Home Depot Cuts Outlook As Home Improvement Slowdown Continues

Home Depot reported lower third-quarter profit and trimmed its full-year outlook as an extended downturn in home improvement activity shows little sign of ending.

“Our customers tell us that they remain on the sidelines due to uncertainty and perhaps the hesitation to make larger financial commitments amid an uncertain economic environment,” Chief Financial Officer Richard McPhail said in an interview.

Home Depot said a lack of storms in the third quarter weighed on its sales for roofing, power generation and plywood as compared with the previous year, during which multiple strong fall storms led to greater home preparation and repair activity. And more broadly, a weak housing market and consumer uncertainty continued to hurt demand.

“Our customers are homeowners. They are seeing home prices now decline in more markets than rising, and we know they have job concerns,” McPhail said. “This all comes together in the form of hesitation to take on larger financial commitments.”

For the third quarter, Home Depot’s comparable sales rose 0.2%, missing analysts’ forecast of 1.3%.

The company lowered its full-year comparable sales growth outlook to be slightly positive, down from its previous forecast of up 1%.

It also cut its adjusted earnings-per-share guidance to be down 5% from the previous year. It had previously expected adjusted earnings per share to be down 2%.

Home improvement activity has sagged amid a stagnant housing market, high interest rates and general uncertainty among consumers about the economic environment.

Home Depot has said that an aging housing stock and surging home equity values will eventually lead to a turnaround in home improvement demand. But so far, the market has shown few signs of picking up even as interest rates have crept lower. According to Placer.ai, foot traffic at Home Depot in the third quarter slipped 0.4% from the previous year.

“We’re watching movements in mortgage rates closely. So far we have not seen them catalyze demand in home improvement,” McPhail said. “While we don’t see a near-term catalyst for acceleration of home improvement demand, we’re also bullish on the long-term fundamentals of housing.”

The company has raised prices in some categories to help offset tariffs, but McPhail said those price increases weren’t hurting demand.

“Tariff costs are flowing through our business and as expected, there’s been modest price movement in some of our categories but it hasn’t been broad-based,” McPhail said, adding that customers were continuing to trade up.

Home Depot has been able to offset weakened home improvement demand by expanding its business targeting professional builders and contractors. The company has grown its offerings of bulk supply, custom orders and support services to gain share of the professional market, including through acquisitions of building suppliers.

“While we think that the market for those larger projects that are typically completed by a professional contractor is significantly pressured, we feel great about our momentum with the pro customer,” McPhail said.

For the third quarter, the home improvement retailer reported net income of $3.6 billion, or $3.62 a share, down from $3.65 billion, or $3.67 a share, the year prior.

Adjusted earnings were $3.74 a share. Analysts had expected $3.84 a share, according to FactSet.

Sales rose 2.8% to $41.35 billion. Wall Street had expected $41.15 billion.

Write to Nicholas G. Miller at nicholas.miller@wsj.com