such as kitchen cabinetry, flooring and outdoor structures—were among the softer performers, while core maintenance items held up relatively well.

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Outlook and long-term positioning

Home Depot reiterated its view that underlying industry fundamentals remain favorable over the long run. The company cited an aging U.S. housing stock, historically high levels of homeowner equity and the ongoing shift toward remote and hybrid work arrangements as factors that should eventually revive demand for upgrades and repairs.

For the near term, however, management said it sees no clear catalyst to accelerate spending. Mortgage rates, while off recent peaks, remain well above the lows of 2020–2021, limiting both home sales and cash-out refinancing activity that often funds remodeling projects. In addition, uncertainty over the broader economic outlook and potential labor-market softness continues to influence household budgeting decisions.

The retailer plans to continue investing in supply-chain efficiency and digital capabilities to capture market share as conditions stabilize. It will also focus on professional contractors—an increasingly important customer segment—through expanded tool-rental options and enhanced bulk-buying programs.

Capital expenditures for the fiscal year remain unchanged, with funds allocated toward store refreshes, distribution-center modernization and technology upgrades aimed at streamlining omnichannel fulfillment.

Key metrics from the quarter

• Comparable sales: +0.2 percent (consensus +1.3 percent)
• Foot traffic: –0.4 percent versus prior year (Placer.ai)
• Full-year comparable sales outlook: “slightly positive,” down from ~+1 percent
• Full-year adjusted EPS outlook: –5 percent year over year (previous guidance –2 percent)

Home Depot’s results arrive as the home-improvement sector grapples with the same macroeconomic headwinds affecting the broader retail landscape. Competitors are expected to face similar pressures when they report earnings in the coming weeks, offering further insight into whether homeowners will remain sidelined or cautiously return to remodeling projects as borrowing costs recede.

Crédito da imagem: Reuters