A mixed quarter for Home Depot with fewer storms and a more cautious consumer

Home Depot experienced a mixed third quarter, impacted by fewer severe storms making landfall and growing caution among U.S. consumers amid a sluggish housing market. The company reported earnings of $3.6 billion, or $3.62 per share, for the quarter ending November 2, slightly down from $3.65 billion or $3.67 per share in the same period last year. When stripping out one-time charges and benefits, earnings per share reached $3.74, falling short of Wall Street estimates by ten cents. This led to a 2% drop in shares before the market opened on Tuesday. CEO Ted Decker attributed the earnings miss to the unexpectedly low storm activity, which put more pressure on certain product categories. He also noted that while the underlying demand remained relatively stable, the anticipated growth in the third quarter demand failed to materialize, largely due to heightened consumer uncertainty and ongoing struggles in the housing sector, which are weighing heavily on home improvement spending. The company’s revenue showed improvement, climbing to $41.35 billion from $40.22 billion a year ago, slightly beating analyst expectations of $41.15 billion. Comparable store sales, a critical metric for retailers, inched up by 0.2% overall, with U.S. stores posting a modest 0.1% increase. However, the number of customer transactions dipped by 1.4%, even though the average amount spent per receipt grew from $88.65 to $90.39. Looking ahead, Home Depot revised its fiscal 2025 outlook, lowering its adjusted earnings forecast to a 5% decline compared to fiscal 2024’s $15.24 per share, a steeper drop than the previously anticipated 2%. Conversely, it slightly increased its sales growth projection to about 3%, up from 2.8%, while now expecting only a slight positive gain in comparable sales, down from an earlier estimate of around 1%. In August, the retailer warned customers to expect modest price hikes in select categories due to rising tariff costs, though these increases won’t be widespread. More than half of Home Depot's products are sourced domestically and remain unaffected by tariffs. The company’s financial results come amid a continued slump in the U.S. housing market, where the home turnover rate—the rate at which homes change hands—has fallen to the lowest in decades. From January to September, just 28 out of every 1,000 homes were sold, marking one of the slowest rates since at least the 1990s, according to Redfin. This metric highlights that homeowners are holding on to their properties longer, a trend driven largely by higher mortgage rates that have dampened home buying since 2022, following a frenzy fueled by historically low rates earlier in the decade.