Home Depot Misses Again as Housing Slowdown Drags On, Shares Slip Toward Key Support

Home Depot shares are trading lower by roughly 2% in pre-market trading after the company delivered a pedestrian third-quarter report that offered little convincing evidence of a demand recovery. While revenue modestly beat expectations, the core operating metrics that investors track most closely—comparable sales, traffic, and profitability—fell short. The results underscore a simple reality that continues to hang over the home-improvement sector: the consumer remains unwilling to commit to large projects, the housing cycle remains soft, and the macro backdrop is still too murky to drive meaningful acceleration. With shares already trending lower for months and pressing toward the key $341 level—the 200-week moving average investors have been eyeing—this print does little to ease the pressure.

Total sales of $41.35 billion rose 2.8% year over year, slightly ahead of consensus, but the headline figure was flattered by roughly $900 million in revenue from the recently acquired GMS. Excluding that contribution, underlying demand was weaker than the top-line suggests. Comparable sales rose just 0.2% versus expectations for +1.3%, and U.S. comps increased a meager 0.1%, well below the 1.25% analysts were looking for. Management noted that demand was stable sequentially but failed to show the pickup they anticipated entering the quarter. As CEO Ted Decker put it, “an expected increase in demand…did not materialize,” as consumer caution and ongoing pressure in housing weighed heavily on behavior.

The breakdown of key operating metrics continues to paint a mixed picture. Comparable customer transactions fell 1.6% year over year, signaling softer foot traffic and continued hesitancy among homeowners to initiate discretionary projects. Meanwhile, the comparable average ticket rose 1.8%, a reflection of modest price increases and mix effects. Total transactions declined 1.4% to 39.5 million, while the average ticket climbed to $90.39, roughly in line with expectations. The rise in ticket size is encouraging at the margin, but it has not been nearly enough to offset volume weakness. For a retailer that typically benefits most when customers are moving homes or taking on major renovations, the current backdrop of low housing turnover and elevated mortgage rates is a direct headwind.

Inventory management remained disciplined, though the company did not cite major draws or buildups that would meaningfully change the margin trajectory. Gross margin for the quarter landed at 33.2%, and adjusted operating margin was 13%, down from last year due to weaker-than-hoped volumes and the inclusion of the lower-margin GMS business. Cost of sales rose in line with revenue, which, combined with a slight rise in net interest expense, added to the margin compression. Adjusted EPS of $3.74 missed the $3.85 consensus, marking the company’s third consecutive miss as profit pressures remain stubborn.

Management commentary on the consumer was also notably cautious. Decker reiterated that homeowners remain in a “deferral mindset,” continuing a trend in place since mid-2023. Large-ticket discretionary categories—kitchens, bathrooms, flooring, outdoor projects—remain especially soft as consumers face high borrowing costs, a wobbly housing market, and broader economic unease. The lack of storm activity in the quarter also created a surprising drag across certain categories, reducing demand for roofing materials, generators, and emergency supplies that typically boost sales during hurricane season. CFO Richard McPhail told CNBC that the company expected sequential improvement as interest rates eased—but that macro relief never arrived.

In fact, management explicitly pointed to several macro headwinds that likely weighed on performance: higher mortgage rates, a slowdown in home values in certain markets, lingering consumer uncertainty tied to fiscal instability during the government shutdown, and rising corporate layoff announcements that may be tempering household confidence. Even Home Depot’s more financially stable customer base—90% of DIY shoppers own their homes—has shown caution around committing to big-spend projects. The company has leaned harder into its professional customer segment, supported by acquisitions like SRS Distribution ($18.25B) and GMS, but that effort has not yet been enough to offset the softness on the household side.

The company’s updated fiscal 2025 guidance reflects this more challenging environment. Home Depot now expects full-year sales to grow roughly 3%, slightly higher than the prior 2.8%, but entirely due to the addition of GMS. Comparable sales are seen growing “slightly positive,” down from earlier expectations for 1% growth. More importantly, adjusted diluted EPS is now expected to decline about 5% year over year—steeper than the previously guided 2% decline and well below consensus looking for a 1.7% drop. Operating margin is expected to settle around 12.6%, with adjusted margin at 13%, reflecting persistent cost pressures and softer-than-expected volume recovery.

From a stock perspective, the trend remains unfavorable. Shares are down about 8% year-to-date and have been under steady pressure for months, underperforming both the broader retail sector and rival Lowe’s. The pre-market reaction places the stock on track to open near a five-month low, and the longer-term technical picture remains fragile. The 200-week moving average around $341— highlighted in yesterday's preview —is now firmly in focus, and a decisive break below that level could invite additional pressure from long-term holders.

In short, Home Depot’s third-quarter report reinforces a narrative that has been building across the home-improvement and building-products ecosystem: the consumer is cautious, home turnover is low, big projects are being deferred, and the expected second-half recovery keeps slipping further out of reach. Until interest rates meaningfully ease or consumer psychology shifts, the company is likely to remain in a holding pattern—one that the stock is already reflecting as it grinds lower through year-end.