Home Depot to keep prices steady but says tariffs may make some items unavailable

By Savyata Mishra and Nicholas P. Brown

May 20 (Reuters) - Home Depot HD.N said on Tuesday it will keep prices unchanged despite U.S. tariffs that might however make some products unavailable at the home-improvement chain, which also reported that first-quarter sales beat estimates.

Billy Bastek, Home Depot's executive vice president of merchandising, told analysts on a post-earnings call that the company intends "to maintain pricing across our portfolio."

But that means some products could disappear from shelves.

"There's items that we have that could potentially be impacted from a tariff that, candidly, we won't have going forward if it doesn't make sense inside the line structure," Bastek said. He did not name any specific items that might be affected.

Consumer-facing companies are among the most affected by U.S. President Donald Trump's high tariffs on imports. Several have issued gloomy quarterly results and pulled annual forecasts, due to economic uncertainty. The nation's largest retailer, Walmart WMT.N, warned last week that shoppers could soon face higher prices due to tariffs.

Trump later suggested Walmart should "eat" the higher costs.

Atlanta-based Home Depot is less exposed to China than Walmart. It sources less than half of its goods outside North America, and has cut its exposure to China in recent years. CEO Ted Decker told investors that within the next 12 months, no single country outside the U.S. will represent more than 10% of its purchases.

Net sales for the quarter ended May 4 came in at $39.86 billion, compared with estimates of $39.31 billion, according to data compiled by LSEG. It logged adjusted profit per share of $3.56, missing expectations of $3.60.

The company might be able to lean on suppliers to bear the brunt of tariffs, said Sheraz Mian, director of research at Zacks Investment Research.

"But if they are committing to pass none of the incremental impact on to end consumers, then they will have to absorb the remaining tariff costs internally, which would hit margins," he added.

The company's operating margin dipped to 12.9% for the quarter, down from 13.9% for the year-ago period.

BUDGET CONSTRAINTS

Recent slowness in home improvement retail - often viewed as a bellwether for economic health - has observers watching Home Depot closely for signs of a downturn. The retailer is in its "Super Bowl season," Bastek said, referring to the spring and summer months when people tend to lawns, gardens and DIY home projects.

Budget constraints continue to weigh on larger home renovation activities, which Decker acknowledged on Tuesday could be a result of macroeconomic fears.

On paper, Decker said, conditions seem good for big projects: unemployment is low, inflation is trending down, and with housing turnover stubbornly low, people are staying in their homes rather than moving.

"There are literally trillions of dollars of equity available to be tapped in the homes," Decker said, but added, "there's still enough macro uncertainty" to discourage big projects.

Home Depot's acquisition of SRS Distribution last year has boosted its ability to capture spending from the professional customer base, including contractors. Company executives noted the business was performing above expectations.

The company's commitment to avoid price hikes could help Home Depot increase market share, analysts said. "We expect widening price gaps vs. smaller competitors ahead," Jefferies analyst Jonathan Matuszewski said in a note on Tuesday.

The company's overall comparable sales dipped 0.3% in the quarter, hurt by a weak February due to inclement weather. Analysts expected a 0.15% drop.

It maintained its fiscal 2025 sales growth forecast of 2.8%, and adjusted profit-per-share decline of 2% from last year. Shares fell 0.5% on Tuesday.