Home improvement giant Home Depot (HD) is in the middle of a problem not of its own making. The problem is the wider economy, and how the regular consumer is responding to it. In fact, Home Depot recently found itself addressing the “nervous consumer,” and what that meant for its own operations. Further, Home Depot even had something of a response in mind, one that actually put it in competition with poor economy mainstay Dollar General (DG). The result proved welcome for investors, as shares gained fractionally in Wednesday morning’s trading.
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Home Depot CEO Ted Decker laid it out, saying “The No.1 reason for deferring the large project is general economic uncertainty.” And there has certainly been plenty of that lately; with the Trump administration throwing tariffs around the world and various elements of the United States court system immediately declaring them illegal. Then the higher-court wrangling kicks in, and eventually, we have an economic plan that looks like a freshly-wallpapered fog bank.
Indeed, Decker was not alone in pointing out the economic uncertainty that stalks the regular shopper; Kohl’s (KSS) interim CEO Michael Bender noted, “Consumers continue to be pressured and are being choiceful with their purchases….” And even Dollar General’s Todd Vasos noted, “Seeking value, we’re seeing that in all cohorts of customers, meaning our core customer, mid- and high-end customers, all of them.”
Beating Dollar General to the Punch
It is interesting that Dollar General said much the same thing as Home Depot about economic concerns, because one of Home Depot’s latest moves puts it in unexpected competition with the discount retailer. A new report from Parade Home & Garden suggests that Home Depot is emerging as a serious force in discount retail itself.
One TikTok influencer noted, “This is your reminder to go to Home Depot,” as prices at the dollar store chains were “..getting out of hand.” The influencer’s video noted a variety of products at Home Depot for a mere dollar, including baking soda, dish soap, bleach, paper towels and more. This approach works in multiple directions; not only does it bring in customers who may buy other things, but also, it brings in customers who may now believe they have money to buy those other things thanks to their savings on basic staple items.
Is Home Depot a Good Long-Term Buy?
Turning to Wall Street, analysts have a Strong Buy consensus rating on HD stock based on 18 Buys and six Holds assigned in the past three months, as indicated by the graphic below. After an 11.42% rally in its share price over the past year, the average HD price target of $445.14 per share implies 9.31% upside potential.
