The United States economy shows warning signs! Home Depot, Inc. (HD.US) warns of weak consumer spending: lowers full-year profit guidance.

Home Depot, Inc. (HD.US) reported lower-than-expected profits and same-store sales for the previous quarter ending November 2nd, attributing the decrease to overall weakness in the real estate market and events such as storms reducing demand for roofing, generators, and other categories. Revenue for the third quarter increased by 2.8% year-on-year to $41.4 billion, slightly higher than market expectations. Same-store sales grew by 0.2%, lower than the market's general expectation of 1.4%. The number of transactions by same-store customers decreased by 1.6% year-on-year, while the average ticket price for same-store customers increased by 1.8%. The total number of customer transactions decreased by 1.4% to 39.5 million, and the average ticket price increased by 2.0% to $90.39, higher than the market's general expectation of $89.71. Adjusted operating profit for the third quarter was $5.35 billion, with an adjusted operating profit margin of 13.0%. Sales costs increased by 2.8% to $27.5 billion in the third quarter. Adjusted non-GAAP earnings per share were $3.74, lower than the market's expectations of $3.83 and last year's $4.67. The company lowered its full-year profit forecast, stating that some less confident consumers have paused their purchases of large home goods. The world's largest home goods retailer expects adjusted earnings per share for the full year to decrease by 5% compared to the same period last year, lower than the previous guidance of a 2% decrease. The company expects annual sales to grow by approximately 3%, up from the previous guidance of 2.8%. Following the performance announcement, the company's stock price fell by nearly 4% in pre-market trading on Tuesday. As of Monday's close, its stock price had fallen by around 8% this year, while the S&P 500 index had risen by 13% during the same period. During the U.S. government shutdown, with a lack of official economic data, Home Depot, Inc.'s gloomy forecast once again warned that American consumer spending is gradually weakening. Later this week, reports from Target Corporation (TGT.US) and Walmart Inc. (WMT.US) may provide more information on the cooling job market, corporate operations, and whether inflation is causing broader consumer cuts. Compared to other large retailers, Home Depot, Inc.'s customers are often in more stable financial situations. Approximately 90% of its DIY customers own their homes, and home improvement professionals shopping at Home Depot, Inc. are often employed by homeowners. However, McPhail noted that part of the reason for the soft outlook for Home Depot, Inc. is that consumers in all income brackets are unwilling to take on high investment projects. He pointed out that the slowdown in the real estate market and rising borrowing costs exacerbate this trend. He mentioned that other factors may also be causing a snowball effect, including the government shutdown, increased company layoff announcements, and falling house prices in some markets. Home Depot, Inc.'s Chief Financial Officer, Richard McPhail, stated in an interview: "We originally expected demand to gradually accelerate in the second half of the year with lower interest rates and mortgage rates. But what we see now is that consumers continue to have ongoing uncertainties, and the housing market continues to face pressure, particularly impacting home renovation demand." The stagnant U.S. real estate market has affected furniture businesses The U.S. real estate market remains stagnant for various reasons. Despite mortgage rates being lower than a year ago, Americans are still hesitant to buy homes due to concerns about cost of living and the economy creating new barriers for them. Home prices remain high, making homeownership increasingly unaffordable for consumers. High interest rates have also led American households to abandon plans for buying homes and home renovations. Instead, many families are choosing to engage in smaller projects like painting walls and beautifying their gardens, projects that require minimal financial investment. This has led to a decrease in sales for Home Depot, Inc. and other home improvement companies. Tariffs have brought additional challenges to Home Depot, Inc., which is experiencing its first sales slowdown in the past decade. While flooring, household appliances, and other products have been affected by tariffs, the retailer has maintained its price levels because most of its imported goods arrived in the U.S. before the new tariffs took effect. However, the company warned that prices for certain items will rise later this year. In order to expand its business, the Atlanta-based company has been increasing its online product offerings and expanding its business for professional contractors, whose spending is higher than that of DIY consumers. The company executives stated that customers are postponing large purchases, but due to income growth in recent years and a 50% increase in housing prices since 2019, the business remains in good shape. However, same-store sales for the third quarter only increased by 0.2%, falling short of analysts' forecast of 1.36%, and the company has not yet seen signs of significant growth. McPhail stated that the retailer previously expected an increase in home renovation activities; expected sales of roofing materials, generators, and other supplies typically sold around seasonal storms to be higher. But he noted that neither of these situations occurred, putting pressure on the business. McPhail explained that demand remains stable but has not shown growth. He noted that there is positive momentum in holiday shopping, but the overall housing market is weak due to high interest rates, affordability issues, and employment issues, all of which are affecting consumer confidence. --- Note: Some of the content was paraphrased/reworded for clarity.