Small projects lift Home Depot quarterly sales, but outlook in slumping housing market is unchanged

“We saw broad based demand across the business as customers continued to engage in smaller projects,” Chief Financial Officer Richard McPhail said in prepared remarks Tuesday.

Customer transactions slipped 1% in the quarter, but the amount shoppers spent rose to $92.50 per average receipt from $90.01 a year earlier.

Healthy spending on smaller projects during the quarter is encouraging, said Neil Saunders, managing director of GlobalData.

“From our data, the number of smaller projects undertaken during the quarter increased by 1.5% over the prior year,” Saunders said in an email. “This may sound unimpressive, but it represents a step change from the declines of previous periods."

But Saunders also pointed out a potential weakness that is impacting almost all businesses where credit is sometimes required.

“The number of bigger-ticket projects undertaken remains down, falling by 2.1% over last year,” he said. "Concerns around financing and a previous lack of moving activity both remain major drags on the bigger-ticket segment.”

Homeowners that are currently considering taking out loans using home equity are realizing that it is considerably more expensive now compared with the ultra-low rates Americans could count on in the early 2020s. A home project that seemed within reach at a 4% to 5% borrowing rate looks a lot more daunting at 8% or higher.

While the average long-term U.S. mortgage rate fell slightly for the first time in six weeks, it is still up from last year and borrowing costs remain steeper than they were a year ago.

The U.S. housing market has been in a slump dating back to 2022, the year mortgage rates began climbing from historic lows that fueled a homebuying frenzy at the start of this decade.

Sales of previously occupied U.S. homes slowed again in July as record prices and the highest mortgage rates in a year prove to be an insurmountable hurdle for many prospective buyers. Existing home sales fell 1.7% last month from June, the National Association of Realtors said last week.

Home prices continue to rise and hit unprecedented levels for the month of July, NAR said. The U.S. median sales price increased 2% from a year earlier, to $434,100.

For the three months ended Aug. 2, Home Depot earned $4.77 billion, or $4.79 per share. A year earlier the home improvement retailer earned $4.55 billion, or $4.58 per share.

Excluding one-time items, earnings were $4.92 per share. That’s much better than the $4.73 per share that Wall Street predicted.

Home Depot also announced Tuesday that it is launching express delivery nationwide. The service will get orders to customers within three hours or less. It will be available for a small flat fee in the U.S., with no subscription or membership required.

The Atlanta company has posted solid back-to-back quarterly performances this year though many Americans have struggled to buy a home. Despite the solid performance, Home Depot stuck with its earlier sales growth guidance for fiscal 2026 of between 2.5% and 4.5%. It also left unchanged its expectations that comparable sales will be flat to up 2%.

Home Depot said that its outlook includes tariff refunds, which are expected to partially offset higher fuel, energy, and other product input costs throughout the year. Last year, the company said that it didn't expect to raise prices because of tariffs, but executive Billy Bastek said at the time that some products that were on Home Depot shelves may disappear.

The company's stock rose 2% before markets opened.