Home Depot (NYSE: HD) has struggled over the past two years, but you might not be able to tell by looking at its share price. Although the company has consistently posted negative store sales since late 2022, its stock has still delivered a total return of 19% during that period.

It’s an interesting dichotomy that raises the question: When will the company turn around and will its problems have a greater impact on its share price?

Falling sales in comparable stores

Home Depot reported seven consecutive quarters of declining store sales. That’s the kind of winning streak retailers would rather not experience.

Data source: Home Depot quarterly earnings reports.

In the second quarter of fiscal 2024, transactions fell 2.2% while ticket sizes fell 1.3%. Not only are fewer people visiting Home Depot stores, but when they do visit, they’re also spending less money.

Large items, which the company says cost $1,000 or more, remain a weak spot, down 5.8 percent. The company said there was once again less spending on larger projects that typically require financing. Home Depot cited only one department with positive comparables, namely the plumbing department.

The home improvement retailer’s total sales rose 0.6% to $43.2 billion. Adjusted earnings per share (EPS) fell one cent to $4.67.

Looking ahead, the company lowered its full-year sales forecast. It now expects like-for-like sales to decline 3 to 4 percent, compared to a previous forecast of a 1 percent decline. Management said the lower end of the forecast assumes additional pressure on consumer demand.

The company expects full-year sales to grow 2.5 percent to 3.5 percent, taking into account an additional week of business this year and Home Depot’s recent acquisition of SRS Distribution, a company that distributes roofing supplies and building materials.

Image source: Getty Images.

When will sales in existing stores recover?

Home Depot’s in-store sales problems stem from several causes. First, demand for large-scale projects surged during the pandemic, when people were largely isolated in their homes and embarking on remodeling projects. Then interest rates spiked, making projects much more expensive to finance. Higher interest rates also led to a housing market slowdown and relocation. Remodeling and home repair projects, on the other hand, are often initiated in parallel with home purchases and sales, so a lack of existing home sales is also a headwind.

If you want to predict when remodeling activity might pick up, look to the Leading Indicator of Remodeling Activity (LIRA) published by Harvard University’s Joint Center for Housing Studies. Year-over-year spending declines are expected to bottom out in the fourth quarter with a 6.3% decline, while improving to a decline of just 0.5% in the second quarter of 2025.

Image source: Joint Center for Housing Studies at Harvard University.

Given these projections and Home Depot’s more cautious tone, I would not expect the company’s like-for-like sales to be positive until mid-2025 or later.

Buy, sell or keep?

Although Home Depot stock has lagged the overall market over the past two years, it hasn’t been punished by the market as much as one might think. Even now, shares have a price-to-earnings (P/E) ratio of about 23, close to their historical levels.

Data from YCharts.

If I owned Home Depot stock at this point, I would hold onto it. The company has the potential to rebound next year if interest rates fall. But at current levels, I wouldn’t buy new money. The turnaround seems to be partially priced into the stock price already, and there’s still a chance that industry conditions could worsen if the U.S. enters a recession.

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Geoffrey Seiler does not own any stocks mentioned. The Motley Fool owns and recommends Home Depot. The Motley Fool has a disclosure policy.