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Dive Brief:
Despite ongoing pressure from tariffs, The Home Depot on Tuesday said it doesn’t intend to raise prices.
The announcement came as the home improvement retailer reported first-quarter sales increased 9.4% year over year to $39.9 billion. Overall comparable sales, however, fell 0.3% from last year. U.S. comps increased 0.2%.
Home Depot’s operating income increased 1.1% from the year-ago period to $5.1 billion, but its net income fell 4.6% to $3.4 billion.
Dive Insight:
As the industry grapples with the effects of the ongoing trade war, Home Depot executives were optimistic that it would not need to increase prices to mitigate the impact of tariffs.
“We intend to generally maintain pricing across our portfolio,” Billy Bastek, executive vice president of merchandising, said on a call with analysts. “We’ll continue to use the portfolio approach that we’ve talked about in the past. We don’t see broad-based price increases for our customers at all going forward.”
The Home Depot said over 50% of its purchases are sourced in the U.S., and it anticipates that a year from now, no single country outside of the U.S. will represent more than 10% of its purchases.
“One of the hallmarks of Home Depot has always been diversification,” Bastek said. “A majority of our suppliers have diversified their sourcing strategies across several countries.”
Holding steady on prices stands in contrast to several other companies — including retail giant Walmart — that have said in recent weeks that price increases could be necessary if high tariffs persist.
On top of tariff-related headwinds, Home Depot, like other home-related retailers, faces pressure from a slow housing market. Home sales declined 3.1% year over year in Q1, according to research from GlobalData.
“This lack of recovery makes it difficult to drive home improvement spending,” GlobalData Managing Director Neil Saunders said in emailed comments. “In our view, it is not until interest rates come down substantially that we will see a proper recovery in house moving activity.”
While the retailer’s customers took on smaller projects, in addition to painting and lawn work, there wasn’t much engagement in larger projects, according to Home Depot CEO Ted Decker.
“Obviously we think that will increase,” Decker said, adding that “we’re very much looking forward to … when people tap their equity, gain the stronger macro confidence and engage in those bigger projects.”
Home Depot on Tuesday reiterated its guidance for the year ahead, projecting total sales growth of 2.8%, with comp sales growth of about 1%. The retailer anticipates gross margin of 33.4% and operating margin of 13%. During the year, Home Depot plans to open 13 new stores.