Home Depot has struggled this year as higher prices and a downbeat housing market have crimped demand from customers.
Inflation has rebounded in the wake of the Trump administration’s tariffs, with the Consumer Price Index inflation rate reaching 3% in September, up from 2.3% in April, before most tariffs took effect. The effective tariff rate has climbed to 18% from 2.4% this year, according to Yale Budget Lab.
Homeowners and potential buyers are also facing stubbornly high interest rates, which are slowing home sales and increasing the cost of projects, such as additions and kitchen and bathroom upgrades.
Mortgage rates remain above 6%, despite the Federal Reserve’s interest rate cuts in October and November, while rates on home-equity lines of credit average 7.8%, according to Bankrate.
Housing statistics (2025):
- New-home sales: 800,000 (August 2025)
- Existing-home sales: 4.06 million (September 2025)
- Median price of a new home (August 2025): $413,500
- Median price of an existing home (September 2025): $415,200 Source: Census Bureau; National Association of Realtors
Home Depot’s fiscal-second-quarter results reflect the ongoing headwinds. Sales at stores open for at least one year inched only 1% higher, due primarily to higher prices rather than an increase in shoppers. Visits to Home Depot locations sagged 2.6% during the quarter, according to Placer.ai.
On Nov. 18 Home Depot will report its fiscal-third-quarter update on customer behavior. Wall Street thinks trends improved, but not by much.
Home Depot recently suffered declining foot traffic in its stores.
Bank of America shares Home Depot third-quarter predictions
On Nov. 13 Bank of America weighed in on what Home Depot will likely tell investors about its third-quarter performance. In a letter to customers shared with TheStreet, the bank’s analysts predicted “modest” shifts in customer trends.
A 0.3-percentage-point improvement in comparable-store sales isn’t overly impressive, though, and pricing will likely account for most of the upside. Bank of America’s analysts point out that Bloomberg’s observed credit- and debit-card data show transactions fell 1.1% in the third quarter, even as average transaction amounts increased 2.8%.
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Using Bank of America’s cardholders as a proxy for do-it-yourself demand, spending declined 3.5% in the fiscal third quarter from a year earlier. That’s worse than the 2.9% drop in fiscal Q2.
While Home Depot sources about 50% of its products in the U.S., that still leaves a substantial number of items on store shelves that are more expensive due to tariffs.
Bank of America estimates that Home Depot would need to increase prices by 4.4% to entirely offset the cost increases resulting from tariffs.
The analysts say “modest price increases to offset tariffs” will lead Home Depot to set guidance for the second half of this year slightly better than it was for the first half.
Overall, the analysts expect Home Depot to report earnings per share of $3.82 on sales of $40.9 billion.
Home Depot bets big on pro business
While do-it-yourself shoppers weigh down Home Depot’s overall performance, it is making a bigger push into the pro supply chain, which could help offset some of the weakness it’s seeing in its stores.
Related: Home Depot faces growing consumer boycott calls ahead of holidays
Home Depot recently closed on its $5.5 billion acquisition of GMS, which adds a major distributor of building products, including drywall, ceilings, steel framing and related products to its business mix.
That deal follows Home Depot’s $18.25 billion acquisition of building-materials supplier SRS Distribution, expanding its reach to landscaping, roofing, and pool construction professional contractors.
Bank of America predicts that SRS organic-sales growth will likely remain in the mid-single digits percent through 2025.
Home Depot’s acquisitions aren’t the only moves it’s making to increase business from professionals. It’s also rolling out trade credit for pros in more locations, enabling more flexible payment terms, such as net 30 or net 60 days.
Home Depot guidance is key
While the third-quarter-sales figures may be marginally better than those of the second quarter, what management says about the fourth quarter and next year will be particularly important.
Early evidence suggests that October got the quarter off to a slow start, with spending falling sharply. According to another Bank of America report from its Data Insight team shared with TheStreet, “building products spending slowed [year over year] vs. September with 5 out of 9 categories declining YoY.”
Home improvement spending growth (year-over-year) by month:
- October: -5%
- September: -1%
- August: -5%
- July: -1%
- June: -3%
- May: -4%
- April: -2% Source: Bank of America Data Insights on cardholders/TheStreet.com
Overall, the analysis showed that home-improvement spending sank 5% from one year ago in October — the worst showing since August. Lumber stores were particularly hard hit. Sales at lumber stores fell 8% from one year ago following the September announcement of higher lumber tariffs.