Home Depot cuts outlook citing tariffs, lumber prices

Home Depot cut its sales expectations for the year as lumber prices slid and the company braces for the potential impact of tariffs on its customers.

The Trump administration delayed most of the tariffs it planned to impose on Chinese goods last week and dropped others altogether, responding to pressure from businesses and growing fears that a trade war is threatening the U.S. economy.

Lumber prices are falling because of weakness in home construction. The Commerce Department said Friday that the pace of U.S. home construction fell a sharp 4% in July. So far this year, housing starts have declined 3.1%.

Still, the company handily beat second quarter profit expectations, with Americans capitalizing on falling mortgage rates.

The average rate on the benchmark 30-year loan is hovering at 3.60%, its lowest level since late 2016. A year ago the rate was 4.53%.

More Americans signed contracts to purchase homes in June, marking the second straight month of growth.

“We are encouraged by the momentum we are seeing from our strategic investments and believe that the current health of the U.S. consumer and a stable housing environment continue to support our business,” CEO Craig Menear said in a prepared statement. “That being said, lumber prices have declined significantly compared to last year, which impacts our sales growth. As a result, today we are updating our sales guidance to account primarily for continued lumber price deflation, as well as potential impacts to the U.S. consumer arising from recently announced tariffs.”