Home Depot on Tuesday was locked in full-year sales forecasts as a top executive told CNBC that retailers would not be raising prices due to tariffs.
“We generally intend to maintain our current pricing levels across our portfolio as we have a great size, our supplier partnership and our continued push for our business,” Chief Financial Officer Richard McFeal told CNBC in an interview.
He said more than half of what the company sells comes from the US. McPhail added that Home Depot and its suppliers have been working to diversify the company’s import sources over the past few years, including reducing its share of purchases from China. By this time next year, a single country other than the US will not represent more than 10% of the company’s purchases, he said.
Home Depot’s pricing strategy is at odds with Walmart. Walmart last week said prices would need to be raised in late May to cover higher costs from customs duties.
McPhail’s comments came when Home Depot posted its first quarter results. A few weeks later, President Donald Trump’s rapidly changing tariffs caused various companies to amend or withdraw financial guidance. Residential facility retailers missed Wall Street’s first quarter revenue expectations for the first time since May 2020, but surpassed sales estimates.
Home Depot expects a 2.8% increase in total sales for the full year, with comparable sales rising, with one-off factors such as store openings and calendar differences rising by around 1%. That forecast is based on the continuation of the US contract to temporarily reduce tariffs to 30% of imports from China and 10% in many other countries.
For the three-month period ended May 4th, Home Depot’s net income was $3.43 billion, or $3.45 per share, compared to $3.6 billion, or $3.63 per share, in the same period last year. Adjusted revenue per revenue excludes some expenses, such as the impact of depreciation from acquired intangible assets.
Spring is Home Depot’s peak sales season – Christmas in the world of home improvements – as homeowners and contractors usually work on more projects due to warmer and dryer weather. But even with that seasonal boost, Home Depot’s background remains tough as more US consumers are postponing home purchases or large renovation projects due to mortgage fees and costs of borrowing.
Sales growth has been muted. In the first quarter, comparable sales fell 0.3% across the company. In the US, comparable sales increased by 0.2% year-on-year.
Except for the previous quarter, the trend was persistent. Home Depot filmed comparable sales for the eighth quarter in a row in the fourth quarter. In that quarter, comparable sales increased by 0.8% across the company.
Sales patterns improved as the quarter progressed, McFile said. Equivalent sales fell 3.3% year-on-year in February, up 1.3% from the previous year in March, and 1.8% year-on-year in April, he said.
He attributes negative sales results in February to bad weather.
“We went back the rest of the quarter and returned on a great midway through April. We saw the level of customer engagement that lasted until the first few weeks of May in April,” he said.
As Home Depot stares at the more challenging home background, the company has been chasing more businesses from home experts. Last year it acquired SRS Distribution, a Texas-based company that sells supplies to roof, pool and landscape experts, in a $18.25 billion deal.
Home Depot, including SRS, grew approximately 9% year-on-year in the first quarter, up from $36.42 billion in the same period last year. That year-on-year profit of around $2.6 billion came from SRS’s business, with some of the sales growth coming from new stores, McPhail told CNBC.
In the first quarter, customer transactions on Home Depot’s website and stores rose 2.1% year-on-year. The average tickets measuring the amount of spend on visits to these stores or websites was $90.71, just a few cents above the average for the same period last year.
Compared to other retailers, Home Depot caters to wealthier US consumers who tend to be employed and benefit from the sharp increase in asset values since 2019, McPhail said. Approximately 80% of customers are homeowners, and home professionals who buy from Home Depot are dealing with homeowners who hire them to tackle projects ranging from roof and electrical work to kitchen remodeling.
“I think our customers are healthy and that’s what supports the level of involvement in improving homes,” he said.
Still, McPhail said that clients who do their own things tend to postpone bigger projects and engage in smaller spring-related projects.
Home Depot saw a positive response to the Spring Black Friday event and strong sales in the appliances, gardens, plumbing and electricity sectors, McPhail said. However, he added that sales have been softer in areas such as kitchen countertops and baths. This is a category that tends to be purchased as part of expensive projects such as renovations and modifications.
As of the end of Monday, Home Depot’s shares have fallen by about 2% so far this year. During the same period, you will get a profit of about 1% behind the S&P 500 increase. The shares closed at $379.38 on Monday, bringing a market value of about $377 billion.