Retailer lowers guidance after soft quarterly results
Home Depot reduced its full year profit forecast on Tuesday and posted weaker than expected earnings for a third straight quarter. The company faced sluggish home improvement demand, cautious consumer spending and lower storm activity, all of which weighed on performance. Sales for the year are now expected to rise about 3 percent, with comparable sales becoming only slightly positive, a downgrade from earlier projections. The revised forecast includes roughly 2 billion dollars in added revenue from GMS, a distributor acquired this year.
The company now expects adjusted earnings per share to fall about 5 percent from last year, compared with its previous estimate of a 2 percent decline. Shares fell 6 percent on Tuesday and are down about 13 percent this year. Chief Financial Officer Richard McPhail said the company expected storm related demand and a pickup in home improvement activity, but neither trend materialised. Higher mortgage rates and continued uncertainty in the housing market contributed to the slowdown.
Project delays and weak housing turnover drag activity
Home Depot relies on housing turnover to drive major projects, but higher borrowing costs have discouraged homeowners from taking on large renovations. McPhail said consumers remain in a deferral mindset, delaying major spending until mortgage rates fall or stabilise. Comparable sales rose just 0.2 percent in the quarter, missing expectations, and sales trends cooled as the quarter progressed. August showed growth of 2 percent, September rose 0.5 percent, and October declined 1.5 percent year over year.
Net income for the quarter fell to 3.60 billion dollars compared with 3.65 billion dollars a year earlier. Total revenue reached 41.35 billion dollars, narrowly topping analyst expectations, yet demand remains uneven. CEO Ted Decker said the main contributor to weaker results was the lack of storm activity compared with last year, and expects that pressure to continue through the holiday quarter. Despite softer project activity, customers did not trade down to cheaper goods, and big ticket transactions rose 2.3 percent. Average ticket climbed 1.8 percent while customer transactions fell 1.6 percent.
Company expands pro strategy while managing tariff risks
With DIY customers postponing major spending, Home Depot is pursuing more business from contractors and professional trades. The company completed two major acquisitions in this segment, including SRS Distribution for more than 18 billion dollars and GMS earlier this year. The goal is to expand exposure to roofing, landscaping and other pro services where demand tends to stay more stable.
Tariffs have added cost pressure to some imported goods, and executives have warned that selective price increases may be unavoidable. McPhail said price actions have been modest, and some seasonal items have even become cheaper, such as the Grand Duchess Christmas tree and popular lighting products. Online sales were a bright spot, rising 11 percent year over year. Still, McPhail noted the company does not see clear near term catalysts for a demand acceleration, as consumers across income levels remain hesitant to finance large projects.
