Home Depot reaffirmed its full-year sales forecast on Tuesday while announcing plans to hold steady on prices despite mounting tariff pressures that have forced other major retailers to implement increases. This pricing strategy marks a significant divergence from competitors like Walmart, which recently announced price hikes beginning in late May to offset higher costs from tariffs.
Strategic supplier relationships
The home improvement giant attributes its pricing stability to three key factors that provide competitive advantages in the current economic climate:
- Scale of operations across thousands of retail locations
- Strong partnerships with suppliers developed over decades
- Ongoing productivity improvements throughout the business
These advantages have enabled Home Depot to maintain pricing stability despite external pressures. The company has deliberately diversified its supply chain over recent years, reducing dependency on any single international source. More than half of the retailer’s merchandise originates from domestic suppliers within the United States.
The diversification strategy has specifically targeted reducing Chinese imports. Company executives indicated that by this time next year, no country outside the United States will account for more than 10% of Home Depot’s total purchases. This strategic shift provides increased flexibility and reduced vulnerability to tariff fluctuations between specific countries.
First quarter performance indicators
The pricing announcement accompanied Home Depot’s fiscal first quarter results, which showed mixed performance. The retailer missed Wall Street’s earnings expectations for the first time since May 2020, reporting adjusted earnings per share of $3.56 compared to analyst estimates of $3.60. This represents the company’s first earnings miss in nearly five years.
Despite the earnings shortfall, Home Depot exceeded revenue expectations with $39.86 billion against projected estimates of $39.31 billion. The market responded positively to the mixed results, with shares rising approximately 2% in premarket trading.
Net income for the three-month period ending May 4 totaled $3.43 billion, equivalent to $3.45 per share. This represents a decline from the $3.60 billion or $3.63 per share reported in the same period last year. Adjusted earnings calculations exclude specific costs, including impacts from depreciation of acquired intangible assets.
Seasonality factors and performance patterns
Spring traditionally represents Home Depot’s peak sales season, comparable to the December holiday period for other retailers. Warmer, drier weather typically drives increased project activity among both homeowners and professional contractors. Despite this seasonal advantage, the company continues to face challenging market conditions as consumers postpone home purchases and major renovation projects due to elevated mortgage rates and higher borrowing costs.
Sales growth showed muted performance overall. Comparable sales, which exclude impacts from store openings and calendar differences, dropped 0.3% across the entire company during the first quarter. However, United States operations showed marginally better performance with comparable sales increasing 0.2% year over year.
The quarter demonstrated a progressive improvement pattern as it developed. February began with challenging comparable sales declining 3.3% year over year, attributed primarily to adverse weather conditions. March showed improvement with a 1.3% increase compared to the prior year period. By April, comparable sales had strengthened further to 1.8% growth year over year.
This improving trend has apparently continued beyond the quarter, with company executives noting that customer engagement levels observed in April have persisted through the initial weeks of May. The sequential improvement suggests potential strengthening in consumer demand patterns.
Annual forecast maintained
For the full fiscal year, Home Depot maintained its previous guidance, projecting total sales growth of 2.8% and comparable sales increases of approximately 1%. This forecast assumes continuation of current trade conditions, specifically the temporary reduction of tariffs on Chinese imports to 30% and tariffs of 10% for many other countries.
The maintained forecast comes during a period when numerous corporations have either revised or withdrawn financial guidance due to rapidly changing tariff policies from the current presidential administration. Home Depot’s willingness to maintain its outlook suggests confidence in its ability to navigate these uncertain trade conditions.
Strategic business expansion
As Home Depot confronts challenging housing market conditions, the company has strategically expanded its professional customer segment. A significant component of this strategy was last year’s acquisition of SRS Distribution, a Texas-based supplier of materials to roofing, pool, and landscaping professionals, in a transaction valued at $18.25 billion.
The impact of this acquisition is evident in the company’s overall sales growth. Including SRS Distribution, Home Depot’s sales increased approximately 9% year over year, reaching $39.86 billion compared to $36.42 billion in the same quarter last year. Company executives clarified that approximately $2.6 billion of that year-over-year gain came directly from SRS business, with additional growth contributions from new store openings.
Customer engagement metrics
Customer transactions across Home Depot’s website and physical stores increased 2.1% compared to the previous year. Average ticket value, measuring typical spending during these store or website visits, remained nearly unchanged at $90.71, representing just a minimal increase of a few cents above the average recorded in the year-ago period.
Company representatives note that Home Depot’s customer base skews toward more affluent consumers who tend to be employed and have benefited from significant property value appreciation since 2019. Approximately 80% of their customers are homeowners, and the professional contractors who purchase from Home Depot primarily serve homeowners hiring them for specialized projects ranging from roofing and electrical work to complete kitchen remodels.
Project size trends
Despite the overall stability in customer engagement, the company observed changing patterns in project scope. Do-it-yourself customers currently demonstrate a tendency to defer larger projects while focusing on smaller and seasonal improvements. This shift reflects broader economic caution among consumers.
The company reported strong positive response to its spring Black Friday promotional event. Departments showing particularly robust sales included appliances, garden supplies, plumbing fixtures, and electrical components. However, categories typically associated with larger renovation projects, such as kitchen countertops and bathroom fixtures, have experienced softer sales performance.
Market performance context
Home Depot’s stock performance has slightly trailed broader market indices in 2024. As of Monday’s market close, Home Depot shares had declined approximately 2% year-to-date, compared to the S&P 500’s modest gains of about 1% during the same period. The company’s stock closed at $379.38 on Monday, establishing its market capitalization at approximately $377 billion.
The company’s ability to maintain pricing stability while growing overall sales by 9% demonstrates resilience in challenging market conditions. As interest rates and housing market dynamics continue to evolve, Home Depot’s diversified strategy spanning both consumer and professional segments provides multiple growth avenues despite persistent headwinds in certain project categories.
