Home Depot (HD) Sees Remodeling Project Deferrals as Interest Rates Pressure Homeowners
Home Depot Inc. (NYSE: HD) reported strong fiscal fourth-quarter earnings, yet its executives acknowledged ongoing consumer hesitation toward large-scale remodeling projects. The home-improvement giant attributed the slowdown to persistently high interest rates, which have made extensive renovations less appealing to homeowners.
Billy Bastek, Home Depot’s executive vice president of merchandising, emphasized the trend in the company’s earnings call, stating, “There’s just no denying the deferral that we’re still seeing.” CEO Ted Decker echoed these concerns, pointing to “uncertain macroeconomic conditions” as another factor impacting customer spending behaviors.
Home Depot’s Earnings Beat Expectations
Despite these economic headwinds, Home Depot surpassed Wall Street expectations for both earnings per share (EPS) and revenue:
- Net income: $3.03 billion, or $3.02 per share, up from $2.8 billion, or $2.82 per share, a year ago.
- Adjusted EPS: $3.13, beating the FactSet consensus of $3.04.
- Revenue: $39.7 billion, up 14.1% year-over-year, exceeding analysts’ estimates of $39.2 billion.
- Same-store sales: Increased by 0.8%, outperforming FactSet’s expected 2.0% decline.
In response to its financial performance, Home Depot announced a 2.2% increase in its quarterly dividend to $2.30 per share, payable on March 27 to shareholders of record as of March 13.
Stock Reaction and Future Outlook
Despite cautious consumer behavior, Home Depot’s stock surged 4% in afternoon trading, leading gainers on the Dow Jones Industrial Average (DJIA). However, the company’s guidance for fiscal 2025 fell slightly below analyst expectations:
- Projected 2025 sales growth: ~2.8% (versus 2.9% expected by FactSet)
- Expected same-store sales growth: 1% (versus 1.7% expected)
- Operating margin forecast: 13.4% (below the FactSet consensus of 13.8%)
BNP Paribas Exane analyst Chris Bottiglieri noted that while comps were stronger than expected, the lack of operating-margin expansion was a key concern.
Home Depot’s Expansion and Diversification Strategy
To counter macroeconomic pressures, Home Depot has focused on strategic expansion and diversification. The company opened 12 new stores in 2024—10 in the U.S. and two in Mexico—and plans to open 13 more in 2025. Additionally, executives emphasized their efforts to mitigate supply chain risks by reducing reliance on certain countries.
“We’ve been through this before,” Bastek said regarding potential tariffs, adding that Home Depot remains committed to diversifying its sourcing strategy.
Market Performance and Competitive Landscape
Over the past year, Home Depot’s stock has gained 5.9%, underperforming the S&P 500’s 17.4% gain. Competitor Lowe’s (LOW) has also been closely watched, with its CEO recently expressing confidence in managing potential new tariffs.
With Home Depot maintaining a cautious outlook amid economic uncertainty, investors and analysts will be watching how interest rates, tariffs, and consumer spending trends shape the company’s 2025 performance.
