Key Takeaways:

  • Home Depot CFO Richard McPhail said the company remains "confident" in the current macroeconomic environment and looks ahead to the rest of 2025, while warning that tariffs could drive price increases.
  • The home improvement retailer, headquartered in Atlanta, Georgia, expects customers to remain in "very healthy" shape for the rest of the year. McPhail said during the company's second-quarter earnings call on Tuesday, in response to analysts' questions, that both homeowners and the professional customers who serve them have seen strong income growth over the past few years and "sit on more than $11 trillion of accessible home equity," double the level in 2019. Home improvement demand persists, and Home Depot has taken steps to capitalize on this trend.
  • However, executives also warned of the potential impact of tariffs imposed by the Trump administration. William Baster, executive vice president and merchandising officer, said, "Remember, over 50% of our products are sourced domestically and are not subject to any tariffs," but for some imported goods, "clearly, tariff rates are much higher than what we communicated in May," so "as expected, there will be some modest price movements in certain categories, but it won't be across the board."

Deeper Insights:

The price increase warning comes alongside ongoing challenges in the housing market. According to a report released by RedFin, U.S. home prices fell 0.1% month-over-month in July, marking the third consecutive monthly decline; year-over-year, they rose 2.9%, the lowest growth rate in the RedFin Home Price Index since 2012. The report was released on Tuesday.

Meanwhile, home sales continue to shrink, according to the National Association of Realtors, extending a trend that began in 2024. The association found in a January report that the home turnover rate in 2024 fell to its lowest level in 30 years.

Executives said on the call that economic uncertainty is also causing homeowners and professional customers to delay larger projects.

"When we talk broadly with our customers—whether consumers or professionals—the primary reason for delaying larger projects is widespread economic uncertainty," Chairman and CEO Edward Decker said Tuesday in response to questions about taxes and interest rates. "That outweighs project pricing, labor availability, and the various factors we've discussed in the past."

Decker said lower mortgage rates would "definitely help" alleviate some of the pressure. McPhail said the company's "customers still tell us that the interest rate environment makes them hesitant on larger renovation projects that typically require debt financing."

For the second quarter ended August 3, Home Depot reported net sales of $45.3 billion, up 4.9% year-over-year; net profit was roughly flat at $4.5 billion.

The company also reaffirmed its fiscal 2025 guidance, expecting diluted earnings per share to decline approximately 3% from $14.91 in fiscal 2024.

Competitors are also watching home improvement trends and weak demand. Lowe's second-quarter comparable sales rose 1.1%, driven by "solid performance" in the do-it-yourself and professional home improvement categories, Chairman, President, and CEO Marvin Ellison said in a statement.

"Despite unfavorable weather at the start of the quarter, our teams drove sales growth and profitability improvements," Ellison said in a statement accompanying the company's earnings on Wednesday. Lowe's reported net sales of approximately $24 billion for the quarter ended August 1, compared with $23.6 billion in the same period last year.

Lowe's is also taking steps to drive growth, completing its $1.3 billion acquisition of Artisan Design Group in June—a company that provides interior design and installation services.

"This acquisition enhances our ability to capture more of the professional customer's planned spending and expands our reach in the new residential construction market," Ellison said in Wednesday's statement. Also on Wednesday, Lowe's announced plans to acquire Foundation Building Materials, a distributor of interior building products, for approximately $8.8 billion, according to another announcement.