Home Depot sharply reduced its earnings guidance for fiscal 2025 on Tuesday, citing disappointing demand in the third quarter and a broader slowdown in consumer spending on home improvement that the company had anticipated would accelerate heading into the fall and winter months.
The world’s largest home-improvement retailer now expects adjusted earnings per share to decline 5 percent from the prior year, down from its previous forecast of a 2 percent decline. The company also lowered its full-year comparable sales guidance to “slightly positive” from its prior forecast of 1 percent growth.
“While underlying demand in the business remained relatively stable sequentially, an expected increase in demand in the third quarter did not materialize,” CEO Ted Decker said in the company’s earnings announcement. “We believe that consumer uncertainty and continued pressure in housing are disproportionately impacting home improvement demand.”
Home Depot’s third quarter comparable sales grew just 0.2 percent, missing analyst expectations of 1.36 percent growth. The company attributed some weakness to an unseasonably mild fall that reduced demand for storm-related products like roofing and generators compared to the prior year, which experienced multiple strong storms.
But executives indicated the broader issue was consumer hesitation.
Chief Financial Officer Richard McPhail told Bloomberg that the company had expected demand to strengthen as mortgage rates declined. “We had expected demand to begin accelerating gradually in the back half of the year as interest and mortgage rates eased,” McPhail said in the Bloomberg interview. “But what we see is ongoing consumer uncertainty and continued pressure in housing disproportionately impacting home improvement demand.”
The guidance cut comes as retailers face mounting pressure from a cooling job market and broader economic uncertainty. Home Depot’s results suggest that even modest improvements in borrowing costs have failed to convince consumers to make larger financial commitments on home projects. The Federal Reserve is no longer expected to cut interest rates in December, and critics have argued that the central bank is keeping rates too high relative to economic conditions. Consumers are instead gravitating toward smaller discretionary purchases like painting supplies and garden items that don’t require significant financing.
“Our customers are homeowners. They are seeing home prices now decline in more markets than rising, and we know they have job concerns,” McPhail told the Wall Street Journal. “This all comes together in the form of hesitation to take on larger financial commitments.”
Home Depot shares fell as much as 5 percent in early trading following the announcement. The stock is down approximately 8 percent year-to-date, underperforming the S&P 500 Index, which is up 13 percent.
The company reported third-quarter net earnings of $3.6 billion, or $3.62 per diluted share, compared with $3.67 per share in the same period last year. Adjusted earnings per share came in at $3.74, below the $3.84 that analysts had expected.
Sales rose 2.8 percent to $41.35 billion, though approximately $900 million of that growth came from the company’s recent acquisition of GMS Inc., a building supplier.
That means organic sales growth was significantly weaker than the headline figure suggests.
Despite the weakness, Home Depot noted that it is gaining market share and that certain positive trends persist. The company said customers continue to trade up to higher-priced products even when making smaller purchases, and that big-ticket transactions over $1,000 grew during the quarter compared to the prior year. The company has also been successfully expanding its business serving professional contractors and builders, which has provided a partial offset to weakness in the do-it-yourself consumer segment.
Still, with no immediate catalyst in sight to reverse housing market pressure or reduce consumer uncertainty, Home Depot’s outlook suggests a prolonged period of weakness in home-improvement spending. Mortgage rates have edged lower but remain elevated by historical standards, and affordability concerns continue to weigh on consumers already anxious about job security and economic conditions.
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