Latest news with #RichardMcPhail
Yahoo
8 hours ago
- Business
- Yahoo
From Tariffs to Tags: The Price Hike Reality for US Shoppers (Part 2)
So far in 2025, the U.S. economy has maintained its strong performance, propelled by factors like low unemployment and real wage gains, according to the National Retail Federation (NRF). Nevertheless, policy uncertainty, primarily linked to the unpredictable nature of Trump's tariffs and ongoing legal disputes, is eroding both consumer and business confidence. For 2025, the NRF anticipates retail sales to expand between 2.7% and 3.7%, hitting between $5.42 trillion and $5.48 trillion. This outlook is consistent with 2024's 3.6% sales growth ($5.29 trillion) and matches the 3.6% average annual growth recorded in the ten years prior to the pandemic. Even with these broader economic trends, the retail sector confronts unique challenges. This second part of our series will delve into how other retailers are reacting to ongoing tariff issues and the implications for investors in this volatile climate. (Read Part 1 here now). Home Depot missed Q1 earnings expectations but reaffirmed its full-year guidance — a signal of operational confidence despite economic headwinds and tariff pressures. CFO Richard McPhail emphasized that the company does not plan to raise prices in response to tariffs, citing Home Depot's size, strong supplier relationships, and ongoing productivity gains as buffers. More than half of the company's inventory is U.S.-sourced, and McPhail noted that no single country outside the U.S. will represent more than 10% of imports by next year — reflecting a long-term shift away from Chinese dependence. The company has been steadily diversifying its supply chain for years. However, with high interest rates dampening home improvement demand and tariffs threatening product costs, executives acknowledged that if certain items become too expensive to source under current trade policy, they may simply be removed from the shelves. For now, Home Depot is betting on scale and flexibility, while keeping pricing steady to maintain customer loyalty in a cooling housing market. Lowe's reported a smaller-than-expected Q1 sales drop, thanks in part to steady demand from professional contractors. Like its rival Home Depot, Lowe's said it aims to remain price competitive, although it did not rule out increases in the second half of the year when newer, tariff-impacted inventory reaches shelves. CFO Brandon Sink expects flat profit margins this fiscal year, signaling that Lowe's is absorbing some near-term cost pressures. About 60% of Lowe's products are sourced from the U.S., while 20% still come from China. The company has expanded its network of local suppliers and diversified its sourcing to cushion the tariff blow. Investors should watch for incremental pricing shifts as the year progresses — particularly as older, pre-tariff inventory phases out and newer stock reflects rising input costs. Best Buy posted solid Q1 earnings but lowered its full-year outlook, citing the growing impact of tariffs and weakening consumer demand. The retailer has already raised prices on some items, including electronics heavily sourced from China — such as smartphones, laptops, and appliances. CEO Corie Barry called price hikes a 'last resort', but said they've already gone into effect for select goods as of mid-May. The company's sourcing has shifted considerably in recent months: China now accounts for about 33% of imports (down from 55% earlier this year), while 25% of goods come from the U.S. and Mexico, and the rest from other tariff-exposed countries like Vietnam and South Korea. Despite the price increases, demand has held steady for now. Still, the margin pressure and uncertainty over future tariffs have led Best Buy to guide lower, warning that it will continue adjusting pricing and sourcing strategies as conditions evolve. For ultra-price-sensitive retailers like Dollar Tree, tariffs pose a direct threat to their core value proposition. After raising its base price point from $1 to $1.25 in 2021, the chain is now considering further price increases on select products to offset rising costs from ongoing U.S. trade actions. CEO Michael Creedon said the first round of 10% tariffs on Chinese goods cost the company roughly $15–$20 million per month, but Dollar Tree has mitigated around 90% of that impact so far. Additional tariffs on Mexico and Canada, now partially in effect, could add another $20 million monthly burden. Dollar Tree is still evaluating how best to absorb these costs, and due to the fluid policy environment, the company has not fully factored tariffs into forward guidance. Surprisingly, the company is observing a