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Is Home Depot Facing a Structural Demand Reset After Soft Q3 Comps?
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Key Takeaways
HD's Q3 comparable sales rose just 0.2%, missing forecasts amid weak storm-driven category demand.
Consumer caution and housing turnover at 40-year lows are pressuring large discretionary projects.
HD cut its FY25 comp sales outlook, signaling demand may be settling into a lower equilibrium.
The Home Depot, Inc.’s (HD - Free Report) comparable sales growth of just 0.2% in the third quarter of fiscal 2025, following a 1% increase in the second quarter, raises an important question: Is this soft comparable sales growth a sign of a lasting demand reset? The company's results missed expectations as the anticipated demand increase did not materialize. A major factor was the lack of storm activity, which impacted categories like roofing and plywood.
Management also noted that consumer uncertainty and ongoing pressure in housing are disproportionately affecting home improvement demand. This pressure appears structural, with housing activity at four-decade lows in terms of housing stock turnover. The softness is especially noticeable in larger discretionary projects where customers often use financing.
Despite these challenges, the underlying demand in the core business seems to have remained steady sequentially. The company’s underlying comparable sales, adjusted for storm and weather effects, grew 1% in the third quarter, matching the increase in the preceding quarter. Additionally, the average ticket size rose 1.8%, while big-ticket transactions above $1000 increased 2.3%.
For fiscal 2025, Home Depot now predicts comparable sales growth to be slightly positive compared to its previous forecast of 1% growth. The revised outlook reflects lower-than-expected third-quarter results, ongoing pressure in the final quarter due to the lack of weather-driven activity, continued consumer uncertainty and housing pressures. Even a drop in mortgage rates has not spurred the desired demand.
With customers prioritizing essentials and pro backlogs beginning to ease, the quarter’s results point toward a market that may be settling into a lower-demand equilibrium. The soft comparable sales, therefore, look less like a temporary disruption and more like an early signal of a structural shift shaped by housing constraints and persistent consumer caution.
Are FND and LOW Also Seeing a Structural Demand Reset?
Floor & Decor Holdings, Inc. (FND - Free Report) continues to face industry-wide softness, with third-quarter 2025 comparable store sales down 1.2% as transactions remain pressured. Despite better Pro engagement and category innovation, Floor & Decor repeatedly acknowledged that the hard-surface flooring market remains in a “trough” and that demand recovery is uncertain. This suggests Floor & Decor is navigating similar structural headwinds as Home Depot.
Lowe's Companies, Inc. (LOW - Free Report) posted third-quarter comparable sales at 0.4% but also cited an anxious consumer and continued pressure on big-ticket discretionary spending. While Pro, appliances and online improved, Lowe's emphasized that affordability constraints and macro uncertainty remain barriers to any broad rebound. Overall, Lowe's also appears constrained by the same structural demand backdrop limiting large-project activity.
What the Latest Metrics Say About Home Depot
Home Depot shares have fallen 16.4% in the past year compared with the industry’s decline of 21.9%.
Image Source: Zacks Investment Research
From a valuation standpoint, Home Depot trades at a forward price-to-earnings ratio of 23.21, higher than the industry’s 21.12. HD carries a Value Score of D.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for Home Depot’s current financial-year sales implies year-over-year growth of 3.1%, while the same for earnings per share suggests a decline of 3.9%.
Image Source: Zacks Investment Research
Home Depot currently carries a Zacks Rank #4 (Sell).
Image: Bigstock
Is Home Depot Facing a Structural Demand Reset After Soft Q3 Comps?
Key Takeaways
The Home Depot, Inc.’s (HD - Free Report) comparable sales growth of just 0.2% in the third quarter of fiscal 2025, following a 1% increase in the second quarter, raises an important question: Is this soft comparable sales growth a sign of a lasting demand reset? The company's results missed expectations as the anticipated demand increase did not materialize. A major factor was the lack of storm activity, which impacted categories like roofing and plywood.
Management also noted that consumer uncertainty and ongoing pressure in housing are disproportionately affecting home improvement demand. This pressure appears structural, with housing activity at four-decade lows in terms of housing stock turnover. The softness is especially noticeable in larger discretionary projects where customers often use financing.
Despite these challenges, the underlying demand in the core business seems to have remained steady sequentially. The company’s underlying comparable sales, adjusted for storm and weather effects, grew 1% in the third quarter, matching the increase in the preceding quarter. Additionally, the average ticket size rose 1.8%, while big-ticket transactions above $1000 increased 2.3%.
For fiscal 2025, Home Depot now predicts comparable sales growth to be slightly positive compared to its previous forecast of 1% growth. The revised outlook reflects lower-than-expected third-quarter results, ongoing pressure in the final quarter due to the lack of weather-driven activity, continued consumer uncertainty and housing pressures. Even a drop in mortgage rates has not spurred the desired demand.
With customers prioritizing essentials and pro backlogs beginning to ease, the quarter’s results point toward a market that may be settling into a lower-demand equilibrium. The soft comparable sales, therefore, look less like a temporary disruption and more like an early signal of a structural shift shaped by housing constraints and persistent consumer caution.
Are FND and LOW Also Seeing a Structural Demand Reset?
Floor & Decor Holdings, Inc. (FND - Free Report) continues to face industry-wide softness, with third-quarter 2025 comparable store sales down 1.2% as transactions remain pressured. Despite better Pro engagement and category innovation, Floor & Decor repeatedly acknowledged that the hard-surface flooring market remains in a “trough” and that demand recovery is uncertain. This suggests Floor & Decor is navigating similar structural headwinds as Home Depot.
Lowe's Companies, Inc. (LOW - Free Report) posted third-quarter comparable sales at 0.4% but also cited an anxious consumer and continued pressure on big-ticket discretionary spending. While Pro, appliances and online improved, Lowe's emphasized that affordability constraints and macro uncertainty remain barriers to any broad rebound. Overall, Lowe's also appears constrained by the same structural demand backdrop limiting large-project activity.
What the Latest Metrics Say About Home Depot
Home Depot shares have fallen 16.4% in the past year compared with the industry’s decline of 21.9%.
Image Source: Zacks Investment Research
From a valuation standpoint, Home Depot trades at a forward price-to-earnings ratio of 23.21, higher than the industry’s 21.12. HD carries a Value Score of D.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for Home Depot’s current financial-year sales implies year-over-year growth of 3.1%, while the same for earnings per share suggests a decline of 3.9%.
Image Source: Zacks Investment Research
Home Depot currently carries a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.