Home Depot Accelerates Supply Chain Diversification, Shifts Sourcing Away From Single Countries: Management Sees 'Limited Impact' From Tariffs

Home Depot Inc. HD highlighted its supply chain diversification strategy during its earnings call, estimating “limited” tariff impact as senior economist Mohamed El Erian hailed its “China plus many” approach.

What Happened: Despite reporting a mixed quarter, the Home Depot management remained confident about its diversification strategies during its first quarter earnings call on Tuesday.

The EVP of merchandising, Billy Bastek, told analysts on the call that 50% of our purchases are sourced in the U.S. while highlighting its diversification efforts.

“We’re already taking action, moving quickly, and we anticipate 12 months from now that no single country outside of the U.S. will actually represent more than 10% of our purchases,” said Bastek.

El Erian found this “interesting” and highlighted in an X post that “It reflects the growing trend of companies looking to move beyond a ‘China plus 1’ or ‘China plus 2’ supply chain model towards a more diversified ‘China plus many’ approach.”

Bastek explicitly stated that “We don’t see broad-based price increases for our customers at all going forward,” also seeing a “limited impact” from the existing tariffs.

He highlighted Home Depot’s strategy to limit tariff impact, which involved:

Reducing exposure by diversifying sourcing.
Utilizing internal efficiencies (productivity) to offset costs.
Strategically adjusting their product assortment by discontinuing tariff-affected items that no longer fit their “line structure” or value proposition.
Avoiding widespread price increases for their customers.

Why It Matters: The company’s revenue rose 9.4% year-over-year to $39.86 billion, topping the $39.33 billion consensus. Whereas, its adjusted earnings per share fell 3% to $3.56, missing the $3.60 estimate.

Earn 7.2% — No Matter What the Fed Does

Markets expect rate cuts — but your earnings don’t have to suffer. Lock in 7.2% until 2028 from ten individual bonds.

“Our first quarter results were in line with our expectations as we saw continued customer engagement across smaller projects and in our spring events,” said Ted Decker, chair, president, and CEO.

The company reiterated its guidance for the full fiscal year, seeing the revenue up 2.8% at $163.98 billion, slightly below the consensus estimate of $164.17 billion.

Home Depot forecast its adjusted earnings per share to be at $14.94, falling short of the $14.99 consensus, along with an adjusted operating margin of around 13.4%.

Price Action: HD shares ended 0.61% lower on Tuesday and declined 0.013% in after-hours. The company has declined 2.94% on a year-to-date basis, and it was up 12.17% over a year.

Benzinga Edge Stock Rankings shows that Home Depot had a stronger price trend over the short, medium, and long term. Its momentum ranking was moderate, however, its value ranking was poor at the 24.93th percentile. The details of other metrics are available here.

The SPDR S&P 500 ETF Trust SPY and Invesco QQQ Trust ETF QQQ, which track the S&P 500 index and Nasdaq 100 index, respectively, fell on Tuesday. The SPY was down 0.34% to $592.85, while the QQQ declined 0.33% to $520.27, according to Benzinga Pro data.

On Wednesday, the futures of the S&P 500, Dow Jones, and Nasdaq 100 indices were trading lower.

Read Next: