Home Depot Misses Earnings Expectations Despite Positive Sales Growth

NEW YORK CITY, NY — Home Depot reported its fiscal second quarter earnings on Tuesday, falling slightly short of Wall Street’s expectations despite an increase in revenue. The home improvement retailer stated that it expects full-year sales to grow by 2.8%, with comparable sales anticipated to rise about 1%.

In the three-month period ending August 3, Home Depot’s net income fell to $4.55 billion, or $4.58 per share, down from $4.56 billion, or $4.60 per share in the same period last year. Revenue did increase nearly 5%, reaching $43.18 billion, though this was not enough to meet analysts’ estimates.

This marked the first time since May 2014 that Home Depot’s results missed both earnings and revenue expectations. According to Chief Financial Officer Richard McPhail, the company is still navigating a slow recovery in home improvement activity influenced by factors like housing turnover and consumer sentiment.

McPhail noted a continuing trend of homeowners adopting a “deferral mindset” since mid-2023, awaiting better conditions before investing in home improvement projects. Yet, he pointed out that big-ticket transactions, defined as those over $1,000, rose by 2.6% compared to the previous year.

Twelve of Home Depot’s 16 merchandising departments reported year-over-year sales gains, with comparable sales showing steady improvement throughout the quarter. In May, comparable sales increased by 0.3%, followed by 0.5% in June and 3.3% in July.

Regarding the future, McPhail indicated that Home Depot’s fiscal 2025 outlook does not account for possible interest rate cuts by the Federal Reserve, which could stimulate consumer borrowing and larger projects. “We don’t embed any point of view on the rate environment changing,” he stated.

As the real estate market remains sluggish, Home Depot is expanding its focus. The company recently announced a $4.3 billion acquisition of a specialty building products distributor. McPhail mentioned that around 55% of Home Depot’s sales are from professional customers, leaving 45% derived from DIY shoppers.

Overall comparable sales saw a 1% increase across the business and 1.4% domestically during the second quarter. However, foreign exchange impacts lowered comparable sales by approximately 40 basis points.

Customer transactions dipped to 446.8 million, down from 451 million the year before, although customers spent slightly more per transaction, with the average ticket rising to $90.01 from $88.90. Home Depot’s shares were down about 2% in premarket trading, closing at $394.70 on Monday, up around 1.5% for the year.