Home Depot says tariffs will lead to price increases, but th

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Dow Jones NewsAug 19, 3:09 PM UTC
MW Home Depot says tariffs will lead to price increases, but they won't be across the board

By James Rogers

 

Home Depot's stock surges as continued growth in U.S. sales suggests the slump in home-improvement spending could be over

 

Home Depot reported second-quarter results Tuesday morning.

 

Home Depot Inc. says that the raft of tariffs implemented by President Donald Trump will lead to some price increases on certain products but that they won't be wide-ranging.

 

The company reported fiscal second-quarter results that missed expectations, but investors appeared to focus on the acceleration in sales at its U.S. stores as a sign that spending on home improvement may have bottomed out.

 

Speaking during a conference call to discuss Home Depot's (HD) second-quarter results Tuesday, Billy Bastek, the company's executive vice president of merchandising, said that more than 50% of the retailer's products are sourced domestically and are therefore not subject to tariffs.

 

However, he acknowledged that there will be some impact, noting that tariff rates are "significantly higher" on some imported goods than at the time of Home Depot's last quarterly conference call in May.

 

"So as you'd expect, there'll be some modest price movement in some categories, but it won't be broad-based," he said.

 

Bastek highlighted how tariffs were impacting some garden products and cited chemicals in particular as a "headwind" with regard to comparable transactions in the second quarter. The company helped ease some of the tariff pressure by being "a little less promotional on a couple of those garden areas" during the quarter, he said.

 

Meanwhile, the stock climbed 3.9% toward a six-month high in morning trading, enough to pace the Dow Jones Industrial Average's DJIA gainers, as investors focused on growth in U.S. store sales rather than on profit and net sales misses.

 

The rally helped boost the shares of others in the home-improvement sector, as paint seller Sherwin-Williams Co.'s stock (SHW) gained 2.4% and Lowe's Cos. (LOW), which reports earnings on Wednesday, saw its stock advance 2.6%.

 

For the quarter ending Aug. 3, net income was $4.6 billion, or $4.58 per share, compared with $4.6 billion, or $4.60 per share, in the same period last year.

 

Adjusted earnings per share, which excludes nonrecurring items, edged up to $4.68 from $4.67 in the same period a year ago. That was below the average analyst estimate compiled by FactSet of $4.72. Last quarter, the company missed bottom-line expectations for the first time in five years.

 

Net sales grew 4.9% to $45.28 billion but missed the FactSet consensus of $45.41 billion, while comparable sales - those in stores open more than a year - increased 1%, versus expectations of 1.2% growth. Unfavorable currency moves contributed to the comparable-sales miss.

 

On a bright note, comparable sales for U.S. stores increased 1.4% to beat the FactSet consensus of a 1.3% rise. That marked the third straight quarter of U.S. sales growth, following an eight-quarter streak of declines, and the fastest growth since the fiscal third quarter of 2022.

 

Sales improved in each month of the quarter, with 0.3% growth in May, a 0.5% rise in June and a 3.3% jump in July.

 

The Atlanta-based company said that customers engaged more broadly in smaller home-improvement projects but continued to hold off on larger projects that required financing.

 

"These may be shallow gains, but they show a material strengthening over the last quarter and provide confidence that the slump in home improvement is finally over," GlobalData analyst Neil Saunders said in a note to clients.

 

Overall, Saunders described Home Depot's quarterly results as solid, with the company continuing to drive overall growth through its acquisition of building-products maker SRS Distribution last year.

 

"The 4.9% uplift in net sales is a little shallower than previous quarters as the anniversary of the closing of the SRS deal partially laps current trading; indeed, this is the last quarter from which Home Depot will get a boost, so overall growth will flatten over the balance of this year," he wrote.

 

Home Depot affirmed its full-year growth outlook for adjusted earnings per share to decline approximately 2%, for total sales to increase by about 2.8% and for comparable-sales growth of about 1%. Home Depot expects to open approximately 13 new stores during the year, in line with its prior guidance.

 

The company's stock has gained 5.4% in 2025, compared with the S&P 500 index's SPX gain of 9.4%.

 

Home Depot ended the quarter with 2,353 retail stores and over 800 branches, up from 2,340 retail stores and over 760 branches at the end of the same period last year.

 

-James Rogers

 

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08-19-25 1109ET

 
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