Home Depot confirmed its full-year sales forecast on Tuesday, with Chief Financial Officer Richard McPhail telling CNBC that the retailer does not plan to raise prices due to tariffs. Despite facing challenges in a sluggish housing market, Home Depot is leveraging its scale and supplier partnerships to maintain current pricing levels.
Pricing Strategy and Market Dynamics
McPhail emphasized Home Depot’s ability to absorb higher tariffs due to its scale and flexibility, noting that the company has worked over several years to diversify its sources of imports, decreasing reliance on China. By next year, no country outside the U.S. will represent more than 10% of Home Depot’s purchases.
This strategy contrasts with Walmart, which announced plans to raise prices due to tariffs. McPhail explained that keeping prices stable could help Home Depot capture market share, especially in the face of a sluggish housing market and changing consumer behavior.
First-Quarter Results
In its fiscal first quarter, Home Depot missed Wall Street’s earnings expectations for the first time since May 2020 but exceeded sales estimates. The retailer reported earnings per share (EPS) of $3.56, adjusted, compared to expectations of $3.60. Revenue came in at $39.86 billion, surpassing analysts’ forecast of $39.31 billion.
While Home Depot’s seasonal boost from spring sales was evident, challenges remain due to high interest rates and consumer uncertainty. CEO Ted Decker highlighted that while smaller home improvement projects are seeing demand, larger projects have been delayed, impacting the retailer’s growth.
Growth Expectations and Forecast
For the full year, Home Depot expects total sales to grow by 2.8%, with comparable sales rising around 1%. The company’s forecast is based on the continuation of a temporary agreement to lower tariffs to 30% on Chinese imports and 10% for other countries.
Challenges and Consumer Trends
Home Depot’s first-quarter performance showed some positive trends, particularly in appliance, garden, plumbing, and electrical departments. However, sales have been weaker in areas related to larger home improvement projects, such as kitchen countertops and bath remodels. This trend aligns with broader consumer reluctance to take on large renovations due to financial uncertainty.
Strategic Acquisitions and Future Outlook
In a bid to strengthen its business, Home Depot acquired SRS Distribution, a roofing and landscaping supplier, for $18.25 billion last year. This acquisition helped drive about $2.6 billion in sales growth for the quarter, with additional growth attributed to new store openings. Despite challenges, Home Depot’s affluent customer base and strong market presence position it well for continued engagement in home improvement.
As of the most recent market close, Home Depot’s shares have seen a slight decline of 2% year-to-date, trailing the S&P 500’s gains. The company’s market value stands at approximately $377 billion.
