Home Depot reaffirmed its full-year sales outlook on Tuesday, as a senior executive conveyed to Finance Newso that the retailer does not plan to increase prices despite the impact of tariffs.
“Thanks to our size, strong partnerships with suppliers, and ongoing operational productivity, we aim to generally keep our pricing stable across our entire product range,” said McPhail during a Finance Newso interview.
According to McPhail, over half of the company’s sales come from the United States. He noted that in recent years both Home Depot and its suppliers have worked on diversifying their import sources, reducing the proportion of purchases from China. By next year, he projected that no single country outside the U.S. would account for more than 10% of the company’s total purchases.
This pricing approach sets Home Depot apart from Walmart, which announced last week that it may need to raise prices as soon as May to offset increased costs from tariffs.
McPhail’s remarks followed the release of Home Depot’s first-quarter results amidst a broader context of companies reassessing their financial forecasts due to President Donald Trump’s fluctuating tariff policies. The retailer fell short of Wall Street’s earnings expectations for the first time since May 2020 but surpassed sales projections.
For the entire year, Home Depot anticipates a 2.8% growth in total sales along with an approximate 1% increase in comparable sales, which exclude one-time factors like store openings. This prediction is based on the assumption that the U.S. will maintain lowered tariffs of 30% on imports from China and 10% on imports from many other countries.
Below are Home Depot’s fiscal first-quarter results in contrast to analyst expectations from a survey conducted by LSEG:
- Earnings per share: $3.56, adjusted vs $3.60 expected
- Revenue: $39.86 billion vs. $39.31 billion expected
Following the announcement, Home Depot shares increased by over 2% in premarket trading.
In the three-month period ending May 4, Home Depot reported a net income of $3.43 billion, or $3.45 per share, compared to $3.60 billion, or $3.63 per share, in the same period last year. The adjusted earnings per share take into account certain costs, including depreciation of acquired intangible assets.
Spring is Home Depot’s busiest season, as warmer and dryer weather typically encourages homeowners and contractors to initiate more projects. However, the environment remains challenging for the retailer, as increasing mortgage rates lead many U.S. consumers to postpone home purchases and significant renovation projects.
Sales growth has been tepid. In the fiscal first quarter, comparable sales declined by 0.3% overall, while U.S. comparable sales saw a modest increase of 0.2% year-over-year.
This pattern of sales performance has been consistent, except for the previous quarter, during which Home Depot broke an eight-quarter streak of declining comparable sales. In the fourth quarter, comparable sales rose by 0.8% across the company.
McPhail noted that sales patterns improved as the quarter progressed. Comparable sales fell by 3.3% year-over-year in February, then rose by 1.3% in March, and increased by 1.8% in April compared to the previous year.
He attributed the weak sales in February to unfavorable weather conditions.
“We managed to recover through the latter part of the quarter, culminating in a strong April, and we’ve continued to see a high level of customer engagement into the early weeks of May,” he stated.
Facing a more challenging housing market, Home Depot has been actively seeking to attract more business from home professionals. The retailer acquired SRS Distribution, a Texas-based supplier for roofing, landscaping, and pool professionals, last year for $18.25 billion.
Including SRS, Home Depot recorded a year-over-year sales growth of approximately 9% in the first quarter, increasing from $36.42 billion in the same quarter last year. About $2.6 billion of this growth was attributed to SRS, along with contributions from new store openings, McPhail reported.
During the fiscal first quarter, there was a 2.1% year-over-year increase in customer transactions at Home Depot’s stores and on its website. The average transaction amount also showed a slight increase, reaching $90.71, surpassing the average amount from the previous year.
Compared to other retailers, Home Depot serves a more affluent customer base that is typically employed and has benefited from the significant rise in property values since 2019. McPhail noted that around 80% of its customers are homeowners, and the home professionals purchasing from Home Depot cater to homeowners who hire them for various projects ranging from roofing to kitchen renovations.
“Our customer base is performing well, and we believe this has fostered their strong engagement in home improvement,” he remarked.
Nonetheless, McPhail acknowledged that do-it-yourself customers are delaying larger projects and are primarily engaging in smaller, seasonal improvements. Home Depot experienced favorable responses during its spring Black Friday promotion and observed robust sales in the appliance, garden, plumbing, and electrical departments, while categories like kitchen countertops and bathrooms, which are typically linked to more expensive renovation projects, have seen weaker sales.
As of Monday’s market close, Home Depot’s shares have decreased by approximately 2% year-to-date, lagging behind the S&P 500’s gain of around 1% over the same timeframe. Its shares ended Monday at $379.38, giving the company a market capitalization of approximately $377 billion.
— Finance Newso’s Robert Hum contributed to this report.
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