ii view: Home Depot confident in growth forecast

Second-quarter results to 3 August  

• Net sales up 5% to $45.28 billion (£34 billion)
• Comparable or same store sales up 1%
• Adjusted diluted earnings per share (EPS) up 0.2% to $4.68 per share

Guidance: 

• Continues to expect comparable full-year sales growth of around 1%
• Continues to expect full-year adjusted diluted EPS down 2% to $15.24   

Chief executive Ted Decker said:

“Our second quarter results were in line with our expectations. The momentum that began in the back half of last year continued throughout the first half as customers engaged more broadly in smaller home improvement projects.

"Our teams are executing at a high level and we continue to grow market share.”

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ii round-up:

The Home Depot Inc (NYSE:HD) today detailed sales and earnings that marginally missed Wall Street hopes, although with the DIY retailing giant maintaining its previous full-year forecast for same store sales growth. 

Second quarter same store sales up 1% from a year ago helped fuel 5% growth in overall sales to $45.28 billion (£34 billion), with earnings of $4.68 per share up from last year’s $4.67 per share. Analysts had expected $45.36 billion and $4.71 per share respectively. 

Shares in the Dow Jones company rose 3% in US trading having come into these latest results up by close to a tenth over the last year. That’s similar to the Dow index. UK and European DIY retailer Kingfisher (LSE:KGF) is down around 1% over that time.

Home Depot operates more than 2,300 stores across the US, Canada and Mexico. Same store sales for the US during the quarter rose 1.4%, with the group’s home nation generating 92% of sales during its last financial year. 

The DIY retailer continues to expect annual group-wide comparable sales to grow by 1%. That’s despite a potential souring in Canadian and Mexican consumer sentiment following Trump imposed trade tariffs on their respective nations as well as a lacklustre US housing market. 

Adjusted earnings for the year to late January 2026 are still expected by management to retreat by around 2% year-over-year to $15.24.    

Total customer transactions for this latest quarter fell 0.9% to 446.8 million. The average ticket value rose 1.2% to $90.01. 

Third-quarter results are scheduled for 18 November. 

ii view:

Started in 1978, the Dow Jones and S&P 500 company today employs more than 470,000 people. The Atlanta, Georgia headquartered company sells around 35,000 products instore and approximately one million items online. 

For investors, the tough backdrop for consumers including trade tariff uncertainty and US existing home sales at a nine-month low in June, warrants attention. Costs for businesses remain elevated, with Home Depot’s expenses rising 8.7% from Q2 2024. The weather and its influence on sales should not be forgotten, while a forecast price/earnings (PE) ratio above the three- and 10-year averages may suggest the shares are not obviously cheap.  

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To the upside, management hopes for full-year sales growth have been maintained, potentially buoyed by a recent US interest rate cut and hopes for a further cut in September. A significant sourcing of US made goods should help navigate trade tariff headwinds. A previous purchase of SRS, focused on trade professionals, adds to customer diversity and is expected to contribute around $6.4 billion in full year 2025 sales, while a forecast dividend yield of around 2.3% is not to be ignored.

In all, and despite ongoing risks, a consensus analyst estimate of fair value near $424 per share implies continued long-term hope on Wall Street.  

Positives: 

• Strong brand name
• Progressive dividend policy

Negatives:

• Uncertain economic outlook
• The weather can impact performance

The average rating of stock market analysts:

Buy