Investors who want to have a turnaround in the housing market may have to continue waiting.
Consumers reconsider home renovation projects due to Trump administration tariffs, which were mixed incomes on Tuesday morning. Revenue rose 9.4% year-on-year to $39.86 billion, compared with Wall Street's expected $392.9 billion. Net income fell 4.95% to $3.45, missing the expected $3.59.
Sales in the same store fell by 0.3%, compared with expected 0.20%. The reversal of sales growth in the same store in the fourth quarter was positive after the same store fell for eight consecutive quarters. The company said this has an impact on foreign exchange rates of about 70 basis points.
CEO Ted Decker said in a press release that the results “correspond to our expectations” as it sees clients joining around “small projects.”
Home Depot stock fell just 2.5% year-on-year before earning the report. Stocks grew 2% in listing trading. Competitor Lowe (low) stocks fell nearly 5%, while the S&P 500 (^GSPC) grew at 1%.
"We expect it to take several quarters until next year's growth becomes more stable and flows to revenue, as macro pressures continue in the near future, especially in the uncertainty in the new tariff policy," Joe Feldman of Telsey Advisory Group wrote in a note to clients.
Here is what Home Depot reported in its first quarter results, compared to Wall Street’s expectations, according to Bloomberg data:
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income: $39.86 billion, with $39.29 billion
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Adjusted EPS: $3.45, $3.59
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Same-store sales growth: -0.30%, versus -0.20%
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Transaction growth: +2.1%, versus +0.18%
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Average ticketing: +0.03%, versus -0.65%
Tariff uncertainty remains the biggest concern for Home Depot and Lowe's, the report reported Wednesday.
The United States temporarily reduced tariffs on Chinese imports from 145% to 30%, while the so-called mutual tariffs have been suspended due to the general duty of 10%. However, interest rates are still much higher than historically, and changes in the tariff environment may cause consumers to think twice before undergoing a major renovation.
Read more: What Trump’s tariffs mean to the economy and your wallet
At a meeting in early April, Home Depot Chief Financial Officer Richard McPhail said Asia is a key area for procurement, but “most of the goods we sell are made in the United States.” He added: “Diverization will be our ongoing strategy.”
TD Cowen analyst Max Rakhlenko told customers that Home Depot “can better manage tariffs” because its specialty business accounts for 50% of its client business, while Lowe's accounts for 20% of Chinese goods and a larger DIY customer base.
Another factor that weighs retailers is the slow housing market. Homebuilders' confidence continued to deteriorate in May. Sales and potential buyer traffic are also expected to fall to 18-month lows over the next six months.
"We expect single-family households to continue to slow down given rising mortgage rates, higher levels of unsold new homes in stock and weak consumer confidence," Bank of America analyst Rafe Jadrosich wrote in a note to clients.
The 10- and 30-year Treasury yield (^TNX, ^Tyx) rose on Monday after Moody's lowered the U.S. government's long-term credit rating from AAA to AA1. Although this is not reflected in first-quarter revenue, higher treasury yields may create another headwind for the industry by increasing financing costs for home improvement projects and home purchases.
Read more: What is the 10-year Treasury and how does it affect your financial situation?
Home Depot reiterated its guidance. It expects net sales to grow by 2.8% throughout the fiscal year and same-store sales to rise by 1%.
Under the tariffs, companies raise financial guidance and warn that higher prices have become a common theme in this income season. Wal-Mart last week warned that higher tariffs would increase costs for retailers, but rising prices to offset those costs could impact consumer demand.
"Consumers are still very choice and this will fall into discretion," Stacey Widlitz, president of SW retail consultant, told Yahoo Finance.
Feldman said that because of “first-class execution, digital capabilities and hybrid work, Home Depot “should remain a long-term winner in retail”, leading to more maintenance and repair activities.”
He added that its professional client base has a "important opportunity" to have an approximately $250 billion addressable market after the acquisition of the SRS issue.
Brooke Dipalma is a senior journalist at Yahoo Finance. Follow her on @Brookedipalma Or email her at bdipalma@yahoofinance.com.
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