Home Depot beat quarterly expectations on Tuesday but warned that sales in the second half of the year will be weaker than expected as high interest rates and consumer uncertainty dampen demand.

The home improvement retailer now expects comparable sales for the full year to decline by 3 to 4 percent compared to the previous year. Previously, it had expected comparable sales to decline by around 1 percent, a figure that excludes the impact of store openings and closings and other one-off factors.

Home Depot’s full-year sales will get a boost from the recently completed acquisition of SRS Distribution, a company that sells supplies for professionals in landscaping, roofing and pool construction. Total sales are expected to increase 2.5 to 3.5 percent, including a 53rd week in the fiscal year and about $6.4 billion in sales from SRS. However, without the SRS sales, the new full-year guidance would have amounted to a sales cut.

In an interview with CNBC, Chief Financial Officer Richard McPhail said that since mid-2023, Home Depot has struggled with consumers who have a “deferral mentality.” Interest rates have caused them to postpone buying and selling homes and taking out loans for major projects, such as a kitchen renovation.

But last quarter, he said, surveys of customers and home improvement professionals such as contractors have identified another challenge: the more cautious consumer.

“Experts tell us that for the first time, their customers are not only postponing their loans because of higher financing costs,” he said. “They are postponing their loans because they feel the economy is more uncertain.”

Here’s what the company reported compared to Wall Street expectations for the three-month period ended July 28, based on an analyst survey conducted by LSEG:

• Earnings per share: 4.60 USD, It was not immediately clear whether it was comparable to the $4.49 per share expected by analysts

• Revenue: 43.18 billion US dollars compared to expected 43.06 billion US dollars

Home Depot is riding a wave of retail gains as economists, investors and politicians closely monitor the health of the American consumer and try to predict the economic outlook, including the likelihood of a recession. Although inflation has cooled, higher prices – especially for everyday costs like food, energy and housing – continue to anger customers. They have also become a major talking point in the 2024 election campaign.

Consumer notices will continue to appear this week and next week, Walmart reports earnings on Thursday and the government reports retail sales. Other retailers, including Goal, Macy’s And Best buywill also publish results in the coming weeks.

Compared to many other retailers, Home Depot has a more financially stable customer base. About half of its sales come from do-it-yourselfers and about half from home improvement enthusiasts. About 90% of these home improvement enthusiasts own their own homes.

Still, Home Depot is feeling the impact of consumer uncertainty, McPhail said. He said the company has seen declining demand for a wide range of project-related items, including lighting and flooring.

Home Depot’s second-quarter net income fell to 4.56 billion US dollars, or $4.60 per share, compared to $4.66 billion, or $4.65 per share, in the prior year period.

Sales increased slightly compared to the same period last year (42.92 billion US dollars).

Comparable sales fell 3.3 percent companywide and 3.6 percent in the U.S. during the quarter, worse than the 2.1 percent decline expected by analysts, according to StreetAccount.

It was the seventh consecutive quarter of negative comparable sales at Home Depot.

Nevertheless, the company stressed that the long-term outlook for home modernization is positive, citing the country’s ageing population, housing shortages and significant increases in property values, especially during the years of the Covid pandemic.

And McPhail said most Home Depot customers are financially healthy and employed, even if they are currently spending less on home improvements.

Home Depot shares closed at $345.81 on Monday. Through Monday’s close, the company’s shares have fallen less than 1% this year, lagging the S&P 500’s 12% gains.

— CNBC’s Robert Hum contributed to this story.