The Home Depot Inc. (HD) is feeling the squeeze from a cautious consumer base, and the numbers tell a pretty clear story. The home improvement giant reported third-quarter fiscal 2025 results that beat on sales but missed on earnings, prompting the company to dial back its profit expectations for the year.
Here's what happened: Home Depot brought in $41.4 billion in sales for the quarter, up 2.8% year-over-year and comfortably above the $41.137 billion analysts were expecting. That sales figure got a boost from about $900 million in revenue from the GMS Inc. acquisition. Comparable sales inched up just 0.2%, while U.S. comparable sales rose a barely-there 0.1%.
But earnings? That's where things got messy. Net earnings came in at $3.6 billion, or $3.62 per diluted share, down from $3.67 a year ago. Adjusted diluted EPS landed at $3.74, missing the $3.85 estimate and down from $3.78 last year. Not exactly the kind of performance that gets investors excited.
The Weather Didn't Cooperate
Management pointed to a couple of culprits behind the disappointing quarter. First up: storms, or rather, the lack of them. Turns out when hurricanes and severe weather don't show up, people don't rush out to buy plywood, generators, and emergency supplies. Who knew?
CEO Ted Decker laid it out plainly: "Our results missed our expectations primarily due to the lack of storms in the third quarter, which resulted in greater than expected pressure in certain categories. Additionally, while underlying demand in the business remained relatively stable sequentially, an expected increase in demand in the third quarter did not materialize."
Translation: they were counting on a seasonal bump that never came. But it's not just about the weather. Decker continued, "We believe that consumer uncertainty and continued pressure in housing are disproportionately impacting home improvement demand. Our teams are continuing to execute at a high level and we believe we are growing our market share."
What the Numbers Say
Digging into the metrics, customer transactions fell 1.4% to 393.5 million, though the average ticket climbed 2% to $90.39. On a comparable basis, transactions dropped 1.6% while the average ticket rose 1.8%. So fewer people are shopping, but those who do are spending a bit more per visit.
Operating income declined 1.2% to $5.35 billion, while adjusted operating income came in at $5.51 billion versus $5.56 billion last year. GAAP operating margin hit 12.9%, and adjusted operating margin was 13.3%. Gross profit increased 2.9% to $13.8 billion, showing some bright spots amid the overall weakness.
Cash flow took a noticeable hit. The company generated $12.98 billion in operating cash flow for the first nine months of fiscal 2025, down from $15.14 billion in the same period last year. Capital expenditures totaled $2.62 billion. At quarter-end, cash and cash equivalents stood at $1.68 billion, while total debt came in around $56.0 billion.
Lowered Expectations
Given the third-quarter performance, Home Depot revised its full-year guidance downward. The company now expects GAAP EPS of $14.02, down from its previous guidance of $14.46 and below the $14.61 analyst estimate. Adjusted EPS guidance was lowered from $14.94 to $14.48, compared with the $14.99 consensus.
On the sales front, the company actually raised its fiscal 2025 outlook slightly to $164.299 billion from $163.980 billion, though it still trails the $164.742 billion analyst estimate. Home Depot expects the GMS acquisition to contribute approximately $2 billion in incremental sales for the full year.
Management's guidance incorporates the weak third-quarter results along with expectations for continued fourth-quarter pressure from reduced storm activity, consumer uncertainty, housing softness, and the integration of GMS.
The Bigger Picture
At the end of the quarter, Home Depot operated 2,356 retail stores and more than 1,200 SRS locations across the U.S., Canada, and Mexico, employing over 470,000 associates. Despite this massive footprint, the company hasn't been immune to broader economic headwinds.
Home Depot shares have struggled in 2025, down approximately 7.8% year-to-date as high interest rates continue to dampen demand for large home improvement projects. Tariffs have added another layer of complexity, forcing the company to implement "modest" price increases in select categories. On the positive side, more than half of the company's products are sourced domestically, which provides some insulation from trade-related cost pressures.
HD Price Action: Home Depot shares were down 4.00% at $343.70 during premarket trading on Monday.
