When the sweeping import tariffs were first announced by the Donald Trump presidential administration earlier this year, Home Depot initially indicated that it would not look to raise its prices. However, it sounds like those plans have changed.
At the time, Home Depot hoped that its ability to diversify its sources would help mitigate the effects of the tariffs. While that strategy may have worked for a few months, it sounds like it’s no longer viable.
On Tuesday, the company officially changed its position, announcing that it will indeed be raising prices on some products.
Home Depot Did Not Expect to Raise Prices
Just three months ago, Home Depot Executive Vice President of Merchandising Billy Bastek seemed to indicate that the company would not have to raise its prices because the company had spent years diversifying the sources for the goods on its shelves.
Bastek indicated that instead of raising prices on its goods, the company would simply stop carrying some products that might be impacted by tariffs.
“We don’t see broad based price increases for our customers at all going forward,” Bastek said last month, via CNN. “There are items that we have that could potentially be impacted from a tariff that, candidly, we won’t have going forward.”
Bastek said at the time that the company did not expect any single country outside of the United States to represent more than 10% of its purchases 12 months from then, allowing it a little protection from the impacts of the tariffs.
Things Have Changed
While Home Depot may have felt confident in that decision at the time, things have changed, and the company will indeed be increasing its prices on some products, after all.
In a recent interview, Home Depot Chief Financial Officer Richard McPhail said the company would have to implement some price increases, considering some of the tariffs are “significantly higher” now than they were when they were announced back in May.
“For some imported goods, tariff rates are significantly higher today than they were at this time last quarter,” he said in an interview with the Wall Street Journal. “So as you would expect, there will be modest price movement in some categories, but it won’t be broad based.”
People Are Delaying Large Projects
Home Depot has also experienced a slowdown in net income, believing that consumers are delaying major home renovations and projects as a result of economic uncertainty and high interest rates.
“Certainly some relief on mortgage rates in particular could help,” CEO Ted Deckersaid on an earnings call this week via CNN. “When we talk to our customers… both consumers and pros, the number one reason for deferring the large project is general economic uncertainty. That is larger than prices of projects, of labor availability. By a wide margin, economic uncertainty is number one.”
That could also play a role in the company’s decision to raise prices, but he expects those regular home renovations will come back eventually.
“Our customers tell us the rate environment is giving them pause on larger remodeling projects,” McPhail said. “Our pros… say that their customers tell them they’re deferring projects. They’re not canceling projects. Home improvement demand persists. And so our job is to position ourselves to be ready for that.”
