When it comes to consumer and corporate confidence, the bellwethers are increasingly ringing the alarm.
That was the case on Home Depot’s third-quarter 2025 investor earnings call Tuesday (Nov. 18).
“We believe that consumer uncertainty and continued pressure in housing are disproportionately impacting home improvement demand,” said Ted Decker, chair, president and CEO of The Home Depot.
While executives stressed that the retailer’s future is less about riding consumer waves and more about market share capture within the Pro segment, a highly resilient, less rate-sensitive business, the company still pointed to the macro realities as a crucial inflection point in both consumer behavior and the broader housing market.
“Our results missed our expectations primarily due to the lack of storms in the third quarter, which resulted in greater than expected pressure in certain categories. Additionally, while underlying demand in the business remained relatively stable sequentially, an expected increase in demand in the third quarter did not materialize,” Decker said, noting that this had forced the company to recalibrate its entire fiscal 2025 outlook.
The company’s comparable sales for the quarter rose only 0.2% globally and a marginal 0.1% in the critical U.S. market. For a retailer that is often the bellwether for discretionary spending on the home, this near-flat performance suggests a significant evaporation of organic demand. When The Home Depot posts comps this close to zero, it signals a complete absence of meaningful growth from its existing store fleet.
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Still, Decker claimed that Home Depot is growing market share, a crucial point suggesting that while the tide may be going out for the entire industry, The Home Depot is losing less water than its competitors.
Read more: Home Depot Bolsters B2B Business With Digital Planning Tool for Contractors
A Strategic Pivot to Resilience Amid Ongoing Headwinds
Home Depot’s headline sales increase of $1.1 billion is complicated by the recent acquisition of GMS Inc., a move intended to bolster The Home Depot’s professional (Pro) segment. GMS contributed approximately $900 million in sales over eight weeks, meaning the organic, like-for-like growth was a meager $200 million. This is the first clue that the core business could be sputtering.
The acquisition of GMS, while strategically sound for long-term Pro-segment growth, effectively served as an accounting mask for a stalling retail environment in Q3. The full-year guidance reinforces this, with GMS expected to contribute $2.0 billion in incremental sales, yet the total sales growth forecast is only 3.0%. Without the acquisition, the organic sales growth target would be perilously close to 1%, a figure that is barely keeping pace with inflation.
The high-end Pro customer, often tackling large-scale remodels, is more insulated but still sensitive to rising costs and project timelines. The average DIY consumer, facing persistent inflation and economic uncertainty, is pulling back on large, discretionary projects like kitchen remodels or deck installations, instead opting for only essential maintenance or “light touch” décor upgrades. The 0.1% U.S. comp figure is the financial fingerprint of this constrained, cautious consumer.
Home Depot’s true alarm sounds in the EPS forecast. The company now anticipates a decline in diluted EPS of approximately 6.0% from fiscal 2024, or 5.0% on an adjusted basis. This is a significant revision and a clear signal that the topline headwinds are overwhelming cost-control measures.
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The Home Depot is effectively bracing for a 5% to 6% reduction in profitability despite acquiring $2.0 billion in new revenue. This dynamic suggests margin compression is either more severe than expected in the core business, or the GMS acquisition, in its early phase, is dilutive to the overall margin profile. Given the context, it is likely a combination of both: a mix shift away from high-margin discretionary DIY goods, coupled with increased operating costs in a slow-growth environment.
The company is now in a period of strategic digestion, integrating GMS and optimizing its operational machine for a 0% growth environment. The challenge for leadership is to prove that this near-flat performance is an external market phenomenon, and not a structural erosion of the competitive moat.
The ultimate test will be whether the efficiency gains can keep the stock viable during this low-growth cycle, until consumer confidence and housing velocity inevitably return. The Home Depot has moved from the accelerator to the cruise control, bracing for an extended period of slow but steady market grinding.
