Home Depot on Tuesday stuck by its full-year sales forecast as a top executive told CNBC the retailer doesn’t plan to hike prices because of tariffs.
“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,” Chief Financial Officer Richard McPhail told CNBC in an interview.
More than half of what the company sells comes from the U.S., he said. McPhail added that Home Depot and its suppliers have worked to diversify the source of the company’s imports over the past several years, including by decreasing the share of purchases that come from China. By this time next year, no single country outside of the U.S. will represent more than 10% of the company’s purchases, he said.
Home Depot’s pricing strategy is at odds with Walmart, which said last week that it would have to raise prices as soon as late May to cover higher costs from tariffs.
McPhail’s comments came as Home Depot posted results for the fiscal first quarter, after weeks in which a range of corporations have either revised or withdrawn their financial guidance due to President Donald Trump‘s rapidly changing tariffs. The home improvement retailer missed Wall Street’s first-quarter earnings expectations for the first time since May 2020, but beat sales estimates.
For the full year, Home Depot said it expects total sales to grow by 2.8% and comparable sales, which take out the impact of one-time factors like store openings and calendar differences, to rise about 1%. Its forecast is based on the continuation of a U.S. agreement to temporarily lower tariffs to 30% on imports from China and to 10% for many other countries.
Here’s what Home Depot reported for the fiscal first quarter compared with Wall Street’s estimates, according to a survey of analysts by LSEG:
- Earnings per share: $3.56, adjusted vs $3.60 expected
- Revenue: $39.86 billion vs. $39.31 billion expected
Shares of the company rose more than 2% in premarket trading.
In the three-month period that ended May 4, Home Depot’s net income was $3.43 billion, or $3.45 per share, compared with $3.60 billion, or $3.63 per share, in the year-ago period. Adjusted earnings per share exclude some costs, including the impact of depreciation from acquired intangible assets.
Spring is Home Depot’s peak sales season — the Christmas of the home improvement world — as homeowners and contractors typically tackle more projects because of warmer and dryer weather. Yet even with that seasonal boost, the backdrop for Home Depot remains tough as more U.S. consumers put off home purchases or major renovation projects because of higher mortgage rates and costs of borrowing.
Sales growth has been muted. In the fiscal first quarter, comparable sales dropped 0.3% across the company. In the U.S., comparable sales increased 0.2% year over year.
That trend has been persistent, with the exception of the previous quarter. Home Depot snapped eight consecutive quarters of falling comparable sales in the fourth quarter. In that quarter, comparable sales increased 0.8% across the company.
Sales patterns improved as the quarter went on, McPhail said. Comparable sales declined 3.3% year over year in February, increased 1.3% from the prior-year period in March and rose 1.8% year over year in April, he said.
He attributed negative sales results in February to poor weather.
“We clawed our way back through the remainder of the quarter and had a great April, and we’ve seen the level of customer engagement that we saw in April continue into the first few weeks of May,” he said.
As Home Depot stares down a more challenging housing backdrop, the company has chased more business from home professionals. It acquired SRS Distribution, a Texas-based company that sells supplies to roofing, pool and landscaping professionals, last year in a $18.25 billion deal.
Sales for Home Depot – including SRS – grew roughly 9% year over year in the first quarter from $36.42 billion in the year-ago quarter. About $2.6 billion of that year-over-year gain came from SRS’ business, and a portion of sales growth came from new stores, McPhail told CNBC.
In the fiscal first quarter, customer transactions across Home Depot’s website and stores rose 2.1% year over year. Average ticket, which measures the amount of spending on those store or website visits, was $90.71, just a few cents above the average in the year-ago quarter.
Compared with other retailers, Home Depot caters to a more affluent U.S. consumer who tends to be employed and to have benefited from the sharp increase of property values since 2019, McPhail said. About 80% of its customers are homeowners, he said, and the home professionals who buy from Home Depot cater to homeowners who hire them to tackle projects from roofing and electrical work to a kitchen remodel.
“Our customer is healthy, and we think that’s what has supported their level of engagement in home improvement,” he said.
Even so, McPhail said that do-it-yourself customers are tending to defer bigger projects and engaging in smaller and spring-related projects.
Home Depot saw a positive response to its spring Black Friday event and strong sales in the appliance, garden, plumbing and electrical departments, McPhail said. But he added sales have been softer in areas including kitchen countertops and bath – categories that tend to be purchased as part of pricier projects like renovations and remodels.
As of Monday’s close, Home Depot’s shares are down about 2% so far this year. That trails behind the S&P 500’s gains of approximately 1% during the same period. Its shares closed at $379.38 on Monday, bringing its market value to about $377 billion.
— CNBC’s Robert Hum contributed to this report.
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