The Home Depot Inc. HD continues to face pressure in big-ticket discretionary categories, raising questions about whether the slowdown is cyclical or more structural. While fiscal 2025 comparable sales (comps) turned marginally positive, management acknowledged that demand for larger projects remains constrained, reflecting ongoing weakness in housing turnover and consumer confidence.
Big-ticket transactions above $1,000 grew modestly in the fourth quarter of fiscal 2025, but this strength was largely driven by repair-and-maintenance categories such as plumbing, electrical and power tools rather than high-value discretionary remodels. This shift underscores a cautious consumer mindset, where spending is skewed toward essential upgrades rather than large-scale renovations.
Macro headwinds remain a key overhang. Elevated mortgage rates, high home prices and historically low housing turnover continue to suppress demand for major home improvement projects. Management highlighted that customers delaying home purchases are also postponing significant investments, opting instead for smaller, necessity-driven spending.
Importantly, the company has yet to see a meaningful rebound in big-ticket discretionary demand, which management views as a “telltale” indicator of a broader market recovery. Until housing activity improves and consumer confidence strengthens, this category is likely to remain under pressure.
That said, Home Depot continues to gain share through its Pro ecosystem, digital capabilities and supply chain investments. While the current slowdown appears cyclical, tied to macro and housing constraints, the timing of recovery in big-ticket demand remains uncertain, keeping near-term growth expectations measured.
How Do Lowe’s & Floor & Decor Fare Amid Big-Ticket Slowdown?
Peers like Lowe’s Companies Inc. LOW and Floor & Decor Holdings Inc. FND are also contending with a slowdown in big-ticket discretionary demand, as elevated rates and weak housing turnover pressure large project spending across the home improvement landscape.
Lowe’s faces pressure in big-ticket discretionary DIY projects, as cautious consumers delay large home investments amid elevated mortgage rates and housing market volatility. Management highlighted persistent weakness in high-value spending, despite stable demand in Pro, online and smaller repair-driven categories. While structural housing demand remains intact, the recovery in big-ticket items appears gradual, suggesting a cyclical slowdown rather than a lasting shift.
Floor & Decor is seeing pressure from a slowdown in large discretionary flooring projects, as softer existing home sales and tighter budgets push customers toward smaller jobs and lower-spec products. Transactions declined, and average ticket slipped, reflecting cautious spending. Management noted value-seeking behavior among Pros and homeowners, though January showed modest improvement. With housing demand still uncertain, the big-ticket slowdown appears cyclical, but recovery timing depends on broader macro and housing trends.
The Zacks Rundown for HD
HD’s shares have lost 11.5% in the past year compared with the industry’s 16.5% decline.
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From a valuation standpoint, HD trades at a forward price-to-earnings ratio of 21.23X, higher than the industry’s average 19.17X.
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The Zacks Consensus Estimate for HD’s fiscal 2026 and 2027 earnings implies year-over-year growth of 2.3% and 8.8%, respectively. Earnings estimates for fiscal 2026 and 2027 have moved down 0.9% and 0.4%, respectively, in the past 30 days.
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HD currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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This article originally published on Zacks Investment Research (zacks.com).