Home Depot Lowers Annual Profit Forecast After Softer-Than-Expected Home-Improvement Spending

ATLANTA — Home Depot reduced its full-year profit outlook on Tuesday after a third consecutive quarter of earnings below Wall Street projections, citing weaker demand for home-improvement projects, cautious consumer spending and limited storm-related activity.

The company now anticipates adjusted earnings per share for the current fiscal year will decline approximately 5% from the prior year. Management had previously projected a decrease of about 2%. The revised guidance follows muted sales of roofing materials, generators and other products that typically see heightened demand before and after seasonal storms, as well as a slower-than-expected rebound in large renovation projects.

Full-year net sales are expected to rise roughly 3%, while comparable sales — which exclude the effects of store openings and calendar shifts — are projected to be slightly positive. The forecast incorporates an estimated $2 billion in incremental revenue linked to GMS, a building-products distributor acquired earlier this year and therefore absent from the prior outlook.

Third-quarter performance

For the fiscal quarter ended Nov. 2, Home Depot reported:

• Revenue: $41.35 billion, compared with analyst expectations of $41.11 billion based on a survey by LSEG.
• Adjusted earnings per share: $3.74, versus the $3.84 consensus estimate.

Net income fell to $3.60 billion, or $3.62 per share, from $3.65 billion, or $3.67 per share, in the year-earlier period. Revenue decreased year over year, reflecting softer demand for higher-ticket projects.

Average customer spending per visit climbed 1.8%, but overall transactions declined 1.6%. Online sales provided a notable offset, advancing 11% from the prior-year quarter.

Demand dynamics

Home Depot’s business is closely tied to housing turnover, which typically fuels major renovations when homeowners list properties for sale or move into newly purchased residences. Elevated interest rates have tempered that activity, increasing mortgage costs and making it more expensive for homeowners to finance projects through home-equity loans or other borrowing.

Chief Financial Officer Richard McPhail said the company entered the year expecting a gradual pickup in remodeling activity during the second half as borrowing costs eased. Instead, interest rates remained near multi-year highs, prolonging what McPhail described as a “deferral mindset” among homeowners. Federal Reserve data (federalreserve.gov) show the average 30-year fixed mortgage rate hovering around 7%, up markedly from prepandemic levels.

Management also anticipated stronger sales of storm-related items such as roofing supplies, but the Atlantic hurricane season proved less disruptive than expected, limiting demand boosts that typically follow severe weather.

Imagem: imagem internet 1

Stock performance

Shares of Home Depot fell more than 3% in premarket trading after the outlook revision. Through Monday’s close, the stock was down about 8% for the year, lagging the S&P 500’s 13% advance over the same period.

Shifts in customer behavior

The retailer’s shopper base skews toward homeowners with relatively strong balance sheets — roughly 90% of its do-it-yourself customers own their residences. Nonetheless, large discretionary projects have been postponed across income brackets amid uncertainty surrounding interest rates, property values, potential government funding disruptions and high-profile layoff announcements.

With do-it-yourself spending subdued, Home Depot is intensifying its focus on professional contractors, roofers and landscapers. Last year the company completed an $18.25 billion purchase of Texas-based SRS Distribution, its largest acquisition to date. Earlier this year it agreed to buy GMS, expanding its reach among pro customers in the building-materials market.

Pricing and tariffs

Home Depot continues to navigate higher costs on some imported goods linked to U.S. tariffs. The company has diversified its supplier network and limited price adjustments, implementing only modest increases in select categories. Management noted that prices were held steady or reduced on several seasonal items, including the best-selling 7.5-foot Grand Duchess Christmas tree and multiple light-string assortments.

Outlook

Looking ahead, executives indicated that demand remained stable between the second and third quarters when adjusted for storm activity, but they do not foresee clear catalysts for a near-term acceleration. The company plans to monitor interest-rate trends, housing turnover and economic sentiment while continuing to invest in supply-chain improvements and professional customer initiatives.

Crédito da imagem: Kevin Carter | Getty Images