Home Depot announced Tuesday that it will raise prices on select items in response to higher tariff costs, marking a shift from its earlier stance of holding back on discussing the impact of tariffs.
Chief Financial Officer Richard McPhail told The Wall Street Journal, later confirmed to CNN, that tariffs have significantly raised costs on certain imported products. For some imported goods, tariff rates are significantly higher today than they were at this time last quarter, McPhail said. So as you would expect, there will be modest price movement in some categories, but it won't be broad based.
The retailer, the largest home improvement chain in the United States, has previously said that less than half of its inventory comes from suppliers outside the country. To limit risk, the company has been working to diversify its supply chain so that no single foreign country accounts for more than 10% of its goods.
Impact on Sales and Earnings
Home Depot’s quarterly results showed a mixed picture. Sales rose 5% compared to the same period last year, but net income slipped 0.2% due to higher operating costs. Executives now expect full-year earnings per share to fall about 2%, pointing to economic uncertainty and high interest rates as key factors weighing on consumer spending.
“Certainly some relief on mortgage rates in particular could help,†said CEO Ted Decker on the company’s earnings call. Mortgage rates have hovered just under 7% for much of the year, making it harder for many consumers to commit to large renovation projects.
When we talk to our customers both consumers and pros, the number one reason for deferring the large project is general economic uncertainty, Decker added. That is larger than prices of projects, of labor availability. By a wide margin, economic uncertainty is number one.
Long-Term Outlook
Despite the challenges, Home Depot executives remain confident that demand for major home improvements has only been delayed, not lost.
Our customers tell us the rate environment is giving them pause on larger remodeling projects,McPhail explained. Our pros say that their customers tell them they're re deferring projects. They're re not canceling projects. Home improvement demand persists. And so our job is to position ourselves to be ready for that.
With tariffs pressuring costs and interest rates weighing on consumer confidence, Home Depot faces a cautious road ahead. Still, the company is betting that once economic conditions stabilize, deferred projects will drive stronger results in the future.
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