Consumers' growing caution may lead to weaker sales for Home Depot.

• Although Home Depot's second-quarter earnings and sales surpassed expectations, the company anticipates a decline in comparable sales this year.
• The CFO of a home improvement retailer revealed to CNBC that homeowners are postponing projects due to a "greater sense of uncertainty in the economy."
• Retail earnings from companies such as Walmart and Target, which will be closely monitored by investors and economists for indications of consumer weakness, begin with Home Depot.

Although sales exceeded quarterly expectations on Tuesday, the company warned that demand would be lower than anticipated in the second half of the year due to high interest rates and consumer uncertainty.

The home improvement retailer now anticipates a decline of 3% to 4% in full-year comparable sales compared to the previous fiscal year, which was previously predicted to be around 1%.

SRS Distribution's acquisition by Home Depot will increase its total annual sales by between 2.5% and 3.5%, including a 53rd week in the fiscal year and approximately $6.4 billion in sales. However, excluding sales from SRS, Home Depot's new full-year forecast would have resulted in a revenue cut.

Since the middle of 2023, Home Depot has faced consumers with a "deferral mindset" due to rising interest rates, which has caused them to delay buying and selling homes and taking out loans for major projects like kitchen renovations.

In the past quarter, surveys of customers and home professionals like contractors have revealed a new challenge: a more cautious consumer.

"For the first time, customers are deferring purchases due to a sense of greater economic uncertainty, according to pros."

Based on a survey of analysts by LSEG, the company's reported results for the three-month period ending July 28 differed from Wall Street's expectations.

• Earnings per share: $4.60 vs. $4.49 per share expected

• Revenue: $43.18 billion vs. $43.06 billion expected

The American consumer's economic health is closely monitored by economists, investors, and politicians, as retail earnings kick off with Home Depot leading the way. Despite inflation's decrease, customers are still frustrated by rising prices, particularly for daily necessities like groceries, energy, and housing. This topic has become a significant point of discussion during the 2024 presidential campaign.

Reports earnings and government shares retail sales numbers on Thursday, while other retailers such as , and will post their results in the coming weeks.

Unlike many other retailers, Home Depot's customer base is financially stable, with approximately half of its sales coming from both home professionals and DIY customers. Out of these DIY customers, about 90% own their own homes.

McPhail stated that although Home Depot experienced the effects of consumer uncertainty, the company observed a decrease in demand for various project-related products, including lighting and flooring.

In the fiscal second quarter, Home Depot's net income decreased to $4.56 billion, or $4.60 per share, compared to $4.66 billion, or $4.65 per share, in the previous year.

Revenue rose slightly from $42.92 billion in the year-ago period.

The decline in comparable sales was worse than expected, with a 3.6% drop in the U.S. and a 3.3% decrease across the business, according to StreetAccount.

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

The company has emphasized a positive future for home improvement due to the country's aging homes, limited housing supply, and substantial property value increases, particularly during the Covid pandemic years.

Even though Home Depot's customers are spending less on home improvement, most of them remain financially healthy and employed, according to McPhail.

On Monday, Home Depot's shares closed at $345.81, with the company's shares down less than 1% so far this year, compared to the S&P 500's 12% gains.

– CNBC's Robert Hum contributed to this story.