Shares of Home Depot rose by nearly 9 percent in early trading on May 20 after the Atlanta-based home improvement company stated that it doesn’t plan to raise in-store prices despite concerns of a possible recession in the first quarter.
“I think from the micro [point of view], the worst concerns have passed,” Decker said, noting that recent U.S. employment and inflation reports also show that the U.S. economy is more stable in May.
“We’ve gone from a dynamic where we were going to have a near-term, certain recession and stock market correction in April, to where markets have fully recovered.”
“Because of our scale, the great partnerships we have with our suppliers, and productivity that we continue to drive in our business, we intend to generally maintain our current pricing levels across our portfolio,” McPhail said.
During the conference call, Decker reiterated McPhail’s earlier comments, saying that one of the hallmarks of Home Depot’s operations is the diversification of its supplier sourcing and supply chain. He said more than 50 percent of Home Depot’s purchases at present are sourced in the United States, giving the retail giant more flexibility in navigating tariffs and inflationary pressures.
“Over the last several years, we have worked diligently with our vendors to further diversify our global supply chain,” Decker said. “During that period, the vast majority of our supplier partners developed diversified sourcing strategies across several countries, including the United States.
“We are already taking action to anticipate that the next 12 months from now, no single country outside of the United States will represent more than 10 percent of our purchases.”
Home Depot also reaffirmed its full-year guidance, which includes a nearly 2.8 percent increase in sales and comparable-sales growth of approximately 1 percent. The company also expects adjusted diluted earnings per share to decline by 2 percent from $15.24 in 2024. Further, it plans to open 13 new stores and maintains its capital expenditure forecast at about 2.5 percent of total sales for the year.
The company was expected to report third-quarter earnings per share of $3.60 on revenue of $39.24 billion, according to FactSet’s consensus estimates.
Although Home Depot’s earnings were 15 cents below Wall Street expectations, the market reacted positively to the news that the company doesn’t plan to raise prices in response to tariffs. Over the weekend, President Donald Trump criticized Walmart for not absorbing the additional costs associated with ongoing trade talks.
During the company’s first-quarter earnings call on May 15, Walmart CEO Doug McMillon thanked Trump and Treasury Secretary Scott Bessent for the progress made recently on trade talks with China but said the company intends to raise prices because of the impact of tariffs.
“We will do our best to keep our prices as low as possible. But given the magnitude of the tariffs, even at the reduced levels announced this week, we aren’t able to absorb all the pressure given the reality of narrow retail margins,” McMillon said. “We’re positioned to manage the cost pressure from tariffs as well or better than anyone. But even at the reduced levels, the higher tariffs will result in higher prices.”
Decker said Home Depot’s typical customer is different from other retailers’. He said the company’s average customer has an annual income of $110,000 and that 80 percent are homeowners.
“Stock markets have recovered. Job and wage growth are strong. So, our customer is in a good spot right now,” he said.
Decker also noted that U.S. homeowners have record levels of equity in homes in the nation’s aging housing inventory. He said those customers are spending more on smaller home improvement projects that boost equity and improve their home value as the housing market stalls.
“We remain bullish on the fundamentals of home improvement and are confident we are best positioned to win,” he said.
“The housing stock is aging, and 55 percent of homes are 40 years or older. And we know that as homes get older they require more maintenance and updates. We will continue investing in our business to ensure we are best positioned to gain market share particularly in periods of disruption.”
Agreeing with Decker, a Bank of America analyst told The Epoch Times that home improvement spending increased sequentially to 32 percent in May from 28 percent in April.
“Correspondingly, more upper-income respondents expect an increase in home improvement over the next 12 months, rising from 9 percent in April to 14 percent in May with lower-income respondents’ expectations remaining flat,” analyst Andrew Didora said via email, citing the bank’s monthly consumer survey.
In other company highlights, Home Depot’s comparable sales decreased by 0.3 percent across its 2,350 retail stores in the United States and abroad as foreign exchange rates negatively affected sales by approximately 70 basis points. However, same-store sales in the United States increased by 0.2 percent. Comparable or same-store sales are a key Wall Street metric to gauge how established stores are performing quarterly or yearly compared with new stores.
For the quarter, the number of customers visiting the home improvement retailer increased by 2.1 percent to 394.8 million. These customers spent an average of $90.71 per visit, compared with $90.68 per visit in the same quarter last year.
