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By Savyata Mishra
(Reuters) - Home Depot forecast a surprise drop in 2025 profit on Tuesday, as the company navigates a weak housing market and high interest rates amid signs of U.S. consumers becoming more cautious.
U.S. business activity nearly stalled in February as worries mount over President Donald Trump's tariffs on imports and deep cuts in federal government spending, while retail sales slumped 0.9% on a monthly basis in January.
Retail giant Walmart last week forecast current year sales and profit below estimates, citing the need for caution in navigating an uncertain geopolitical landscape.
Customers have paused spending on expensive home-improvement projects such as flooring and kitchen renovations as borrowing costs remain stubbornly high. Many have instead turned to repair and maintenance activities around their existing homes.
"I would have expected long-term interest rates to be trending down, given the Fed posture, but that hasn't panned out yet. Existing home sales are key for Home Depot's business outlook," said Zacks Investment Research analyst Sheraz Mian.
Home Depot expects adjusted profit-per-share for fiscal year 2025 to decline about 2%, which analysts cited to a drag from higher selling, general, and administrative expenses. Wall Street was projecting a 4.6% growth in earnings.
Annual comparable sales are forecast to rise 1%, lower than analysts' average estimate of a 1.7% jump, according to data compiled by LSEG.
Shares were marginally up in choppy premarket trading.
Comparable sales turned positive after two years of declines as discounts boosted holiday-quarter demand at the top U.S. home improvement retailer.
Home Depot posted a 0.8% rise in same-store sales, compared with analysts' average estimate of a 1.87% drop.
Customer transactions jumped 7.6% from last year, while the average ticket increased 0.3%, reversing several quarters of decline.
Total operating expenses rose 15.9% in the quarter ended February 2.
(Reporting by Savyata Mishra in Bengaluru; Editing by Sriraj Kalluvila)