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Yahoo
26-05-2025
- Business
- Yahoo
3 Must-Know Facts About Home Depot Before You Buy the Stock
Home Depot generates a sizable chunk of its sales from professional customers, which helps boost the company's financial metrics. Macro headwinds have been impacting the business, but there are long-term industry tailwinds to keep in mind. The stock has outperformed the S&P 500 in the past decade, but the valuation looks expensive today. 10 stocks we like better than Home Depot › With $163 billion in trailing-12-month sales, Home Depot (NYSE: HD) is not only the clear leader in the home improvement industry, but it's undoubtedly one of the biggest retailers in the world. Shares have performed well in the past decade, producing a total return of 319%. But as of this writing, they trade 15% below their peak price. This might prompt you to take a closer look at the company. Here are three facts you should know about Home Depot before buying this top retail stock. Home Depot sells building materials, outdoor equipment, and paint, among many other items, to do-it-yourself (DIY) customers. But the business also targets professionals, including contractors, plumbers, and electricians. It's this latter group that represents about half of the company's total revenue base. That share is substantially higher than what rival Lowe's sees, which is about a 25% share from pros. This has some implications for Home Depot's business. First, pros generally spend much more money and visit stores more frequently than DIY customers. This makes sense, given that DIYers are probably only tackling one project, while a pro could be working on multiple job sites. For Home Depot, this results in better financial metrics. Home Depot's return on invested capital and operating margin have both generally been better than Lowe's. There are other factors involved, but Home Depot's stronger foothold with professionals deserves some credit here. In the latest fiscal quarter (Q1 2025, ended May 4), executive vice president of merchandising Billy Bastek said on the earnings call, "Pro comp sales were positive and outpaced the DIY customer." In fiscal 2020 and 2021, Home Depot's sales surged 19.9% and 14.4%, respectively. These above-average rates of growth were boosted by heightened demand from households to take on home upgrades during the depths of the pandemic. Since then, there's been a normalization of these trends. Home Depot reported same-store sales declines of 3.2% in fiscal 2023, 1.8% in fiscal 2024, and 0.3% in Q1 2025. Clearly, tighter macro conditions have presented a major headwind. Consumers don't like uncertainty, but investors should have a positive outlook over the long term since Home Depot has favorable tailwinds. First is the aging housing stock. CEO Ted Decker pointed out on the latest earnings call that 55% of homes in the U.S. are at least 40 years old. Older houses require more upkeep. In the past five years, the median sale price of a home in the U.S. has gone up by about 50%. Consequently, trillions of dollars of untapped equity can be accessed to spend on home renovations, as improved economic conditions give consumers more confidence. Home Depot's growth has hit the brakes due to the macro environment. However, the valuation tells us a different story, one that shows a company doing well. As of this writing, the stock trades at a price-to-earnings ratio of 24.9, above the trailing five- and 10-year averages. It's clear that shares are expensive on a historical basis. The positive spin is that Home Depot is the industry leader, and that once economic conditions improve, it should get back to registering steady revenue and earnings growth. On the other hand, I think the stock is overvalued based on the latest financial trends. Before you buy stock in Home Depot, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the for investors to buy now… and Home Depot wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $639,271!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $804,688!* Now, it's worth noting Stock Advisor's total average return is 957% — a market-crushing outperformance compared to 167% for the S&P 500. Don't miss out on the latest top 10 list, available when you join . See the 10 stocks » *Stock Advisor returns as of May 19, 2025 Neil Patel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Home Depot. The Motley Fool recommends Lowe's Companies. The Motley Fool has a disclosure policy. 3 Must-Know Facts About Home Depot Before You Buy the Stock was originally published by The Motley Fool Sign in to access your portfolio
New York Post
23-05-2025
- Business
- New York Post
