Home Depot Struggles as Cramer Blames Rising Interest Rates

Jim Cramer recently highlighted The Home Depot, Inc. (NYSE:HD) as one of the Dow Jones Industrial Average’s weakest performers in the third quarter. The stock fell 19%, disappointing Cramer’s Charitable Trust. He attributed the decline to rising interest rates, stating, "No relief to the depot until rates go down." Despite this, he had previously noted that the stock wasn’t expensive enough to avoid.

The Home Depot reported stronger-than-expected second-quarter results, with sales increasing 5.7% year-over-year to $47.9 billion. Comparable sales rose 1.7%, driven by smaller home improvement projects and a 2.8% increase in the average transaction value. The professional-customer segment outperformed the do-it-yourself business, and online sales grew 11%, marking the fifth consecutive quarter of double-digit growth.

However, housing affordability and consumer uncertainty remain significant challenges. CFO Richard McPhail noted historically low housing turnover, with no sign of improvement. The company maintained its fiscal 2026 forecast, expecting total sales growth of 2.5% to 4.5% and adjusted EPS growth between zero and 4%. Cost pressures, including fuel and energy expenses, are also a concern.

Trading at approximately 19x forward earnings, Home Depot’s valuation is higher than rival Lowe’s Companies, Inc. (NYSE:LOW) at 14.6x. Hedge fund ownership remained stable, with 98 funds holding the stock in Q2, down slightly from 100 in Q1. Short interest was limited at 1.18% of the public float as of mid-September.