Additional Coverage:
- Home Depot has been quietly struggling and it could be bad news for the US economy (marketrealist.com)
Home Depot’s Slump: A Red Flag for the US Economy?
America’s go-to spot for everything home improvement, Home Depot, has been hitting a rough patch lately. The retail giant recently trimmed its earnings outlook for the upcoming year, pointing to a noticeable slowdown in the housing market. This cautious report, updated on December 9th, suggests that Home Depot doesn’t anticipate a quick rebound in the housing sector anytime soon.
In its third-quarter earnings report, Home Depot revealed a meager 0.1% year-on-year increase in comparable sales in the U.S., falling short of the company’s own estimates. This marks the third consecutive quarter the retailer has missed Wall Street’s earnings expectations, leading to a further cut in its full-year profit forecast.
The company attributed this downturn to a combination of tepid home improvement demand, reduced consumer spending, and a notable absence of storm activity – a factor that significantly boosted sales in the previous year as homeowners prepared for hurricanes. Adding to the concerns, foot traffic at Home Depot stores also saw a slight dip of approximately 0.4% during the quarter, according to data from Placer.ai.
Ted Decker, Chair, President, and CEO of Home Depot, explained in a statement, “Our results missed our expectations primarily due to the lack of storms in the third quarter, which resulted in greater-than-expected pressure in certain categories. Additionally, while underlying demand in the business remained relatively stable sequentially, an expected increase in demand in the third quarter did not materialize. We believe that consumer uncertainty and continued pressure in housing are disproportionately impacting home improvement demand.”
Looking ahead, Home Depot’s forecast for the next fiscal year offers little cause for immediate optimism. The company projects comparable sales growth of a modest 0% to 2% and diluted earnings-per-share to increase by roughly 4%.
Total sales are expected to grow by approximately 2.5% to 4.5%. These conservative projections are largely attributed to the current landscape of the housing market, where increasing interest rates have created significant barriers for new home buyers.
Furthermore, an uncertain economy and rising costs are prompting consumers to defer large home improvement projects. Richard McPhail, Chief Financial Officer, stated at an investor event in New York, “Looking forward to 2026, we anticipate these pressures will persist, as we have not yet seen a catalyst for an inflection in housing activity.”
McPhail previously told CNBC that homeowners have been in a “deferral mindset” since 2023, creating a “waiting game” for the retailer. He highlighted that the frequency of major improvement projects has decreased as higher interest rates translate to steeper borrowing costs, which many homeowners historically utilized for renovations.
While emphasizing that demand has remained stable over the past two quarters, McPhail reiterated that the absence of hurricanes led to a sales slump compared to the previous year, which saw the impact of Hurricane Milton. Despite these challenges, Home Depot’s report indicates a readiness to pivot toward longer-term strategies to ensure future success, even as it braces for continued slow sales in the coming year.