Home Depot Inc. reported weaker-than-expected sales in its latest quarter, as persistent high borrowing costs and sluggish housing demand continued to weigh on consumer spending for home improvement projects.
Comparable Sales Growth Falls Short
Sales at stores open for at least one year increased by 0.6% during the three months ending May 3, according to a company statement. This figure fell slightly below the average of analysts' estimates compiled by Bloomberg. However, earnings per share, excluding certain items, managed to exceed expectations.
Challenging Housing Market Conditions
The home improvement retailer has faced headwinds from elevated interest rates and high home prices over the past three years, prompting a pullback in home purchases and major renovation projects. Instead of undertaking extensive remodels that require financing and large quantities of materials, many Americans are opting for smaller, less costly projects such as painting and gardening.
Home Depot shares dropped as much as 3.6% on Tuesday. The stock had already declined 13% this year through Monday's close, contrasting with an 8.1% gain for the S&P 500 Index.
Executive Insights on Demand Trends
Chief Executive Officer Ted Decker noted during a conference call with analysts: "The underlying demand in our business was relatively similar to what we saw throughout fiscal 2025, despite greater consumer uncertainty linked to housing affordability pressure." He added that the company does not foresee a "marked" improvement in the near term.
External factors may continue to pressure results. Following a brief dip in February, mortgage rates have risen alongside energy prices as geopolitical tensions, particularly the war in Iran, fuel new concerns about inflation. Existing home sales have remained flat at the start of the critical spring-selling season, while consumer sentiment has deteriorated.
Chief Financial Officer Richard McPhail stated in an interview: "Shoppers continue to defer large projects. They have told us that they have a higher degree of uncertainty." The retailer is closely monitoring rising fuel prices and mortgage rates, though changes in spending habits have not yet materialized. McPhail noted it is too early to determine how much Home Depot's product prices might increase due to higher fuel costs.
Outlook and Market Share Strategy
The company maintained its full-year guidance. Home Depot executives have previously indicated that mortgage rates would need to decline and income levels would need to rise more significantly for the housing market to rebound.
Comparable sales turned negative in April after rising during the two prior months, executives revealed on the call. Demand has improved in recent weeks as spring weather sets in. Popular items among everyday customers include garden products, patio grills, and storage items, while professional customers have been purchasing power tools, water heaters, and paint.
GlobalData analyst Neil Saunders commented on the results: "There is nothing particularly spectacular about the latest results from Home Depot. But then, nor is there anything particularly shocking." The figures reflect the continued softness of the housing market, a situation unlikely to change soon, Saunders added, emphasizing that the focus is on a "medium-term battle" to capture market share from competitors.
