After eight quarters, Home Depot, Inc. (HD.US) comparable sales finally turned positive! But performance outlook is lower than expected.

The latest financial report and performance outlook released by Home Depot, Inc. (HD.US), the world's largest home improvement retailer, shows that the trend of declining same-store sales for eight consecutive quarters has finally come to an end. However, the company's guidance for comparable sales growth for the current fiscal year is below market expectations, mainly due to American consumers maintaining a cautious attitude towards large home improvement projects under continued inflation and high interest rate pressures. The company disclosed on Tuesday that same-store comparable sales for the fiscal year ending January 2026 are expected to increase by 1%, lower than the average growth expectation of 1.65% given by Wall Street analysts. After the news was announced, Home Depot, Inc. stock price plummeted more than 4% in pre-market trading in New York, but later rebounded. The stock price of Home Depot, Inc. has fallen by about 2% so far this year, after achieving a 15% annual increase in 2024, but significantly underperforming the broader market index, the S&P 500. Benefiting from the surge in home improvement and renovation sparked by Americans working from home and moving to rural areas during the COVID-19 pandemic, Home Depot, Inc. experienced a period of explosive growth in its performance. However, with the high interest rate environment suppressing large home improvement projects that require financing support, and consumers shifting their focus towards travel experiences, as well as the significant reduction in non-essential purchases by the large middle and low-income groups in the United States under the pressure of high interest rates and debt, its growth engine has clearly stalled. In order to break the ongoing sluggish demand situation, Home Depot, Inc. is targeting professional contractors who are willing to undertake complex renovation projects, with better consumer performance than regular DIY consumers. The company acquired American building materials distributor SRS Distribution for $18.25 billion in 2023, marking its largest acquisition in history, aiming to strengthen its service capabilities in the professional renovation market. "Consumers are gradually accepting the new normal of high interest rates," said Chief Financial Officer Richard McPhail in a media interview, "but how their consumption mindset evolves still needs to be continuously observed." He also pointed out that although there are signs of recovery in the US housing market and demand for home equity loans for homeowners is rising, there is still uncertainty about the overall real estate market recovery. Demand recovery in progress Although the performance outlook for the current fiscal year falls short of analysts' expectations, the latest fiscal quarter ending in early February has shown signs of recovery in the real estate market renovation demand, with Home Depot, Inc. achieving a positive same-store sales growth of 0.8%, ending a streak of eight consecutive quarters of decline, surpassing the general expectation of Wall Street analysts. McPhail stated that compared to previous demand levels, sales of large household appliances, power tools, and categories favored by professional clientele such as drywall and wood unexpectedly strengthened, but demand for large-scale projects such as flooring installation and kitchen renovations still appeared weak. The financial report also shows that the average transaction size and transaction volume for Home Depot, Inc. both increased, reinforcing the expectation of "demand recovery." Overall, as the US retail industry enters 2025, it still faces multiple uncertainties: consumer spending is becoming more rational and restrained, and the tariff policies proposed by US President Trump may reignite inflation. The financial reports and performance outlook of retail industry leaders have become a barometer for Wall Street analysts to observe the level of consumer demand in the US market, especially as recent economic data shows a trend of "stagflation" in the US economy, making these retailers' financial reports and future outlooks even more important. Last week, retail giant Walmart Inc. (WMT.US) caused stock price volatility due to profit guidance falling short of market expectations, leading the entire US stock market into a downward trajectory. One of Home Depot, Inc.'s largest competitors, Lowe's Companies, Inc. (LOW.US), is set to release its financial report on Wednesday, and the market is watching to see if it can continue the trend of demand recovery.