The Home Depot lowers outlook as consumer uncertainty, housing pressure hurt demand

The Home Depot set a bleak tone on Tuesday as it kicked off a week of big box earnings. The home improvement chain said it expects profits to decline 5% YoY in 2025, as consumer uncertainty, pressure in the housing market, and a lack of revenue-driving storm activity in Q3 take their toll.

“Affordability is a word that’s being used a lot,” CEO Ted Decker told shareholders. “Layoffs, increased job concerns, etc., that’s why we don’t see an uptick in that underlying storm-adjusted demand in the business.”

However, over the same quarter consumers showed a willingness to buy costlier items, with comparable average ticket price increasing 1.8% and big-ticket comp transactions (purchases more than $1,000) increasing 2.3% YoY on the strength of categories such as appliances, portable power, and gypsum.

Billy Bastek, EVP of merchandising, explained the disparity by separating individual big-ticket items such as appliances from “more project-oriented pieces,” which remain challenged.

Decker touched on this distinction as well when he said Home Depot continued “to see softer engagement in larger discretionary projects where customers typically use financing to fund renovation projects.”

Bastek added that big-ticket sales are less an “indicator of demand” and more an indication of “taking share in bigger-ticket, pro-oriented projects.”

The growth of this customer base goes back to 2023, when the company started investing in its professional business as the pandemic-fueled DIY boom waned.

Despite this strategic shift paying dividends, the broader housing market remains a headwind for the company. High interest rates were one challenge, and though they have come down as the company expected, historically low turnover rates are now impacting housing demand.

“We all know the higher interest rates and affordability concerns,” Decker said. “But what we’re seeing now is even less turnover. The housing activity is truly at 40-year lows as a percentage of housing stock.”