Home Depot Profits Fall Amid ‘Greater Consumer Uncertainty'

Home Depot's profits fell amid "greater consumer uncertainty," the company announced in its first quarter earnings update on Tuesday.

The home improvement store’s softer profits highlight how cautious consumers have become as high prices and borrowing costs continue to squeeze household budgets. Because the retailer is a bellwether for housing‑related spending, its slowdown can signal broader cooling in discretionary purchases.

The results also underscore how uneven the consumer economy remains heading into the summer.

Home Depot Earnings Update: What to Know

Home Depot's net earnings fell from $3.43 billion in the first quarter of 2025 to $3.289 billion in the first quarter of 2026, marking a decline in overall earnings for the company on a year-on-year comparison. Ted Decker, chair, president and CEO of Home Depot, said Tuesday that those results were "in line with our expectations."

"The underlying demand in our business was relatively similar to what we saw throughout fiscal 2025, despite greater consumer uncertainty and housing affordability pressure," he wrote. "As always, our associates provided excellent customer service during the quarter, and I would like to thank them for their continued hard work and dedication to serving our customers."

Net sales increased from $39.9 billion in the first quarter of 2025 to $41.8 billion in the first quarter of 2026, a 4.8 percent increase.

David Bieri, a Virginia Tech economist, told Newsweek that the report is a "glass half-full or glass half-empty" story. Home Depot may be relieved that it beat Wall Street expectations, but those expectations were lowered amid difficult headwinds, he said.

There are several layers to the report, including homeowners deferring larger projects, cost pressure from tariffs and an apparent inventory build-up, he said.

Home Depot's profit decline is an "interesting insight into the consumer space in general," Scott Laing, a professor of economics at the University at Buffalo, told Newsweek. He described the company as the “‘canary in the coal mine' for middle-class consumer health" and said that the report indicates consumers "haven’t necessarily broken or given up, but they are cautious."

"They’re showing up, but they’re hesitating-and the housing market might need to thaw a bit before that changes," he said.

The Renovation Shift Behind Home Depot’s Profit Fall

A confluence of economic and geopolitical pressures is shaping Americans' economic confidence, creating caution that is contributing to the decline in Home Depot’s earnings.

Home Depot consumers tend to either be making large renovations or smaller projects, and it appears that those large renovations are being deferred amid economic pressure, Bieri said.

Laing said homeowners appear to be "avoiding purchasing new houses and spending on projects, possibly signaling weakness in spending in general but possibly still inferior inventory on the markets and a tough to process mortgage rate environment.”

"Consumers are starting to feel sticker shock again with rising inputs from tariffs, inflation, and (soon to be, if not already starting to be priced in) general transportation costs due to the Iran war," he said.

A report from Houzz, released in April, found that the percentage of American homeowners planning to take on renovation projects in 2026 fell slightly from 52 percent to 50 percent; the median planned renovation cost stood at $15,000 in 2026, down from $20,000 in 2025.

Marine Sargsyan, head of economic research at Houzz, said at the time that homeowners are taking a "more cautious approach to future projects" but that "pent-up demand from homeowners who are finally able to act on long-planned renovations" is driving resilience in the home renovation market.

Tariffs Fuel Americans’ Economic Unease

President Donald Trump's tariffs have been a key factor contributing to economic uncertainty over the past year. Trump announced last spring major tariffs on imports from across the globe in an effort to bring manufacturing jobs back to the United States and close the trade gap.

But economists warned that the tariff policy would slow the U.S. economy and raise prices for consumers, prompting some to cut back on spending.

The Supreme Court has struck down most of his tariffs, though the administration has sought to enact new 10 percent tariffs using the International Emergency Economic Powers Act. Some sector-specific tariffs also remain in place.

The tariffs threaten to raise the costs of imported building materials, appliances and tools for consumers, which could directly impact Home Depot's sales if consumers face higher project costs and opt to delay big-ticket renovations.

Tariffs are "without a doubt" part of the reason Home Depot has seen rising costs, Laing said, noting that tariffs have been placed on raw materials many consumers may not know are integrated into the company's supply chain.

"Lumber, tools, appliances, fixtures-many of these are imported or contain imported components subject to a number of varying tariff rates. When import costs increase, margins inevitably shrink, or prices rise-and we’re seeing both," he said.

Iran War Complicates Economic Outlook

The ongoing war in Iran is also fueling economic uncertainty due to closures and disruptions in the Strait of Hormuz.

Roughly 20 million barrels of oil per day, about one‑fifth of global petroleum consumption, normally pass through the strait, according to U.S. Energy Information Administration data. Its closure amid the war has put additional pressure on global oil markets, leading to higher prices globally and in the United States.

The war could continue to shape the economic outlook for Home Depot and similar companies, Bieri said.

"We're all feeling the squeeze at the pump, right?" he said. "In that sense, the Iran war has nothing to do with Home Depot directly, but it's sort of collateral damage. Essentially, the worry about inflation being lifted back up is that the longer of the issue of Hormuz isn't resolved, the more time inflation has to embed itself in the system."

Gas prices in the U.S. averaged $4.533 per gallon on Tuesday, up from $4.048 a month ago and $3.180 a year ago. As Americans face pressure at the pump, they may opt to spend less on other consumer goods, such as unnecessary renovations. Disruptions in the oil market could also drive up transportation and logistics costs.

American consumer sentiment slightly fell from April to May, according to the University of Michigan's sentiment survey. The survey’s director, Joanne Hsu, wrote in the latest report that was due to a "surge in concerns about high prices both for personal finances as well as buying conditions for major purchases."

How Housing Market Pressures Affect Home Improvement Spending

The housing market remains another force shaping demand for home improvement companies like Home Depot. Even as mortgage rates have fallen from their recent highs, affordability remains strained amid elevated home prices and limited inventory.

The average cost for a single-family home increased to $422,300 in April 2026, according to the National Association of Realtors' Housing Affordability Index. Meanwhile, the average mortgage rate increased from 6.21 percent in February to 6.41 percent in April, the report found.

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This story was originally published May 19, 2026 at 12:36 PM.