Home Depot Posts Mixed Q1 Results but Reaffirms Outlook Amid Macro Pressures and Tariff Caution

Home Depot reported mixed fiscal first-quarter results Tuesday, missing earnings expectations for the first time in five years but posting a better-than-expected top line and reaffirming its full-year outlook. The results reflect cautious consumer behavior, soft demand for large-ticket items, and headwinds from tariffs and housing market stagnation. Still, management struck a confident tone, highlighting engagement in seasonal projects and committing not to raise prices in response to tariff pressures—a stance likely aimed at preserving customer loyalty during a murky macro backdrop. The stock rose 2.5% in premarket trading as investors seemed relieved the quarter wasn’t worse.

Key Metrics and Performance Breakdown

• Revenue: $39.86 billion, up 9.4% year-over-year, ahead of consensus estimates of $39.31 billion. This marked Home Depot’s first sales beat since early 2024 and showed some resilience despite weaker consumer trends.
• Adjusted EPS: $3.56, just below the $3.60 consensus estimate. It also marks a modest year-over-year decline from $3.67 a year earlier.
• Net Income: $3.43 billion, versus $3.56 billion estimated.
• Operating Income: $5.13 billion, slightly below the $5.26 billion expectation.
• Same-Store Sales: Down 0.3% globally, worse than the 0.1% expected decline. However, U.S. comps were up 0.2%, beating consensus and showing improving monthly trends—February comps were down 3.3%, but turned positive in March (+1.3%) and April (+1.8%).

Management pointed to unseasonal weather and weak housing turnover as near-term drags, though customer engagement remained strong for smaller projects and spring-related merchandise. CEO Ted Decker noted the company was well-positioned as spring progresses, with stores “ready” and product mix “well-assorted.”

Tariff Management and Margin Implications

CFO Richard McPhail confirmed that Home Depot does not plan to raise prices in response to newly enacted U.S. tariffs. While that should insulate consumers, it raises questions about margin protection in an environment already pressured by slower traffic and high freight costs. Gross margin was 33.4% in Q1, in line with guidance, while adjusted operating margin stood at 13.4%.

Analysts will be looking for clarity on how the company plans to maintain profitability without passing on costs, especially with additional tariffs potentially looming in coming months. The home improvement sector has historically fared better than general retail during tariff cycles, but not without risk.

Traffic, Ticket Size, and Consumer Trends

Foot traffic continues to decline, with store visits falling 3.8% year-over-year according to Placer.ai. This lines up with broader industry softness—Lowe’s also saw visits fall 3.6% ahead of its own earnings report on Wednesday. Management did not disclose average ticket size, but the lack of commentary on big-ticket demand suggests ongoing weakness in that category, mirroring tepid existing-home sales data.

The housing market remains a headwind for Home Depot, with elevated mortgage rates (near 7%) limiting both buying and selling activity—two triggers for home improvement projects. March existing-home sales marked the slowest pace since 2009, a fact not lost on investors hoping for a stronger demand rebound this spring.

Fiscal 2025 Guidance

Despite the Q1 miss on EPS and soft comps, Home Depot reaffirmed its full-year fiscal 2025 guidance:

• Total sales growth of approximately 2.8%
• Comparable sales growth of approximately 1.0%
• Adjusted EPS decline of about 2%, from $15.24 to ~$14.93, roughly in line with consensus
• Gross margin of ~33.4% and adjusted operating margin of ~13.4%
• CapEx of approximately 2.5% of total sales

The reiteration of guidance was viewed as a show of confidence, especially in light of macro uncertainty, tariff developments, and persistently high rates. While modest, the reaffirmed outlook suggests Home Depot expects stable—if not accelerating—consumer demand through the rest of the year.

Looking Ahead

Investors will now turn attention to Lowe’s (LOW), which reports Wednesday. While the two companies often trade in tandem, Lowe’s could see heightened scrutiny around margins and guidance, particularly if it fails to match Home Depot’s resilience in U.S. comps.

Analysts also expect Home Depot’s earnings call to further address how the company plans to offset tariff-related pressures, the cadence of spring demand, and what trends management is seeing in DIY versus professional segments.

Bottom Line

Home Depot’s Q1 report was far from stellar—its first EPS miss in five years and continued weak comps paint a cautious consumer backdrop. However, a revenue beat, solid U.S. trends, and unchanged guidance helped stabilize sentiment. The company’s pricing discipline amid tariffs and strong spring merchandising offer a degree of reassurance, but the housing market and trade policy remain wildcards. The sector will stay in focus this week as investors digest Lowe’s report and broader commentary on consumer durability and inflation pass-through.