Home Depot forecast a bigger drop in full-year profit after missing Wall Street estimates for quarterly earnings on Tuesday, as tariff-driven economic uncertainty dampened demand for big-ticket renovations and do-it-yourself projects.
The shift in tone from the company comes as executives said that a widely expected pick-up in demand from easing US interest and mortgage rates had failed to materialize, likely amplifying concerns over a slowing economy.
The world’s top home-improvement chain set the ball rolling for a week packed with earnings reports from big-box retailers, including Walmart and Target, as investors track consumer spending ahead of the all-important holiday season amid tariff-driven cost pressures.
Home Depot’s shares fell about 4% and those of rival Lowe’s declined 2%. Lowe’s is set to report results on Wednesday.
“Company’s margin performance remains soft due to increased operating expenses, tariffs on imported goods, rising wages, and logistics costs,” said Brian Mulberry, senior client portfolio manager at Zacks Investment Management.
Stalled housing market
Home Depot and Lowe’s have faced subdued demand as high mortgage rates prompted owners to stick to their homes and focus on essential repairs and shun big-ticket remodeling.
“We believe that consumer uncertainty and continued pressure in housing are disproportionately impacting home improvement demand,” CEO Ted Decker said in a statement.
Home Depot projected annual adjusted earnings per share to decline 5%, compared with its prior target of a 2% drop year-on-year.
Annual same-store sales growth is expected to be “slightly positive,” compared with an August forecast of a 1% increase.
Home Depot’s comparable sales were largely flat in the third quarter, and comparable transactions fell 1.6%, as customers put off projects such as kitchen and bathroom remodels.
Still, sales of $41.35 billion beat expectations of $41.10 billion, according to data compiled by LSEG.
Adjusted profit per share missed estimates for the third straight quarter, coming in at $3.74, compared with analysts’ expectations of $3.84.
