TLDR
- Home Depot missed Q2 earnings expectations with $4.68 per share vs $4.72 expected, but revenue came close at $45.27 billion
- Same-store sales grew 1% year-over-year, marking third consecutive quarter of positive growth in the US market
- Company maintained full-year guidance expecting net sales growth of 2.8% and same-store sales increase of 1%
- July showed strongest monthly performance with comparable sales rising 3.3%, the best of the year
- Stock initially dropped after earnings but recovered in premarket trading, gaining about 1.3%
Home Depot shares climbed in premarket trading despite missing Wall Street’s earnings expectations for the second quarter. The home improvement giant reported adjusted earnings of $4.68 per share, falling short of the $4.72 consensus estimate.
Revenue reached $45.27 billion, just below the expected $45.41 billion. The miss wasn’t dramatic enough to shake investor confidence, with shares gaining 1.3% in early trading.
Same-store sales provided a bright spot in the report. The metric grew 1% year-over-year, though slightly below the 1.4% Wall Street anticipated. This marks the third straight quarter of positive comparable sales growth in the US market.
The company hasn’t seen three consecutive quarters of US same-store sales growth since Q3 2022. This trend reverses the prolonged slump that had weighed on home improvement retailers.
CEO Ted Decker called the results “in line” with expectations. He noted that momentum from the second half of last year continued as customers engaged more with smaller home improvement projects.
July Momentum Builds
The standout performance came in July with comparable sales rising 3.3%. CFO Richard McPhail highlighted this as “the best monthly comp of the year” during a CNBC interview.
D.A. Davidson analyst Michael Baker, who maintains a Buy rating with a $450 price target, called this July performance particularly encouraging. The strong monthly result suggests customer engagement may be strengthening.
Home Depot stuck with its full-year guidance despite the earnings miss. The company expects net sales growth of 2.8% and same-store sales to increase 1% for fiscal 2025. Adjusted earnings per share are forecast to decline 2%.
Rate Cut Anticipation
Management remains focused on interest rate movements and their impact on consumer behavior. McPhail told Yahoo Finance that rates remain “quite elevated” relative to recent history, causing customers to defer large projects.
The company is watching for Federal Reserve rate cuts expected in September. However, McPhail emphasized they need to see how cuts translate to consumer borrowing rates like mortgages.
“Our customers do tell us they’re deferring, they’re not canceling,” McPhail explained. Projects may resume when rates decrease or consumers adjust to higher rates as the new normal.
Store traffic data from Placer.ai showed visits dropped 2.2% year-over-year in Q2. Despite this decline, the company managed positive comparable sales growth through higher average ticket sizes.
Transaction growth fell slightly during the quarter. Ticket growth remained flat, indicating customers are buying similar amounts when they do visit stores.
Home Depot didn’t provide third-quarter guidance in Tuesday’s report. The company has maintained conservative forecasting throughout 2025 as it navigates housing market uncertainty.
Some price increases are coming for imported goods due to higher tariff rates. McPhail noted that while broad-based price movements aren’t expected, some categories will see modest increases.
The stock has gained about 10% over the past month as investors anticipate Fed rate cuts. This outpaces the year-to-date performance of just 1.5% compared to the S&P 500’s roughly 10% gain.
Home Depot’s recent acquisitions of SRS Distribution and GMS are expected to boost its professional contractor business. These deals should help the company capture more complex project work from pro customers.
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