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High interest rates continued to dampen demand for larger-scale home remodeling projects in 4Q25 for Home Depot (HD), but the remainder of the company's business was relatively healthy, resulting in a top and bottom-line beat. Perhaps the best indicator that conditions are improving for the home improvement retailer is that for the first time in two years it generated positive comparable sales at +0.8%.

While HD issued downside EPS and revenue guidance for FY25, the market appears to be betting that the company is taking an overly conservative approach with its outlook. For instance, HD's comp forecast of approximately +1.0% suggests that the upward trajectory in comp growth will essentially come to a halt, which seems unlikely given the positive trends in both the DIY and Pro businesses.

• In Q4, both DIY and Pro generated positive comps with Pro once again outperforming. HD saw particular strength in categories such as decking, concrete, and gypsum on the Pro side, while appliances, lumber, and building materials were strong in DIY. Encouragingly, big ticket transactions -- or those over $1,000 -- increased by 0.9% yr/yr, showing that consumers are loosening up on their spending. Overall, comp average ticket edged higher by 0.2% in Q4, and comp transactions were up by 0.6%.
• HD also believes that it's attaining a higher wallet share in the home improvement retail market, driven by its best-in-class interconnected shopping experience. For instance, the company noted that its delivery speeds are the fastest they have ever been, and that its in-store investments, including in technology and inventory, are providing it with key competitive advantages. 
• Meanwhile, the Pro business is benefiting from last June's acquisition of SRS Distribution, which sells specialty supplies and materials to roofing, landscaping, and pool installation professionals. With the acquisition, HD has gained access to nearly every market with roofing products. For the first seven months under HD's ownership, SRS contributed $6.4 bln in sales and for FY25, HD continues to expect SRS to grow organic sales by mid-single-digits.
• The one main weak spot remains large discretionary projects that typically require financing, such as kitchen and bath remodels. Unfortunately, HD is anticipating ongoing pressure in this category due to the high-interest rate environment likely persisting in 2025.

HD isn't firing on all cylinders at this point as high interest rates continue to keep a lid on the housing market and larger remodeling projects, but its business is quite healthy otherwise. Sales trends in both the DIY and Pro businesses are pointing in the right direction, setting the stage for improved results this year, despite the ongoing interest rate headwinds.