Homeowners are doing renovations and repairs amid economic uncertainty
U.S. homeowners are spending more on home renovation projects, bucking a broader pullback by consumers amid diminished confidence in the economy. Sales at building materials and garden supply retailers rose 0.8% last month from March, the biggest gain since 2022, and were up 3.2% from April last year. At the same time, U.S. retail sales overall rose 0.1%, a sharp slowdown from March. The trend comes even as prices for home improvement products have been rising. Advertisement The cost of home repairs and remodeling climbed by nearly 4% in the first quarter from a year earlier, according to Verisk's Remodel Index. The strategic data analytics firm tracks costs for more than 10,000 home repair items, from appliances to windows. 4 U.S. homeowners are spending more on home renovation projects, despite economic uncertainty. – Recent price increases appear to be driven primarily by labor costs and don't appear to reflect the ongoing trade war that the Trump administration is engaged in with major U.S. trading partners like Mexico, China and Canada. 'We haven't seen panic buying from contractors or investors concerned about the impact tariffs might have on future costs, or labor rates being driven up by stricter enforcement of immigration policies,' Greg Pyne, vice president of pricing for Verisk Property Estimating Solutions, said in a report earlier this month. Advertisement Home Depot said Tuesday that it doesn't expect to raise prices because of tariffs, saying it has spent years diversifying the sources for the goods on its shelves. However, executive Billy Bastek said some products now on Home Depot shelves may disappear. 4 Home Depot said that it doesn't expect to raise prices because of tariffs. REUTERS He also noted that the chain is seeing fewer customers taking on large home improvement jobs like kitchen and bath remodels, because high interest rates may be dissuading homeowners from borrowing money to finance such projects. Advertisement Spending on home renovations has remained resilient as elevated mortgage rates and skyrocketing home prices have frozen out many would-be buyers. That's kept U.S. home sales in a slump, limiting the market for homeowners who want to sell. Many homeowners also bought or refinanced their mortgage when the average rate on a 30-year home loan was below 3% or 4% in the first couple of years of the pandemic. That's made them reluctant to sell now, when the average rate is hovering near 7%. 4 Home Depot executive Billy Bastek says fewer customers are doing large home improvement jobs like kitchen and bath remodels, because high interest rates may be dissuading them from borrowing money for such projects. Andrey Popov – In response, many homeowners have opted to to invest in sprucing up their home rather than sell and take on a mortgage with a sharply higher interest rate. Advertisement A shortfall in new home construction more than a decade in the making has kept people living in older homes longer. Nearly half of the owner-occupied homes in the U.S. were built before 1980 and have a median age of 41 years, according to an analysis of Census data by the National Association of Home Builders. That aging stock of homes has helped fuel the need for repairs and improvements. Harvard University's Joint Center for Housing Studies' most recent quarterly outlook of home improvement projects that spending on home renovations will continue to increase this year, despite economic uncertainty. 4 Many homeowners are investing in sprucing up their homes instead of selling and taking on a mortgage with a higher interest rate. Jacob Lund – Spending by homeowners on maintenance and home improvement projects increased 0.5% in the first quarter from a year earlier to $513 billion, according to the JCHS' leading indicator of remodeling activity, or LIRA. It also forecasts annual increases from here that will drive spending to $526 billion by the first quarter of next year. That would represent a 2.5% increase from the first quarter of this year. Rising home prices and signs of a solid economy have supported the outlook for higher spending on home improvement, but that could change if the housing market and economic outlook worsen, said Carlos Martín, director of the JCHS' Remodeling Futures Program. 'Building materials retail sales are strong, but we are seeing a significant downturn in the sales of existing homes and their median sales price since the last projection — both are known contributors to home improvements,' Martin said. 'Broader economic turbulence like a recession, a worsening job market or higher inflation would almost certainly temper our expectations.'
