Home Depot has adjusted its forecast, anticipating a more significant drop in full-year profits after its latest quarterly earnings fell short of what Wall Street had hoped for. This dip is largely attributed to the economic uncertainty stemming from tariffs, which has resulted in reduced demand for major renovations and DIY projects.
Executives noted that a much-anticipated rebound in demand, fueled by declining U.S. interest and mortgage rates, likely won’t materialize, raising fresh fears about a potential economic downturn.
This announcement from Home Depot comes as big retailers, including Walmart and Target, report their earnings, prompting investors to closely monitor consumer spending—especially with the holiday season approaching amidst ongoing tariff-related cost pressures.
Following the announcement, Home Depot’s stock dropped approximately 4%, while competitor Lowe’s saw a 2% decrease in its shares. Lowe’s is set to release its financial results shortly.
Brian Mulberry, a senior client portfolio manager at Zacks Investment Management, pointed out that elevated operating expenses, tariffs, increased wages, and logistics costs continue to weigh down the company’s profit margins.
Stagnant housing market
Both Home Depot and Lowe’s are experiencing weak demand as rising mortgage rates lead homeowners to stay put, instead opting for essential repairs over costly renovations.
CEO Ted Decker mentioned that ongoing consumer anxiety combined with persistent housing pressures significantly impacts the demand for home improvement services.
Home Depot now projects that its adjusted earnings per share for the year will decline by 5% instead of the previously estimated 2% drop.
For same-store sales growth, the company expects only slightly positive results for the year, a contrast to the 1% increase achieved in August.
In the third quarter, Home Depot’s comparable sales remained stable, with a slight decline of 1.6% in transactions as customers delayed projects like kitchen and bathroom renovations.
Nonetheless, sales reached $41.35 billion, surpassing the anticipated $41.1 billion, as reported by data from LSEG.
On the earnings side, adjusted earnings per share stood at $3.74, falling short of analysts’ expectations of $3.84, marking the third consecutive quarter of disappointing earnings.
