Home Depot stock falls after Q3 earnings miss and lowered outlook

Home Depot’s stock slipped nearly 2.7% on Tuesday during opening trade after the home improvement retailer missed third-quarter profit expectations and slashed its full-year earnings outlook.

The company attributed the results to the softness in home-improvement spending as consumers delay big-ticket projects amid economic uncertainty and a cooling housing market.

The company reported adjusted earnings of $3.74 a share for the quarter, below analysts’ estimates of $3.84.

Revenue rose 2.8% year-on-year to $41.4 billion, slightly ahead of Wall Street’s forecast of $41.2 billion, according to FactSet.

Comparable sales increased just 0.2%, well below the 1.3% gain analysts had expected.

Outlook cut as uncertainty weighs on homeowners; lack of storms adds to low demand

Home Depot now expects adjusted earnings per share to decline by 5% for the fiscal year ending January 2026, deeper than its previous forecast for a 2% decrease.

Management attributed the weak performance partly to the absence of storm-related demand that had boosted sales in the same period last year.

“An expected increase in demand in the third quarter did not materialize,” President and CEO Ted Decker said.

“We believe that consumer uncertainty and continued pressure in housing are disproportionately impacting home improvement demand.”

Chief Financial Officer Richard McPhail told the Wall Street Journal that customers remain cautious, deterred by falling home prices in several markets and concerns about job security.

“This all comes together in the form of hesitation to take on larger financial commitments,” McPhail said.

Overall home-improvement activity has weakened as the housing market stays sluggish, mortgage rates remain elevated, and consumers grow more reluctant to spend on renovations.

Foot traffic at Home Depot stores slipped 0.4% in the third quarter from a year earlier, according to Placer.ai.

Long-term optimism but no short-term catalyst

Despite the slowdown, Home Depot maintains its view that long-term fundamentals remain strong, driven by an aging housing stock and accumulated home equity.

But management acknowledged that signs of a near-term rebound are limited, even with mortgage rates trending slightly lower in recent weeks.

"We're watching movements in mortgage rates closely. So far we have not seen them catalyze demand in home improvement," McPhail said.

"While we don't see a near-term catalyst for acceleration of home improvement demand, we're also bullish on the long-term fundamentals of housing."

The company now expects comparable sales to be slightly positive for the year, down from earlier guidance of about 1% growth.

Home Depot’s strategy to offset weaker do-it-yourself spending has included expanding services for professional contractors.

The retailer has increased its offerings of bulk supplies, customized orders and support services, aided by acquisitions of building materials suppliers that have helped it gain share in the professional segment.

Still, the near-term outlook remains uncertain as households delay major projects, waiting for greater clarity on economic conditions.

With housing indicators soft and consumer confidence mixed, analysts expect home-improvement demand to remain subdued into early 2026.