Home Depot, one of the largest U.S. home improvement retailers, continues to face challenges as shoppers shift their discretionary spending habits in stores. In response, the retailer’s CEO has issued a stern warning about how shifting consumer sentiment and market pressures could impact the company’s future performance and sales. 

In the fourth quarter of 2025, Home Depot’s U.S. comparable sales increased by a minor 0.3% year over year, according to the company’s latest earnings report.

Also, recent Placer.ai data revealed that Home Depot’s same-store visits were down by 1.5% year over year in October, up 3% in November and down 0.5% in December. 

Amid weaker consumer demand, the retailer’s operating income dropped by 14.4%. 

Home Depot saw declines in store foot traffic during the fourth quarter of 2025.

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Home Depot executives pinpoint cause of weak demand in stores

Home Depot’s poor performance comes after it faced several consumer boycotts last year over its decision to cut its diversity, equity, and inclusion policies and its alleged cooperation with ICE’s immigration crackdown (an accusation Home Depot previously denied). It also recently raised prices in its stores to offset tariff pressures. 

Additionally, Home Depot continues to suffer from uncertainty in the U.S. housing market. 

“The home improvement space has faced sustained pressure from macroeconomic headwinds — including persistent inflation and a cooling housing market — prompting many consumers to delay major projects and defer big-ticket purchases,” wrote Ezra Carmel, content writer at Placer.ai, in an analysis.   

Home Depot Chief Financial Officer Richard McPhail confirmed during an earnings call on Feb. 24 that current housing-market challenges are affecting how home improvement consumers shop in stores.

Related: Home Depot cuts back key employee benefit amid customer struggles

“There are a number of dynamics we are observing that are pressuring housing and home improvement demand,” said McPhail. “The current mortgage rate environment and significant increase in home prices since 2019 have impacted housing affordability. Housing turnover has remained at historical lows since 2023, which has significantly reduced demand for projects and other purchases associated with buying and selling a home.”

Billy Bastek, Home Depot executive vice president of merchandising, said that while the company saw categories such as power, plumbing, and electrical perform well during the fourth quarter, “larger discretionary projects remain under pressure.”

It is no surprise that fewer consumers are tackling these projects. The average 30-year mortgage rate in the U.S. has been elevated since 2022, sitting above 6%. 

In recent months, mortgage rates have slowly declined, but challenges remain. In January, the U.S. housing market saw a dip in existing-home sales, according to recent data from the National Association of Realtors. 

How the U.S. housing market performed in January 2026:

  • In January, the average 30-year fixed-rate mortgage was 6.10%, down from 6.19% in December.
  • The median existing-home sales price reached $396,800, up 0.9% year over year.
  • Existing-home sales dropped by 8.4% month over month and 4.4% year over year.
  • Specifically, month-over-month U.S. home sales decreased by 5.9% in the Northeast, 7.1% in the Midwest, 9% in the South, and 10.3% in the West.
    Sources: National Association of Realtors, Freddie Mac

NAR chief economist Lawrence Yun said in a press release that the “decrease in sales is disappointing.” However, he added that although housing affordability is improving, supply remains an issue.

“Affordability conditions are improving, with NAR’s Housing Affordability Index showing that housing is the most affordable it’s been since March 2022,” said Yun. 

“This is due to wage gains outpacing home price growth and mortgage rates being lower than a year ago,” he added. “However, supply has not kept pace and remains quite low. Due to low supply, the median home price reached a new high for the month of January.”

Home Depot CEO drops warning on future sales 

Home Depot CEO Ted Decker said during the earnings call that the company expects economic pressures to continue throughout the year. 

“Our customers also tell us they have concerns over general economic uncertainty, including inflation, growing job concerns, and higher financing costs,” said Decker. “As we look ahead to fiscal 2026, we anticipate these pressures will persist, as we have not yet seen a catalyst for an inflection in housing activity.”

For fiscal year 2026, Home Depot expects its comparable sales to either remain flat or grow by 2%.

Decker emphasized that the top reason the company’s sales could fall at the lower end of that range is continued consumer uncertainty resulting from poor market performance. 

He said Home Depot has yet to see a major improvement in large discretionary purchases, a sign the market is still struggling. 

“That’s really the telltale for us of when we think the demand profile is going to change for the upside, and we still have not seen that,” he said. “You’ve heard us consistently now saying things are improving. Our comp (comparable sales) clearly improved, a positive comp in 2025, but we have not seen the increase in big ticket, and that will be a telltale for a turn in the market.”

Decker highlighted that low housing turnover has led to a $22 billion cumulative underspend by consumers on home improvement projects, a trend he said the company doesn’t expect to worsen.

“Turnover obviously helps people fix things up before they sell, and the new owner modifies the house to how they want it,” said Decker. “It also has an impact on the people who think they’re gonna move and just waiting in more of a repair than a replacement cycle. I don’t necessarily think that’s gonna get any worse, but we’re certainly bouncing along what we hope would be a bottom in things like turnover.”

Home Depot makes big push to win back shoppers

Despite recent challenges, Home Depot plans to open 15 new stores this year and is betting big on its recent launch of digital tools powered by artificial intelligence to drive consumer demand.

In September last year, Home Depot launched a Project Planning tool for its Pro customers (residential and commercial professional contractors), which allows them to create material lists, track and manage orders, personalize delivery preferences, and gain visibility on early pricing and inventory availability. 

“We’ve improved in-store tools and processes that drive greater engagement with our Pros that have resulted in higher sales there,” said Bastek.

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Last month, Home Depot also expanded its partnership with Google Cloud to launch more AI tools to assist associates and customers with project completion tasks.

Decker said during the call that Pros customers will soon have more AI tools to make tackling projects more seamless. 

“We’re introducing a number of project management and list builders for our pros, including things like an AI takeoff scheme, letting pros build projects, just typing in the type of project they’re working on in a pre-populated list of the project in the app for the pros, so they don’t have to go through and put the hundreds of items,” said Decker.

“It pre-populates, and then they can edit that list, they can save that, repeat it for future jobs. There’s a tremendous set of activities,” he continued.

Related: Home Depot over the years: A complete history of America’s biggest hardware store