Home Depot shares fell 5%. The retailer disappointed with results and worsened its outlook

Shares of Home Depot, the world's largest seller of home improvement and home improvement products, fell 5% after the company reported worse-than-expected sales and lowered its full-year profit forecast. Management attributed the weak results to prolonged stagnation in the housing market, where demand is being held back by the rising cost of living and high interest rates. However, analysts said Home Depot remains an attractive investment in the long term due to robust demand and the aging U.S. housing stock.

Adjusted third-quarter earnings came in at $3.74 per share and revenue rose 2.8% to $41.4 billion. The FactSet consensus was calling for $3.84 per share and $41.2 billion, Barron's wrote. Comparable sales (counting stores that have been in business for more than a year) increased only 0.2% versus the 1.3% forecast.

The company also lowered its forecast for adjusted earnings per share: it now expects the figure for the fiscal year ending January 2026 to fall 5%. Previously, the company had forecast a 2% decline.

This is the second consecutive quarter that Home Depot has fallen short of consensus earnings forecasts, MarketWach clarifies. Management said the results were weaker than expected because of a sluggish housing market and a lack of seasonal storms that typically support demand for roofing, generators and similar products, Bloomberg writes .

"We had expected demand to begin to gradually accelerate in the second half of the year as loan and mortgage rates fall. But we are seeing continued buyer uncertainty and pressure in the housing market, which is hitting the home goods category particularly hard," said CFO Richard McPhail.

Home Depot's pessimistic forecast was another signal of weakness in consumer demand in the absence of official statistics due to the U.S. government shutdown, Bloomberg notes. The U.S. housing market remains virtually frozen: despite lower mortgage rates than last year, rising everyday costs and general economic uncertainty continue to deter buyers from making deals. Housing remains expensive, and high interest rates are forcing families to put off major renovations, which directly pressures sales at Home Depot and similar retailers, Bloomberg noted.

The situation is complicated by duties: although some of the assortment was purchased before the introduction of new import duties, Home Depot warned of possible price increases in certain categories. Analysts surveyed by Barron's, however, consider Home Depot as a whole less vulnerable to duties, since about half of the assortment is produced domestically.

Since the beginning of the year, Home Depot stock has lost 12%, while the S&P 500 index has added 13%.

Home Depot's reporting was further evidence that the macroeconomic environment has worsened for consumers and that the real estate market outlook lacks the catalysts to accelerate in the short term, said Citi analyst Stephen Zaccone in a note from Barron's.

Most Wall Street experts believe the stock is an attractive buy despite current weak results and pressure from the housing market. According to MarketWatch, the majority of analysts (22 out of 38), recommend buying the stock, while another 14 suggest holding and two suggest selling.

This article was AI-translated and verified by a human editor