The outlook overshadowed the top U.S. home improvement chain's strong holiday quarter and pushed shares down about 2% in premarket trading.
The forecast comes as President Donald Trump's tariff threats and deep cuts in federal government spending have fueled uncertainty. Walmart (WMT.N) last week forecast disappointing annual sales and profit, citing an uncertain geopolitical landscape.
Customers have stalled spending on expensive home-improvement projects such as flooring and kitchen renovations, which are often financed, as borrowing costs remain high while the U.S. Federal Reserve has paused its interest-rate cuts.
Many have instead turned to repair and maintenance activities around their existing homes.
Home Depot expects adjusted earnings-per-share for fiscal year 2025 to decline about 2%, compared to expectations of a 4.6% growth, according to data compiled by LSEG.
Annual comparable sales is forecast to rise 1%, lower than analysts' average estimate of a 1.7% jump.
Customers across income groups have traded down as inflation remains elevated, prompting them to shop more at retailers such as Walmart and Costco (COST.O) for lower-priced furniture and electronics.
Still, Home Depot posted a surprise rise in comparable sales in the all-important holiday quarter, driven by discounts.
"Our fourth quarter results exceeded our expectations as we saw greater engagement in home improvement spend, despite ongoing pressure on large remodeling projects," CEO Ted Decker said in a statement.
Customer transactions jumped 7.6% from last year during the quarter, while average ticket increased 0.3%.
The company posted a 0.8% rise in same-store sales, after eight straight quarters of decline, compared with analysts' average estimate of a 1.87% drop.
Customer visits to the company's stores declined 3% in the fourth quarter, compared with a 3.5% fall in the previous three months, Placer.ai data showed.