rise in demand from higher-income customers in addition to low-income shoppers, indicating a broader shift in consumer behavior: seeking value is now a common behavior across different income levels. For investors, the situation poses a complex challenge: U.S. consumer spending has remained resilient so far, but rising retail prices and cost-cutting responses hint at a deeper strain brewing beneath the surface. Many retailers are trading cautiously on guidance, with some already lowering earnings forecasts — a potential red flag for stockholders seeking stability in a volatile market. Tariff-driven margin compression could weigh heavily on retail earnings in the second half of the year, especially if trade tensions escalate or consumer sentiment falters. The on-again, off-again nature of Trump's tariffs creates another layer of unpredictability, making it increasingly difficult for companies to plan their supply chains and pricing strategies. This uncertainty is compounded by recent court rulings that have challenged the legal basis for some of these tariffs, leading to a dynamic situation where the very existence of certain levies is in question. Furthermore, there's always the possibility that the U.S. might completely rule out some tariffs, or pivot to different trade strategies, adding another layer of complexity for businesses and investors trying to anticipate future costs and market conditions. Retail-focused ETFs and sector funds may underperform broader indices if tariffs remain in play. Investors should watch for further price guidance during the next quarter's earnings season, especially from Walmart, which sets the tone for the sector. Moreover, long-term investors may want to examine which retailers have stronger supply chain flexibility, digital infrastructure, and pricing power. Companies able to adapt quickly — either by diversifying sourcing or leveraging scale — are more likely to weather the storm than those with rigid or China-heavy supply networks. In short, Trump's tariff chessboard is reshaping the retail landscape, forcing companies to choose between shrinking profits and rising shelf prices. For shoppers, the consequences are already visible. For investors, they're only just beginning to play out. This article was originally posted on FX Empire Should You Invest in the US Stock Market Now? Romania: Election of Centrist Candidate Supports Structural Reform Momentum Though Fiscal Pressures Remain Weekly Data for Oil and Gold: Price Review for the Week Ahead From Tariffs to Tags: The Price Hike Reality for US Shoppers (Part 2) Urban Outfitters Seeing Inflows Profits, Big Money Inflows Send SEI Shares Higher
CNBC
4 days ago
- Business
- CNBC
Home Depot CFO Richard McPhail talks domestic supply chain
Home Depot CFO Richard McPhail joins 'Closing Bell Overtime' to talk domestic production, its supply chain, the labor market, and more.
Yahoo
7 days ago
- Business
- Yahoo
No Quick Fix for Home Depot (HD) as Market Conditions Deteriorate
Home Depot (HD) stock has been under a cloud lately, with last week's earnings report laying bare some tough challenges. The home improvement giant faces headwinds like tariff pressures, a sluggish housing market, and rising financing costs, which have dulled its shine. With sales growth slowing and earnings forecasts underwhelming, the stock will likely remain under pressure, especially given that Home Depot's valuation isn't particularly attractive. As a result, I am leaning bearish on HD stock. Easily unpack a company's performance with TipRanks' new KPI Data for smart investment decisions Receive undervalued, market resilient stocks right to your inbox with TipRanks' Smart Value Newsletter Tariffs are hitting Home Depot hard, especially with nearly half its sales tied to imported goods. The U.S. recently adjusted tariffs on Chinese imports to 30% and slapped a 10% duty on other countries, which, while a short-term breather, continues to mess with orders and pricing. CFO Richard McPhail emphasized during the Q1 earnings call that Home Depot won't raise prices to offset these costs, choosing instead to absorb them or tweak its product lineup. This strategy will protect customers, but it will also squeeze margins, which already took a 40-basis-point hit in Q, partly due to tariffs. With trade policies still in flux, this pressure will not likely ease soon. Fortunately, the company's diversified supply chain and strong pro business (50% of sales) give it some wiggle room compared to rivals like Lowe's, which relies more on Chinese imports. However, absorbing a blended tariff cost on goods in the mid-single-digits isn't trivial. If trade tensions heat up, Home Depot could be forced to ditch its no-price-increase policy, which might tick off customers or squeeze profits even more. For now, tariffs are a persistent pain in the neck. In the meantime, the housing market is in a funk, and Home Depot is naturally feeling the pinch. High mortgage rates, now hovering close to 7%, have frozen homebuyers, slowing turnover and big-ticket renovation projects. Evidently, even though Q1 sales reached $39.86 billion, up 9.4% year-over-year, comparable sales dipped 0.3%, signaling weaker demand for major projects. Customers are sticking to smaller jobs, like spring gardening, which boosted transactions by 2.1% but didn't move the needle on average ticket size. I believe squeezed consumer spending power and high rates will suppress demand for pricey remodels. Indeed, Home Depot's guidance assumes this trend lasts, with management noting 'continued pressure on larger projects' in the earnings call. With no clear catalyst like falling rates or a housing rebound on the horizon, this headwind could linger into late 2025, keeping sales growth muted. Higher financing costs are another hurdle. After Moody's downgraded the U.S. credit rating to AA1, 10-year and 30-year Treasury yields climbed, pushing up borrowing costs for home improvement projects. This hits Home Depot's core customers (both DIYers and pros) who often finance large purchases. The latest report didn't directly tie this to performance, but management acknowledged the broader impact of higher yields on consumer behavior. Overall, the current environment discourages splurging on appliances or major renovations, as seen in flat average ticket sizes. It's also worth noting that Home Depot's acquisition of SRS Distribution, which serves pros, added sales but also drove a 15-basis-point margin drag, partly due to financing sensitivity in that segment. With yields likely to stay high, this is another headwind that could keep weighing on demand, especially if economic uncertainty persists. Despite these challenges and notable pressure lately, Home Depot stock still trades at a lofty 24x this year's expected EPS of ~$15. This feels steep for a company staring down flat EPS growth in 2025. And yes, Home Depot's a quality name, with a rock-solid pro business and decades-long track record of successful execution, but a premium valuation paired with lackluster growth is a tough sell. Today's valuation essentially assumes a recovery that's not guaranteed soon. Consensus estimates point to a 0.6% EPS growth for FY2026, and management's cautious tone on the Q1 call, including stressing tariff and housing pressures, doesn't inspire confidence. So while Home Depot's brand and scale deserve some premium, the gap between its price and growth prospects could keep sentiment sour, especially if headwinds persist. Despite the fog surrounding Home Depot's investment case, Wall Street analysts seem somewhat bullish. Specifically, HD stock features a Strong Buy consensus rating based on 20 Buys, six Holds, and zero Sell recommendations over the past three months. At $428.74, the average HD stock price target implies an upside potential of ~18% from current levels. Home Depot's recent stock decline may attract value-oriented investors, but the path forward appears challenging. Persistent headwinds—including tariffs, a sluggish housing market, and rising financing costs—remain firmly in place, as reflected in the company's latest earnings report. With limited growth prospects and a valuation of 24x earnings, the stock currently seems more like a potential value trap than a bargain. For long-term investors, it may be prudent to wait for clearer signs of recovery, such as easing trade pressures or declining interest rates, before considering an entry point. 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Business Insider
27-05-2025
- Business
- Business Insider
No Quick Fix for Home Depot (HD) as Market Conditions Deteriorate
Home Depot (HD) stock has been under a cloud lately, with last week's earnings report laying bare some tough challenges. The home improvement giant faces headwinds like tariff pressures, a sluggish housing market, and rising financing costs, which have dulled its shine. With sales growth slowing and earnings forecasts underwhelming, the stock will likely remain under pressure, especially given that Home Depot's valuation isn't particularly attractive. As a result, I am leaning bearish on HD stock. Confident Investing Starts Here: Tariffs: A Costly Curveball Tariffs are hitting Home Depot hard, especially with nearly half its sales tied to imported goods. The U.S. recently adjusted tariffs on Chinese imports to 30% and slapped a 10% duty on other countries, which, while a short-term breather, continues