Business Insider
21-05-2025
- Business
- Business Insider
4 factors that help explain why Walmart and Home Depot are sending opposite signals on price hikes
Retail giants Walmart and Home Depot are sending conflicting signals about post-tariff prices. Walmart said during its earnings report last week that it would raise prices in the coming weeks and months — a move that also opened the door for other retailers to act. But on Tuesday, Home Depot said it didn't plan to follow suit and would instead rely on other "levers" to manage expenses without broad-based price adjustments. A closer look reveals four factors likely contributing to why the two companies are approaching pricing differently as they navigate new import costs. Home Depot has more room to work with Home Depot operates with wider profit margins than Walmart does, which means it has more flexibility to absorb any tariff-related costs. Home Depot reported gross margins of 33.4% in the first quarter, compared to 27.5% in Walmart's US segment. In other words, Walmart's markup is about six percentage points lower than Home Depot's, which makes sense given the different kinds of products each retailer specializes in. Higher-priced items like power tools and home appliances typically have higher profit margins than food and apparel. Shoppers depend on Walmart for low-priced groceries While Walmart is America's undisputed grocery king, Home Depot doesn't sell much food. Sure, you can pick up a snack bar and a drink at the Home Depot checkout lane, but that's not the company's main category. By contrast, roughly 60% of Walmart's sales are from the food and beverage aisles. This matters because many US shoppers have grown frustrated at inflation driving their grocery bills up, so Walmart has effectively ruled out, for now, using food price hikes to offset new costs for imported products. "The first thing that goes through my mind is food inflation," Walmart CEO Doug McMillon said. "We've been through a number of years here where prices have gone up on food, and our customers have felt that, and they don't want any more food inflation." For Home Depot, there's a bit more flexibility about where the company can shift costs, make some strategic pricing decisions, or make outright product cuts. "We'll continue to use the portfolio approach that we've talked a lot about in the past, but we don't see broad-based price increases for our customers at all going forward," Home Depot's head of merchandising, Billy Bastek, said during Tuesday's call. Walmart depends more on China Home Depot says half of its inventory was sourced from within the US, and the company says no single country will represent more than 10% of its supply base by this time next year. Walmart sources two-thirds of the products it sells in the US from US suppliers. A 2023 Reuters report found, though, that the company depends on China for about 60% of its imports. While Walmart may have made tweaks to its supply chain since then, taken together, those figures would indicate Walmart has a higher exposure than Home Depot does to the 30% additional tariffs on Chinese imports, which Walmart CFO John David Rainey described as "too high." Home Depot has more exclusive brand partnerships Home Depot also said during the earnings call Tuesday that it plans to enlist its partner brands in its efforts to hold the line on prices for shoppers. As avid DIYers or pro remodelers know, there are certain brands that are only available at a given national chain, so if Milwaukee Tool wants its products' sales to outperform Bosch's, it would behoove the brand to help Home Depot keep prices lower than chief retail rival Lowe's. "It's a great opportunity for us to take share, and it's a great opportunity for our suppliers to take share as well," Bastek said. Walmart, by contrast, is a mass retailer, which means it sells many of the same national brands that Target, Costco, or any other large company carries — so there's less incentive for, say, Energizer or Duracell to offer a better deal on batteries. Companies have choices to make Although President Donald Trump has said he would prefer that retailers simply " eat the tariffs," there aren't any set rules about how companies have to handle the new costs on imports. Still, it would appear that Home Depot has a bit more flexibility than Walmart has to keep prices stable and still turn a profit. As more companies report their earnings in the coming days and weeks, analysts will be sure to probe which path other retailers say they'll follow.
The Independent
20-05-2025
- Business
- The Independent
Home Depot claims it won't raise its prices in response to Trump's tariffs
Home Depot has announced that it will not raise prices in response to President Donald Trump 's widespread tariffs. Meanwhile, Walmart announced last week that it would raise its prices because of the tariffs, prompting Trump to lash out. Executive Vice President of Merchandising, Billy Bastek, told the paper that Home Depot considers pricing across its portfolio, hoping to hold most prices steady and possibly take market share from those raising their prices. 'It's a great opportunity for us to take share, and it's a great opportunity for our suppliers to take share as well,' he told The Journal. Suppliers say that retailers, including Walmart and Home Depot, have been arguing for concessions on pricing or that suppliers move their production out of China. Some suppliers to Home Depot have done so. 'We anticipate that 12 months from now, no single country outside the United States will represent more than 10 percent of our purchases,' Chief Financial Officer Richard McPhail told the paper. Home Depot's comparable sales in the quarter dipped by 0.3 percent. However, in the U.S., they increased by 0.2 percent. February sales were low because of bad weather. Still, good employment levels and home appreciation have meant that its customer base of mostly homeowners has carried on spending on home improvement, McPhail noted. Chief Executive Ted Decker added that he's waiting for an improvement in consumer confidence. While Home Depot's customers continue to spend on things like painting or yardwork, projects that would need financing appear to have been paused for now. 'While there are literally trillions of dollars of equity available to be tapped in the homes, I think there's still enough macro uncertainty,' Decker told The Journal. As a number of companies have scaled back or suspended their forecasts amid the tariff uncertainty, Walmart and Home Depot have kept their financial forecasts for the fiscal year unchanged.
