Home Depot(HD.US) Q4 comparable sales exceeded expectations, increasing by 0.4%. Home improvement demand remains resilient despite the economic "cold wave."

The SmartMoney Finance APP notes that driven by steady demand, Home Depot (HD.US) exceeded expectations on key sales metrics, but the retailer also warned that macro challenges still exist. The earnings report shows that Home Depot’s revenue for the fourth quarter reached $38.2 billion, down 3.8% year-over-year, surpassing expectations by $100 million; adjusted earnings per share were $2.72, beating expectations by $0.20.

In the fiscal quarter ending February 1, same-store sales for stores open at least one year increased by 0.4%, outperforming the average forecast. These results indicate that despite high interest rates and ongoing inflation concerns, demand for home improvement projects remains stable.

Home Depot stated that the company gained more market share, and e-commerce achieved double-digit growth for three consecutive quarters. However, substantial changes in housing demand have yet to materialize.

The company expects total sales for fiscal 2026 to grow approximately 2.5% to 4.5% year-over-year, below the previous estimate of a 4.06% increase. Same-store sales growth is projected to be between 0% and 2.0%.

Chief Financial Officer Richard McFarlane said in an interview, “Our customers have been holding back on large renovation projects for a full three years. While homeowners are among the healthiest consumer groups right now, they tell us that uncertainty is increasing, and people are worried about housing affordability and layoffs.”

There are some early positive signs in the housing market: mortgage rates have declined, and median home prices have remained relatively flat over the past year. McFarlane noted that mortgage rates need to fall further, and income levels must grow more significantly for growth to accelerate.

He pointed out, “Everything is moving in the right direction at an extremely slow pace, but we haven’t yet seen a catalyst that could change home improvement demand.” Home Depot reaffirmed its full-year performance outlook.

Consumer confidence remains volatile, housing affordability challenges persist, and last year’s employment growth in the U.S. has nearly stalled. Last week, after the Supreme Court overturned former President Trump’s broad global tax plan, U.S. tariff policies once again became uncertain. Trump has promised new taxes, but questions remain about the rates, implementation, and duration.

McFarlane said that Home Depot is analyzing the potential impacts of these changes. He added that before the latest statement was released, the company had largely absorbed the effects of tariffs. Due to recent price increases, some products will see “modest” price hikes in the first half of this year.

Home Depot executives stated at the investor day last December that the pent-up demand accumulated since 2023 would eventually translate into spending.

During the prolonged business slowdown, Home Depot has focused on its faster-growing professional contractor segment, which spends more than regular customers. Additionally, the company is seeking to expand its digital business and offer AI-enhanced shopping experiences. To counteract tariffs, Home Depot has implemented a sourcing diversification strategy.

The retailer recently cut corporate jobs and asked employees to return to the office to seek a recovery in growth. Furthermore, the company has tightened standards for executive bonus payouts.

Home Depot is the latest major retailer to report earnings this season, with its main competitor Lowe’s scheduled to release its earnings on Wednesday. Walmart provided a cautious outlook last week, citing a fluid economic environment. However, Walmart also noted that consumer habits remain consistent and that price increases across many product categories are normalizing.