to mess with orders and pricing. CFO Richard McPhail emphasized during the Q1 earnings call that Home Depot won't raise prices to offset these costs, choosing instead to absorb them or tweak its product lineup. This strategy will protect customers, but it will also squeeze margins, which already took a 40-basis-point hit in Q, partly due to tariffs. With trade policies still in flux, this pressure will not likely ease soon. Fortunately, the company's diversified supply chain and strong pro business (50% of sales) give it some wiggle room compared to rivals like Lowe's, which relies more on Chinese imports. However, absorbing a blended tariff cost on goods in the mid-single-digits isn't trivial. If trade tensions heat up, Home Depot could be forced to ditch its no-price-increase policy, which might tick off customers or squeeze profits even more. For now, tariffs are a persistent pain in the neck. Housing Market Blues In the meantime, the housing market is in a funk, and Home Depot is naturally feeling the pinch. High mortgage rates, now hovering close to 7%, have frozen homebuyers, slowing turnover and big-ticket renovation projects. Evidently, even though Q1 sales reached $39.86 billion, up 9.4% year-over-year, comparable sales dipped 0.3%, signaling weaker demand for major projects. Customers are sticking to smaller jobs, like spring gardening, which boosted transactions by 2.1% but didn't move the needle on average ticket size. I believe squeezed consumer spending power and high rates will suppress demand for pricey remodels. Indeed, Home Depot's guidance assumes this trend lasts, with management noting 'continued pressure on larger projects' in the earnings call. With no clear catalyst like falling rates or a housing rebound on the horizon, this headwind could linger into late 2025, keeping sales growth muted. Rising Financing Costs Sting Higher financing costs are another hurdle. After Moody's downgraded the U.S. credit rating to AA1, 10-year and 30-year Treasury yields climbed, pushing up borrowing costs for home improvement projects. This hits Home Depot's core customers (both DIYers and pros) who often finance large purchases. The latest report didn't directly tie this to performance, but management acknowledged the broader impact of higher yields on consumer behavior. Overall, the current environment discourages splurging on appliances or major renovations, as seen in flat average ticket sizes. It's also worth noting that Home Depot's acquisition of SRS Distribution, which serves pros, added sales but also drove a 15-basis-point margin drag, partly due to financing sensitivity in that segment. With yields likely to stay high, this is another headwind that could keep weighing on demand, especially if economic uncertainty persists. A Pricey Stock in a Tough Spot Despite these challenges and notable pressure lately, Home Depot stock still trades at a lofty 24x this year's expected EPS of ~$15. This feels steep for a company staring down flat EPS growth in 2025. And yes, Home Depot's a quality name, with a rock-solid pro business and decades-long track record of successful execution, but a premium valuation paired with lackluster growth is a tough sell. Today's valuation essentially assumes a recovery that's not guaranteed soon. Consensus estimates point to a 0.6% EPS growth for FY2026, and management's cautious tone on the Q1 call, including stressing tariff and housing pressures, doesn't inspire confidence. So while Home Depot's brand and scale deserve some premium, the gap between its price and growth prospects could keep sentiment sour, especially if headwinds persist. Is Home Depot Stock a Good Buy Right Now? Despite the fog surrounding Home Depot's investment case, Wall Street analysts seem somewhat bullish. Specifically, HD stock features a Strong Buy consensus rating based on 20 Buys, six Holds, and zero Sell recommendations over the past three months. At $428.74, the average HD stock price target implies an upside potential of ~18% from current levels. Caution Is Warranted on Home Depot Home Depot's recent stock decline may attract value-oriented investors, but the path forward appears challenging. Persistent headwinds—including tariffs, a sluggish housing market, and rising financing costs—remain firmly in place, as reflected in the company's latest earnings report. With limited growth prospects and a valuation of 24x earnings, the stock currently seems more like a potential value trap than a bargain. For long-term investors, it may be prudent to wait for clearer signs of recovery, such as easing trade pressures or declining interest rates, before considering an entry point.
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.
