(Bloomberg) — Terms of Trade is a daily newsletter that untangles a world embroiled in trade wars. Sign up here. Home Depot Inc. reported profit in the spring quarter — a key time of the year for home-improvement spending — that outpaced projections, sending shares higher. The retailer also cut its revenue forecast due to lumber price deflation and the potential for U.S. tariffs on Chinese goods to hurt consumption.Earnings per share were $3.17, exceeding analysts’ average estimate. Same-store sales — a key gauge of a retailer’s performance — rose 3% in the second quarter, trailing the average 3.2% projection, according to Consensus Metrix. The company now sees 4% growth for the full year, down from a previous forecast for 5%.Key InsightsWhile concerns are growing that the economy is slowing, Home Depot sees a market that’s doing well: “The current health of the U.S. consumer and a stable housing environment continue to support our business,” Chief Executive Officer Craig Menear said. Still, he cited lumber deflation and the tariff outlook for a lower sales outlook.For years, Home Depot has been riding the tide of rising home prices, since homeowners spend more when they see their properties increasingly as an investment. But the overall home market has moderated from a few years ago, and now the drop in the cost of lumber in the past year is adding to price pressure for Home Depot.There’s about a two-quarter lag for orders, meaning the follow-through of slowing home building is hitting companies like Home Depot that are closely tied to housing. Still, the company maintained its earnings per share forecast for the year.Market ReactionHome Depot rose as much as 1.5% in premarket trading Tuesday after the announcement, reversing earlier declines. The stock had advanced 21% this year through Monday’s close, exceeding gains in the S&P 500 Index.Get MoreFor more on the results, click here.For the company statement, click here.To contact the reporter on this story: Joe Deaux in New York at jdeaux@bloomberg.netTo contact the editors responsible for this story: Anne Riley Moffat at ariley17@bloomberg.net, Lisa Wolfson, Thomas MulierFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.

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