Home Depot's contractor bet pays off in soft US housing market
By Savyata Mishra
Feb 24 (Reuters) - Home Depot's quarterly earnings topped analysts' estimates on Tuesday despite sluggishness in the U.S. housing market, buoyed by resilient demand from professional contractors and minor repairs by budget-strapped customers.
Its shares were up 3% in afternoon trading. Shares of rival Lowe's, which reports on Wednesday, were up 2%.
Home Depot, which maintained its annual forecasts, has leaned on professional customers, such as contractors, builders and carpenters, whose large, ongoing jobs have helped the company offset the slowdown in big do-it-yourself remodels amid elevated borrowing costs and a weak U.S. housing market.
In November, it launched an AI-powered tool designed to help these customers keep track of material lists and project cost estimates.
Home Depot has also benefited from selective price hikes it took last year to offset tariffs, and executives on Tuesday indicated no plans for further increases ahead of the spring selling season.
The company reported a 0.4% rise in same-store sales for the fourth quarter, compared with analysts' expectations of largely flat sales, according to data compiled by LSEG.
"It appears that the company set the appropriate initial bar for this year's expectations after a volatile start to the year given the recent winter storms," said David Wagner, head of equity and portfolio manager at Aptus Capital Advisors.
HOUSING MARKET REMAINS UNDER PRESSURE
Economic uncertainty has left consumers more cautious about taking on major home renovations, with a tepid labor market and affordability concerns weighing on spending plans.
Meanwhile, the housing market has offered little support. New U.S. single-family home sales slipped 1.7% in December.
CFO Richard McPhail said U.S. consumers and the company have been operating in what he described as a "frozen housing environment" since 2023 and that conditions have yet to show meaningful improvement.
TARIFF WATCH
"We're still analyzing the impacts of the Supreme Court's decision and new tariff announcements," a company spokesperson told Reuters.
The U.S. imposed a new 10% tariff on all non-exempt goods starting Tuesday after President Donald Trump on Friday announced a temporary global 10% tariff following a Supreme Court ruling against his earlier duties. Trump had said on Saturday he would raise the tariff to 15%.
Over half of Home Depot's goods are domestically sourced, and no single country outside of the U.S. represents more than 10% of purchases, executives said, adding that exposure to tariffs was in the mid-single-digit range in 2025.
Home Depot earned $2.72 per share on an adjusted basis in the fourth quarter, surpassing analysts' expectations of $2.54.
The company maintained its fiscal year 2026 comparable sales forecast of flat to 2% jump and adjusted earnings per share to be flat to 4% higher from a year earlier.
ICE SCRUTINY
Home Depot has also been pressured by investors to review its partnership with surveillance firm Flock Safety and state how its data is used and shared with law enforcement.
On Tuesday, the company said it had no prior knowledge of and was not involved in recent immigration-enforcement operations near a handful of its store parking lots, adding that employees are instructed not to intervene for safety reasons.
(Reporting by Savyata Mishra in Bengaluru and Nicholas P. Brown in New York; Editing by Sriraj Kalluvila)