Home Depot tops expectations in the fourth quarter, but customers pull back on spending

Home Depot reported a muted fourth-quarter performance as cautious consumer spending and a sluggish housing market continue to impact the home improvement sector. Despite these challenges, the Atlanta-based retail giant managed to exceed Wall Street expectations in several key metrics.

The company posted earnings of $2.57 billion, or $2.58 per share, for the quarter ended February 1. When adjusted for one-time items, earnings reached $2.72 per share, comfortably surpassing analyst projections of $2.53 per share. This represents a decline from the $3 billion, or $3.02 per share, earned during the same period last year, though last year’s figures benefited from an additional week that contributed approximately 30 cents per share.

Revenue for the quarter totaled $38.2 billion, down from $39.7 billion a year earlier. The company noted that the extra week in the prior-year period had added roughly $2.5 billion in sales. Despite the decline, the latest revenue figures still exceeded Wall Street expectations of $38.09 billion.

Investors responded positively to the results, with Home Depot shares rising more than 3% in pre-market trading on Tuesday.

Sales at stores open at least a year, considered a key indicator of retail health, showed modest growth of 0.4% overall, with U.S. comparable store sales increasing by 0.3%. Customer transactions declined by 1.6%, though the average receipt value increased to $91.28 from $89.11 a year earlier, suggesting that while fewer customers visited stores, those who did spend more per trip.

Ted Decker, Chair and CEO of Home Depot, characterized the quarter’s results as “largely in-line with our expectations,” citing the lack of storm activity in the third quarter and “ongoing consumer uncertainty and pressure in housing.” He noted that, when adjusted for storm-related spending, underlying demand remained “relatively stable throughout the year.”

The U.S. housing market has been in a prolonged slump since 2022, when mortgage rates began climbing from historic lows that had previously fueled a homebuying frenzy. This cooling housing market has directly impacted Home Depot, as homeowners typically undertake major renovation projects when buying or selling properties.

Consumer confidence also fell sharply in January, hitting its lowest level since 2014, as Americans grow increasingly concerned about their financial prospects amid persistent inflation and economic uncertainty.

Neil Saunders, managing director of GlobalData, highlighted a notable shift in homeowner behavior due to these market conditions. “The broader truth here is that Home Depot does best for big scale improvement tasks and major DIY jobs and is a major destination for consumers undertaking such work,” Saunders wrote. “Unfortunately, the market did not play ball over the final quarter with the number of projects undertaken down by 1.5%, mostly driven by a sharp decline in bigger ticket projects, such as full remodels.”

This trend has directed more consumers toward local hardware stores for smaller projects, creating a challenging environment for big-box retailers like Home Depot that traditionally excel in serving customers undertaking major renovations.

Looking ahead, Home Depot provided a cautious outlook for fiscal 2026, projecting adjusted earnings to be approximately flat to up 4% from fiscal 2025’s $14.69 per share. The company forecasts total sales growth of about 2.5% to 4.5%, with comparable sales growth expected to be approximately flat to up 2%.

These projections reflect the company’s careful approach amid ongoing economic uncertainties and the persistent challenges in the housing market. While Home Depot continues to demonstrate resilience in a difficult retail environment, its performance remains closely tied to broader economic conditions and consumer confidence, particularly in housing-related spending.