By Sabrina Escobar and Elsa Ohlen

Home Depot stock rose Tuesday even after the home-improvement retailer missed earnings expectations for the first time in five years. The company beat revenue estimates.

Shares rose 2% to $387.31 in premarket trading, suggesting that investors perhaps were relieved the retailer's earnings weren't any worse. The sales beat comes against the backdrop of an uncertain macroeconomic environment fueled by tariffs.

Importantly, Chief Financial Officer Richard McPhail indicated in an interview with The Wall Street Journal that the company plans to keep prices unchanged despite the new levies. Executives are likely to speak further about tariffs at the company's earnings call, scheduled for 9 a.m. Eastern time.

Adjusted earnings per share for the April quarter came in at $3.56 on revenue of $39.9 billion. Analysts surveyed by FactSet had expected adjusted EPS of $3.60 on revenue of $39.3 billion.

Prior to Tuesday's earnings, Home Depot had beaten earnings expectations for 19 consecutive quarters, according to FactSet data. During that period it beat expectations by 4.8% on average. The retailer hasn't missed on sales since the first fiscal quarter in 2024.

Same-store sales were worse than expected, declining 0.3% compared to the same period last year. Analysts had predicted they would decline 0.1%.

First-quarter sales were unfavorably impacted by unseasonal weather and deteriorating consumer confidence, Jefferies analysts led by Jonathan Matuszewski said in a research note.

U.S. same-store sales rose 0.2%. The company also reaffirmed its full year 2025 guidance which it issued in February.

It continues to expect sales growth of 2.8%, on par with analysts' expectations, and same-store sales growth of 1% for the current fiscal year. Adjusted earnings per share will decline about 2%, roughly in line with consensus estimates calling for a 1.6% yearly decrease.

Reiterating guidance in an unfavorable macroeconomic environment is no small feat. That said, investors hoping for a home-improvement renaissance this year could find themselves disappointed with the results and the outlook, which still takes a conservative approach to demand for the rest of the year.

CEO Ted Decker said in a press release that the company saw "continued customer engagement across smaller projects" and in spring events, but made no reference to improving demand for big-ticket items or bigger renovation projects. Investors will be looking for more details on the earnings call.

And while executives have indicated prices won't be going higher in response to tariffs, analysts will want more details on how the company plans to avoid increasing prices while keeping margins intact in a period of softer sales growth. Many investors believe the home-improvement sector is generally better insulated to shifts in trade policy than other retailers, but it won't be completely immune.

"Given the recent de-escalation in tariff tensions, we see more moderate tariff risks but continue to expect muted home improvement demand with mortgage rates elevated at close to 7% and consumer spending power constrained," wrote Zhihan Ma, an analyst at Bernstein.

The housing market plays a big role in home improvement demand. People tend to renovate homes just before selling a home, or right after buying. And so far, Americans haven't been doing much of either. March existing-home sales were the slowest since 2009, coming off the heels of several months of lackluster sales trends. High mortgage rates and home prices have kept many potential buyers on the sidelines, and even warmer spring weather has done little to reboot demand.

Home Depot had 3.8% fewer store visits throughout the quarter than the same period a year ago, according to data from Placer.ai. Lowe's visits fell as well, down 3.6%.

Write to Sabrina Escobar at sabrina.escobar@barrons.com

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May 20, 2025 08:00 ET (12:00 GMT)

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