Home Depot Blames Weather for Earnings Miss. The Stock Market Isn’t Buying It.

Home Depot stock is down 12% this year. The S&P 500 has gained 14%. (Brandon Bell/Getty Images)

Key Points

• Home Depot’s stock fell 3.9% after reporting adjusted third-quarter earnings of $3.74 per share, below analyst expectations of $3.84.
• The company lowered its fiscal year adjusted earnings per share forecast to a 5% drop, previously anticipating a 2% decrease.
• Home Depot’s comparable store sales increased by 0.2%, missing analyst expectations of a 1.3% jump, with transaction numbers falling 1.6%.

Home Depot stock fell Tuesday after the big-box retailer reported weaker-than-expected earnings, fueling investors’ worries about stalling home improvement demand.

Shares dropped 3.9% to $344.06 in morning trading. The S&P 500 was 0.9% lower.

The move lower came after Home Depot reported adjusted third-quarter earnings of $3.74 a share, as sales climbed 2.8% from a year ago to $41.4 billion. Analysts were expecting adjusted earnings of $3.84 a share on $41.2 billion in revenue, according to FactSet.

Home Depot also slashed its profit outlook. It now expects adjusted earnings per share to fall by 5% over the fiscal year ending in January 2026, having previously forecast a 2% drop. Part of the decline stems from incorporating newly acquired building-products distributor GMS into its results, executives said.

The company raised its sales outlook slightly, now expecting yearly revenue to grow by about 3% compared with prior guidance for a 2.8% uptick. Same-store sales growth will be “slightly positive.” The company previously projected an annual increase of about 1%.

Home Depot President and CEO Ted Decker blamed the earnings miss on a lack of storms. Over the third quarter of 2024, hurricane-fueled demand boosted home-improvement sales in affected regions—$200 million in extra sales in the third quarter, and $220 million in the fourth.

What’s more, demand for big-ticket discretionary projects that often require financing was still weak, executives said. And while the underlying demand in the business remained “relatively stable” compared with the second quarter, economic uncertainty—led by increasing layoffs and concerns over affordability—hampered a much-expected improvement in sector-wide sales, Decker said on a call with analysts Tuesday.

Created with Highcharts 9.0.1Home DepotSource: FactSet

Created with Highcharts 9.0.1Nov. 11Nov. 17355.0357.5360.0362.5365.0367.5370.0372.5375.0$377.5

Shares in fellow home-improvement chain Lowe’s were down 1.8%.

Despite prominent predictions like one from Lowe’s CEO Marvin Ellison only a couple of months ago, a rebound in the home-improvement sector hasn’t come, third-party data show. The reason: the housing market just hasn’t picked up, keeping Americans from ambitious remodeling projects.

“We were expecting interest rates and mortgage rates to come down, which they did. That would have been some assistance to housing, but we really just saw ongoing consumer uncertainty and pressure in housing that are disproportionately impacting home improvement,” Decker said.

Visits to Home Depot stores, for example, have dropped every month this year except August compared with last year, foot-traffic numbers from Placer.ai show. Home Depot’s same-store sales confirmed it, climbing just 0.2% from a year ago. Analysts were expecting a 1.3% jump. Same-store sales exclude newly opened stores.

“The new news is the tone change from HD citing demand has not increased in the 2H of the year like they originally planned citing growing consumer uncertainty and pressure in housing,” wrote Steven Zaccone, an analyst at Citi. “This is another data point confirming the macro has softened for the consumer and the housing outlook lacks near-term catalysts to accelerate.”

And tariffs are still a worry. Retailers are closely monitoring whether or when shoppers will balk at prices bumped up by import costs.

Home Depot, according to analysts, is insulated from many of those tariff pressures—roughly half of its merchandise is sourced from the U.S. But executives have warned that some prices will be moving higher, which analysts think could dampen demand even more.

Modest price increases contributed to the 1.8% increase in the comparable average ticket price, which accelerated from a 1.4% pace in the second quarter, even though the number of comparable transactions fell 1.6%—a byproduct of lapping last year’s hurricanes. Home Depot’s average ticket rose 2% year over year to $90.39 from $88.65.

Home Depot stock is down 12% this year; the benchmark S&P 500 has gained 13%.

Write to Sabrina Escobar at sabrina.escobar@barrons.com