Home improvement spending remains resilient against sluggish real estate market! Home Depot (HD.US) Q2 results exceed expectations, maintains full-year sales guidance but warns uncertainties persist in outlook

According to news from Zhitong Finance APP, U.S. home improvement and building materials retail giant Home Depot (HD.US) reported second-quarter results that exceeded market expectations, showing that despite high borrowing and housing costs, consumer spending on home improvement projects remains resilient. As of press time, Home Depot shares were up more than 2% in U.S. pre-market trading on Tuesday.

The financial report shows that for the quarter ended August 2, Home Depot's sales increased by 5.7% year-over-year to $47.86 billion, surpassing the average analyst expectation of $47.24 billion. Same-store sales rose by 1.7%, the fastest growth rate since the end of 2022, and well above analysts' average forecast of 0.94%. Adjusted operating profit was $7.017 billion, up 4.8% year-over-year. Adjusted earnings per share were $4.92, beating the average analyst estimate of $4.73.

These better-than-expected results indicate that measures taken by Home Depot have helped the company mitigate the impact of the U.S. real estate market downturn. Currently, high housing prices and interest rates continue to weigh on the real estate market. In response, Home Depot's strategies include expanding the fast-growing professional contractor business and further developing its e-commerce segment. At the same time, Home Depot is attracting consumers undertaking smaller home improvement projects, such as repainting a room or adding new plants to the garden, rather than large-scale renovations.

Home Depot’s Chief Financial Officer, Richard McPhail, stated that in the second quarter, the company saw healthy demand across all U.S. regions and product divisions. Portable power tools were particularly popular. Everyday consumers showed strong demand for live plants, patio products, and grills, while professional contractors showed strong demand for plumbing and electrical supplies as well as hand tools. A heatwave in July also boosted sales of air conditioners and fans.

While U.S. households are still purchasing essentials, many consumers are cutting back on non-essentials and big-ticket items. The war in the Middle East has further increased pressure on consumers, sparking a new round of inflation concerns and pushing mortgage rates to their highest level in over a year. At the same time, supply shortages and higher material costs have also driven up housing prices.

McPhail said that due to concerns about housing affordability, borrowing costs, and consumer uncertainty, the broader real estate market has not yet recovered and the outlook remains uncertain. He added that large-scale home improvement projects remain "on hold". He stated: "The messages from our customers have been consistent. What they see is that uncertainty is intensifying, and they are increasingly concerned about inflation and fuel costs."

It is worth noting that in the face of these challenges, Home Depot CEO Ted Decker will take a temporary medical leave in the coming months, with McPhail and Senior Executive Vice President Ann-Marie Campbell temporarily assuming Decker’s responsibilities.

Home Depot executives have previously stated that unless mortgage rates fall and income levels increase more significantly, the real estate market is unlikely to show notable improvement in the short term. However, they remain optimistic about the company's long-term growth prospects due to a large amount of pent-up consumer demand for home upgrades.

Looking ahead, Home Depot maintained its full-year performance guidance and noted that tariff refunds are expected to partially offset "unplanned fuel, energy, and other product input costs" in the current fiscal year. The company currently expects fiscal 2026 sales to grow by 2.5%-4.5%, with the midpoint of 3.5% below analysts’ average estimate of 3.78%. Adjusted earnings per share for fiscal 2026 are expected to grow by 0%-4%, with the midpoint of 2% above the analyst average estimate of 1.83%.