Globe and Mail
20-05-2025
- Business
- Globe and Mail
Home Depot says it doesn't expect to boost prices because of tariffs
Home Depot doesn't expect to raise prices because of tariffs, saying it has spent years diversifying the sources for the goods on its shelves. Billy Bastek, executive vice president of merchandising, said during a conference call on Tuesday that Home Depot's suppliers have shifted sourcing across several countries and that the company doesn't expect any single country outside of the U.S. will represent more than 10% of its purchases 12 months from now. 'We don't see broad based price increases for our customers at all going forward,' he said. Other companies, domestic and foreign, have warned customers that price hikes are on the way due to a trade war kicked off by the U.S. Walmart said last week that it has already raised prices and will have to do so again in the near future. Late Monday, Subaru of America said it would raise prices on some of its most popular models by as much as $2,000. President Donald Trump lambasted Walmart, saying on social media over the weekend that the retail giant should 'eat' the additional costs created by his tariffs. As Trump has jacked up import taxes, he has tried to assure a skeptical public that foreign producers would pay for those taxes and that retailers and automakers would absorb the additional expenses. Most economists are deeply skeptical of those claims and have warned that the trade penalties would worsen inflation. Tariffs on materials like lumber are also a concern for both homebuilders and home buyers. A homebuyer now needs to earn at least $114,000 a year to afford a $431,250 home -- the national median listing price in April, according to data released this month by Additional housing material costs would put home ownership out of reach for more potential buyers, though Home Depot is somewhat insulated as it sources the majority of its lumber in the U.S. Early last year, the company said that about 17% of its wood is sourced from Canada. The company would not say Tuesday if those import levels have changed though after negotiations, Canadian lumber was exempted from additional 25% U.S. tariffs. During the first quarter, Home Depot's revenue climbed as customers spent slightly more on smaller home projects. A number of U.S. companies have lowered or pulled financial guidance for investors as tariffs launched by the the Trump administration scramble world trade but on Tuesday, Home Depot stuck by earlier projections of sales growth at around 2.8%. Shares of the Atlanta company dipped slightly on Tuesday. Revenue rose to $39.86 billion from $36.42 billion a year earlier, beating the $39.3 billion that analysts polled by FactSet expected. Sales at stores open at least a year, a key gauge of a retailer's health, edged down 0.3%. In the U.S., comparable store sales climbed 0.2%. Wall Street anticipated a 0.1% decline in same-store sales. Customer transactions rose 2.1% in the quarter. The amount shoppers spent climbed to $90.71 per average ticket from $90.68 in the prior-year period. 'Our first quarter results were in line with our expectations as we saw continued customer engagement across smaller projects and in our spring events,' Home Depot Chair and CEO Ted Decker said in a statement. Home improvement retailers like Home Depot have been dealing with homeowners putting off bigger projects because of increased borrowing costs and lingering concerns about inflation. The U.S. housing market has been in a sales slump dating back to 2022, when mortgage rates began to climb from pandemic-era lows. Sales of previously occupied homes have dropped as elevated mortgage rates and rising prices discouraged home shoppers. Existing home sales fell 5.9% in March from February to a seasonally adjusted annual rate of 4.02 million units, the National Association of Realtors said. The March sales decline was the largest monthly drop since November 2022, and marks the slowest sales pace for the month of March going back to 2009. Sales of previously occupied U.S. homes fell last year to their lowest level in nearly 30 years. 'One of the central problems for Home Depot is the skittish housing market,' Neil Saunders, managing director of GlobalData, said in a statement. 'While last quarter was robust, home sales declined by 3.1% year-over-year this quarter as consumers were deterred from moving by continued high interest rates and growing economic uncertainty. This lack of recovery makes it difficult to drive home improvement spending.' For the three months ended May 4, Home Depot Inc. earned $3.43 billion, or $3.45 per share. A year earlier the Atlanta-based company earned $3.6 billion, or $3.63 per share.
