Home Depot (HD) expects headwinds to persist in FY2026 with no rebound yet in sight

Shares of The Home Depot (NYSE: HD) were down over 2% on Wednesday. The home improvement retailer delivered better-than-expected earnings results for the fourth quarter of 2025, although the top and bottom line numbers decreased versus the previous year. The company expects the ongoing challenges in the housing market to persist in the upcoming year with chances of change seemingly remote.

Sales and earnings decline

Home Depot’s sales decreased 3.8% year-over-year to $38.2 billion in the fourth quarter of 2025. The top line results were impacted by a lack of storm-related demand as well as consumer uncertainty and housing market pressures. Sales were also hurt by tough year-ago comparisons due to an extra week in last year’s fourth quarter. Adjusted earnings per share decreased 13.1% to $2.72 in Q4.

Persistent market headwinds

The housing market continues to remain challenged with high mortgage rates and home prices hindering affordability. This, combined with inflationary pressures and job security concerns, have led to a substantial drop in demand for home improvement projects. Home Depot expects these headwinds to continue in fiscal year 2026 as it has “not yet seen a catalyst for an inflection in housing activity.”

In Q4, HD saw a 1.6% decline in comparable customer transactions. Comparable average ticket, on the other hand, increased 2.4%, driven mainly by price increases and a greater mix of higher ticket items. Although big-ticket comp transactions, or those over $1,000, were up 1.3% in the quarter, larger discretionary projects continued to see softness.

Home Depot’s comparable sales increased 0.4% in the fourth quarter, with a 0.3% rise in US comp sales. The company continues to see strength in its Pro segment, which delivered positive comps and outperformed the DIY segment in Q4. HD is generating more spend from Pro customers through its Pro ecosystem. SRS continues to grow organic sales and expand market share, and it is anticipated to deliver mid-single-digit organic sales growth in FY2026.

Outlook

For fiscal year 2026, Home Depot expects total sales to grow 2.5-4.5% and comparable sales to be flat to up 2%. Both GAAP and adjusted EPS are projected to be flat to up 4% from the previous year.