ii view: Home Depot downgrades full-year estimates

Third-quarter results to 2 November  

• Net sales up 2.8% to $41.35 billion (£31.4 billion)
• Comparable or like-for-like (LFL) sales up 0.2%
• Adjusted diluted earnings per share (EPS) down 1.1% to $3.74 per share

Guidance: 

• Now expects annual LFL sales to be slightly positive, down from a previous estimate of up around 1%
• Now expects annual adjusted earnings per share to fall by 5% from $15.24 last year, below a previous estimate for a 2% decline

Chief executive Ted Decker said:

“Our teams are continuing to execute at a high level and we believe we are growing our market share.”

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ii round-up:

The Home Depot Inc (NYSE:HD) today detailed sales and profits that missed Wall Street estimates, with the DIY retailer lowering its full-year earnings estimate given weaker-than-expected customer demand.

Third-quarter like-for-like sales at the core US market rose 0.1%, held back by reduced storm repair activity, leaving adjusted earnings down 1.1% from a year ago to $3.74 per share. Analysts had expected comparable sales growth of 1.25%, generating earnings of $3.84 per share. 

Shares in the Dow Jones company fell 4% having come into these latest results down by close to a tenth so far in 2025. The Dow Jones index is up by almost a tenth over that time, while UK and European DIY retailer Kingfisher (LSE:KGF) is up by close to fifth year-to-date. 

Home Depot operates more than 2,300 stores across the US, Canada and Mexico. 

Comparable sales for the full year are now expected to be only slightly positive, pushing adjusted earnings down 5% from last year’s $15.24 per share. That’s below the prior quarter’s estimate for sales growth of around 1% with earnings falling just 2%.

Management believes that consumer uncertainty and continued pressure in housing are disproportionately impacting home improvement demand. 

Total sales for the third quarter, and including its prior acquisition of building products distributor GMS, rose 2.8% to $41.35 billion. Analysts had forecast sales of $41.11 billion. 

Customer transactions for the quarter fell 1.4% to 393.5 million although with the average spend rising 2% to $90.39. Online sales climbed 11% from Q3 2024.

ii view:

Started in 1978, Home Depot describes itself as the world's biggest home improvement retailer, generating revenue of $159.5 billion in 2024. Headquartered in Atlanta, Georgia, the company sells over 35,000 products instore and around one million items online. 

For investors, the importance of the weather cannot be forgotten, with fewer storms compared to a year ago impacting sales. The backdrop for customers remains tough with increased costs via US trade tariffs and US existing home sales hitting a nine-month low in June. A forecast price/earnings (PE) ratio above the three-year average may suggest the shares are not obviously cheap, while selling and admin costs for Home Depot rose 5.9% from a year ago.  

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More favourably, bolt-on acquisitions continue to boost growth. Diversity of product and geographical region exist. A significant sourcing of US made goods should help navigate trade tariff headwinds, while a forecast dividend yield of around 2.5% is not to be ignored. 

On balance, and despite ongoing risks especially in the near term, a consensus analyst estimate of fair value above $430 per share appears to point to continuing long-term optimism 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