MW Why Home Depot's approach to prices and tariffs will 'likely play better' to Trump administration

By Bill Peters

Executives say they don't expect widespread price hikes due to tariffs

When Walmart Inc. last week warned that it would raise prices in response to tariffs, the big-box chain triggered a social-media tirade from President Donald Trump. After Mattel Inc. $(MAT)$ warned of price increases earlier this month and said making toys outside the U.S. served consumers' pocketbooks better, Trump floated the idea of a 100% tariff on the toy maker.

But Home Depot Inc.'s more conservative approach to prices and tariffs might go further in placating the president, even if the end result, after factoring in the overall mix of items that could be marked up or down, might not be that much different for consumers, an analyst said.

D.A. Davidson analyst Michael Baker said in a research note on Tuesday that Home Depot $(HD)$ executives, during the home-improvement chain's earnings call, emphasized their "portfolio approach" to pricing, which "keeps pricing generally consistent across a basket of goods."

"To us that means that some prices may go up, some may go down, but on balance pricing will be neutral, without a 'broad-based price increase' for customers," Baker said.

"We don't see that as being significantly different from Walmart, which we think will raise some prices in some areas, but also be more aggressive on price in other areas to take market share," he said. "But, HD's approach will likely play better to the administration."

Shares of Home Depot finished regular trading 0.6% lower on Tuesday. The stock is up 12.2% over the past 12 months.

Read more: Home Depot doesn't plan to raise prices because of tariffs, as U.S. sales show surprise growth

Retailers have been bracing for the impact on Trump's tariffs, as they try to prepare shoppers and investors for potential price increases. Tariffs have threatened to push prices higher for already inflation-weary consumers, as stores try to cover the extra costs of shipping goods from outside the U.S.

Billy Bastek, Home Depot's executive vice president of merchandising, said during the retailer's earnings call on Tuesday that more than half of the items Home Depot buys and brings to its shelves came from the U.S. He added that 12 months from now, he expects no single country outside of the U.S. would account for more than 10% of its purchases.

"We'll continue to use the portfolio approach that we've talked a lot about in the past," Bastek said. "But we don't see broad-based price increases for our customers at all going forward. It's a great opportunity for us to take share, and it's a great opportunity for our suppliers to take share as well."

Analysts have said retailers' margins are generally too narrow to stomach all the impact from tariffs. Western-themed retailer Boot Barn Holdings Inc. $(BOOT.UK)$ recently warned of softer demand and higher prices in the months ahead as it starts to sell more tariffed products.

Trump on Saturday told Walmart to "eat the tariffs," rather than raise prices to cover the extra costs. Treasury Secretary Scott Bessent later said that Walmart would, in fact, "eat some of the tariffs, just as they did in '18, '19 and '20."

Walmart $(WMT)$, when reached, did not directly answer a question about whether its approach to absorbing tariffs had changed following the conversation with Bessent.

"We have always worked to keep our prices as low as possible and we won't stop," a representative said. "We'll keep prices as low as we can for as long as we can given the reality of small retail margins."

Home Depot's first-quarter results missed on adjusted per-share profit but beat on sales. The retailer also stuck with its fiscal-year outlook.

Along with the broader impact from tariffs, Home Depot has been dealing with a housing market still locked up by higher mortgage rates. Those mortgage rates have weighed on existing-home sales, and in turn remodeling projects, Sheraz Mian, director of research at Zacks, said in emailed commentary.

Still, as analysts try to dissect consumer behavior following Trump's announcement of sweeping new tariffs in April, the steepest of which are currently on pause, Mian pointed to improving sales trends for Home Depot.

"Management noted that the quarter got underway relatively softly, but activity levels improved in March and April," he said.

Jonathan Reid, a director at Fitch Ratings, said in emailed commentary that the results showed continued demand for smaller home-improvement items and big-ticket purchases, like appliances or flooring, or transactions that cost more than $1,000.

"However, we remain cautious about the outlook for the rest of the year, anticipating that tariffs will affect sales and margins in the latter half of 2025," he said.

"Despite this, we believe that major home-improvement retailers like Home Depot, with their expansive and adaptable supply chains, are well-positioned to overcome tariff-related obstacles and potentially increase market share in the long run."

-Bill Peters

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May 20, 2025 18:23 ET (22:23 GMT)

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