Home Depot Third Quarter 2025 Results (HD)

Home deposit The group on Tuesday lowered its full-year profit forecast and missed Wall Street expectations for the third straight quarter, due to weaker home improvement demand, lukewarm consumer spending and weaker-than-usual storm activity.

The retailer said it now expects full-year sales to increase by around 3% and that comparable sales, which exclude the impact of one-off factors such as store openings and calendar differences, will be slightly positive. This compares to its previous expectations that full-year sales would increase 2.8% and comparable sales would increase 1%.

The revised outlook includes about $2 billion in additional revenue from GMS, a building products distributor acquired by Home Depot earlier this year. The company’s sales were not part of its previous full-year guidance.

Home Depot expects full-year adjusted earnings per share to decline about 5% from the year-ago period, compared to previously expecting a decline of about 2%.

In an interview with CNBC, CFO Richard McPhail said the retailer previously expected an increase in home improvement activity. He also expects higher sales of roofing materials, generators and other supplies that typically sell out before and after seasonal storms.

Neither dynamic came to fruition, he said, putting pressure on the company.

“When we established our forecast, we anticipated that demand would begin to gradually accelerate in the second half of the year as interest rates and mortgage rates declined,” he said. “But what we have found is that continued consumer uncertainty and continued housing pressure are having a disproportionate impact on home improvement demand.”

Here’s what Home Depot reported for the fiscal third quarter compared to Wall Street estimates, according to a survey of analysts by LSEG:

• Earnings per share: $3.74 adjusted vs. $3.84 expected
• Income: $41.35 billion versus $41.10 billion expected

Home Depot shares closed at $336.48 on Tuesday, down 6%. As of Tuesday’s close, the company’s shares were down about 13% year to date. That’s behind the S&P 500’s nearly 13% gains over the same period.

For Home Depot, housing turnover typically spurs larger, more lucrative projects as customers repair their homes before or after moving. However, the frequency of these large projects has declined as higher interest rates have led to higher mortgage rates and borrowing costs for loans, which a homeowner can use to pay for a kitchen remodel or major addition.

Since around mid-2023, McPhail told CNBC, owners have been in a “carryover mindset.” This has led to a bit of a waiting game for Home Depot as it waits for either lower mortgage rates or a shift from consumers getting used to higher mortgage rates as the new normal.

Over the past three months, this waiting game has continued. McPhail told CNBC that demand was “flat” from the second to third fiscal quarters, taking into account the absence of hurricanes.

But, he added, “at this stage it is difficult to identify short-term catalysts that could lead to acceleration.”

Home Depot’s net income for the three months ended Nov. 2 fell to $3.60 billion, or $3.62 per share, from $3.65 billion, or $3.67 per share, in the year-earlier quarter. Revenue was down from $40.22 billion in the year-ago quarter.

Taking into account one-time items, including the value of intangible assets, Home Depot reported earnings of $3.74 per share.

Comparable sales rose 0.2% in the quarter, below analysts’ expectations of 1.4% growth, according to StreetAccount.

Year-over-year sales trends slowed as the quarter progressed. Comparable sales rose 2% in August, 0.5% in September and 1.5% year over year in October, Billy Bastek, executive vice president of merchandising, said during the company’s earnings conference call.

CEO Ted Decker said during an earnings conference call that the main factor in the deceleration was the lack of storm activity, particularly during the period last year with many hurricanes. He said the pressure would continue in the fourth quarter.

Compared to other big-box retailers, Home Depot’s customers tend to be more financially stable. About 90 percent of its DIY customers own their homes, and home professionals who shop at the retailer tend to be hired by homeowners.

Even so, McPhail told CNBC Home Depot that he gave a gloomy outlook, in part because buyers across all income groups are reluctant to take on expensive projects. He said the slowdown in the housing market and the higher cost of borrowing had contributed to the trend.

He added that other factors could also have a deterrent effect, including the prolonged government shutdown, a rise in corporate layoff announcements and a decline in housing values ​​in some markets.

However, Bastek said during the company’s earnings conference call that Home Depot has not seen its customers shift to cheaper products. Instead, he said, they often opt for more innovative, high-end appliances, power tools or other items, which tend to cost more.

Expensive transactions, which the company defines as costing $1,000 or more, increased 2.3% year over year. Nonetheless, Bastek added that the company continues to see “softer engagement in larger discretionary projects where clients typically use financing to fund renovation projects.”

The average ticket, the typical amount spent by customers in-store or on the company’s website, increased 1.8% year over year during the quarter. However, customer transactions fell 1.6% year-on-year.

The bright spot for the quarter was online sales, which increased 11% year over year, McPhail said.

As DIY customers postpone larger projects, the company has tried to attract more business from contractors, roofers and other professionals.

The company made two significant purchases from professional-related companies. Last year, it bought Texas-based SRS Distribution for $18.25 billion – the largest acquisition in its history. The company sells supplies to professionals in the landscaping, swimming pool and roofing industries. Home Depot acquired GMS earlier this year.

Like other retailers, Home Depot has felt the impact of rising costs on some imported items due to tariffs. McPhail said in May that the company was diversifying the countries from which it sources products and intends to “generally maintain our current pricing levels across our portfolio.”

However, company executives warned in August that they may have to raise prices in some categories due to higher tariffs.

McPhail told CNBC that Home Depot had raised prices on some items, but said “where there was price action, it was modest.”

He said Home Depot has kept prices the same for some key items or has even been able to reduce them. For example, he said, the price of his best-selling 7½-foot Grand Duchess Christmas tree and many of his tree string lights has come down.