Home Depot (HD) reported second-quarter results that fell short of Wall Street’s earnings and sales forecasts, marking a rare stumble after more than five years of consistent upside surprises.
Adjusted earnings came in at $4.68 per share, just shy of analyst expectations of $4.72. Net sales rose nearly 5% to $45.3 billion, a figure that was also slightly below forecasts.
Still, investors largely looked past the miss. Shares of the home-improvement giant rose nearly 3% Tuesday, buoyed by management’s decision to reaffirm its full-year guidance. The company expects sales to grow about 2.8% this year, with comparable store sales climbing around 1%.
CEO Ted Decker credited “continued momentum” in smaller home-improvement projects, while CFO Richard McPhail noted that comparable sales increased every month in the quarter, culminating in a robust 3.3% gain in July.
Consumers Spend More per Visit, but Foot Traffic Slips
The report painted a nuanced picture of consumer behavior. Comparable store sales rose 1% in the quarter, reversing a 0.3% decline the previous period. Shoppers also spent more per trip, with the average ticket rising 1.4%.
But that strength was offset by a 0.4% drop in comparable transactions, signaling fewer visits overall. Data from Placer.ai showed total store visits declining 2.2% year over year. Analysts said the weakness reflected a housing market that remains in a holding pattern, as high mortgage rates and economic uncertainty keep homeowners from tackling larger, debt-financed renovations.
“Customers are deferring projects, not canceling them,” McPhail emphasized. “Home improvement demand persists, and our job is to be ready when those projects move forward.”
Market Looks Ahead to Fed Rate Cuts
Despite the mixed performance, Wall Street appeared encouraged by Home Depot’s resilience and focus on smaller projects. The stock climbed as much as 3.9% in early trading Tuesday to just under $410, even as the broader S&P 500 slipped.
Investor optimism hinges on the Federal Reserve. Markets widely expect the central bank to begin cutting interest rates in September, which could help unlock demand for bigger-ticket remodeling projects. Lower borrowing costs would reduce financing hurdles for homeowners, potentially reigniting activity in Home Depot’s higher-margin professional contractor segment.
In the meantime, the company is also contending with external pressures. Roughly half of its merchandise is imported and subject to tariffs, which executives warned could result in “modest price movement” across select categories.
Despite the mixed performance, Wall Street appeared encouraged by Home Depot’s resilience and focus on smaller projects. The stock climbed as much as 3.9% in early trading Tuesday to just under $410, even as the broader S&P 500 slipped.
Investor optimism hinges on the Federal Reserve. Markets widely expect the central bank to begin cutting interest rates in September, which could help unlock demand for bigger-ticket remodeling projects. Lower borrowing costs would reduce financing hurdles for homeowners, potentially reigniting activity in Home Depot’s higher-margin professional contractor segment.
In the meantime, the company is also contending with external pressures. Roughly half of its merchandise is imported and subject to tariffs, which executives warned could result in “modest price movement” across select categories.
A Wait-and-See Approach
While Home Depot’s second-quarter results underscored lingering headwinds, its guidance signals confidence in steady—if unspectacular—growth. With homeowners sitting on an estimated $11 trillion in tappable equity, management believes the long-term outlook for home improvement remains intact.
For now, the company is leaning on smaller projects to drive sales, while waiting for rate relief and housing activity to reignite larger-scale renovations. Investors appear willing to be patient, betting that Home Depot’s positioning will pay off once economic conditions turn more favorable.
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