Home Depot Markdown Cycle Analysis: How Clearance Pricing Works
Home Depot uses a structured markdown system to progressively reduce clearance prices over time. Each stage is identifiable by the cents ending of the price. This report breaks down the four main markdown stages, how long items typically stay at each stage, and how frequently items transition between stages based on real price tracking data.
The Four Markdown Stages
Home Depot’s clearance system generally follows a four-stage progression. Not every item passes through all stages — many sell before reaching deeper markdowns, and some items skip stages entirely.
Stage 1 — First Markdown: Price ending: .06 or round number Average discount: 37.2% off original price Products at this stage: 5,990 Average days at this price: 114.4
Stage 2 — Second Markdown: Price ending: .04 or .03 Average discount: 38.8% off original price Products at this stage: 251 Average days at this price: 119.5
Stage 3 — Final Markdown: Price ending: .02 or .01 Average discount: 60.8% off original price Products at this stage: 344 Average days at this price: 128.2
Stage 4 — Penny Pricing: Price: $0.01 Average discount: 62.0% off tracked original price Products at this stage: 7 Average days at this price: 68.8
Cents-Ending Price Code System
Home Depot encodes markdown stage information in the cents portion of clearance prices. Learning to read these codes helps you quickly assess where an item is in its markdown lifecycle and whether further reductions are likely.
| Cents Ending | Stage | Typical Discount | What It Means |
|---|---|---|---|
| .06 / .00 | First Markdown | 25–40% | Initial clearance price. Item was recently marked down. |
| .04 / .03 | Second Markdown | 35–50% | Additional reduction. Item hasn’t sold at first markdown. |
| .02 / .01 | Final Markdown | 50–75% | Last major price cut before removal or penny pricing. |
| $0.01 | Penny Deal | 99%+ | Item flagged for removal. Extremely rare to find. |
Stage Transition Timing
How long does it take for an item to move from one markdown stage to the next? The following table shows average and median transition times based on observed price changes in our dataset.
| From | To | Avg Days | Median Days | Observed |
|---|---|---|---|---|
| Other | First Markdown | 20.8 | 12.0 | 159 |
| First Markdown | Second Markdown | 17.3 | 14.5 | 42 |
| First Markdown | Final Markdown | 94.3 | 94.3 | 2 |
| Other | Final Markdown | 47.7 | 41.5 | 25 |
| Other | Penny | 26.0 | 26.0 | 1 |
How Long Items Stay at Each Stage
Products tend to spend a similar amount of time at each markdown stage before either selling or transitioning to a deeper discount.
- 114 - Avg days at First Markdown
- 120 - Avg days at Second Markdown
- 128 - Avg days at Final Markdown
The relatively long durations at each stage suggest that Home Depot’s markdown progression is gradual. Items are not rapidly cycled through stages — they tend to sit at each price point for months before further reduction. This gives shoppers time to evaluate purchases, but also means waiting for a deeper discount carries the risk that the item sells before the next markdown.
What Percentage Reach Penny Pricing?
- 0.05% - Items reaching penny pricing
Out of 14,171 tracked products, only 7 were observed at penny pricing ($0.01). This confirms that penny deals are exceptionally rare. The vast majority of clearance items sell or are removed from inventory well before reaching this stage. Penny deals are typically found by scanning items with the Home Depot app rather than by browsing shelf tags.
Practical Implications
- Check the cents ending before buying. If a price ends in .06, you may be able to wait for a deeper discount. If it ends in .01 or .02, you’re likely seeing the best price.
- Don’t hold out for penny deals. With only 0.05% of items reaching penny pricing, banking on a $0.01 price is not a reliable strategy.
- The first-to-second markdown transition is the fastest at 17.3 days on average. If you see a .06 price, a deeper discount could come within 2–3 weeks.
- Items at final markdown have been on clearance for months. If you find a .01 or .02 priced item, it’s already deeply discounted and unlikely to drop further — buy it.
- Stage classification isn’t perfect. Over half the products fall into “other” pricing, meaning the cents-ending system is a useful heuristic but not a guarantee.
Methodology
Data source: Automated daily price tracking via the Endless platform. Markdown stages are classified by the cents-ending of each product’s clearance price.
Sample: 14,171 unique clearance products across 9 Home Depot stores in the Sacramento, CA metro area.
Time period: August 30, 2025 - February 23, 2026.
Stage classification: Products are assigned to stages based on price endings: .06/.00 = first, .04/.03 = second, .02/.01 = final, $0.01 = penny. All others = “other.”
- Limitation: Stage classification by cents ending is a heuristic based on community knowledge and may not perfectly reflect Home Depot’s internal system.
- Limitation: Transition data is limited by the 6-month observation window. Some transitions may take longer than the data covers.
- Limitation: The “other” category (53.4% of products) represents items that don’t conform to the standard cents-ending convention.
Frequently Asked Questions
What are the markdown stages at Home Depot?
Home Depot uses four main markdown stages: First Markdown (prices ending in .06, averaging 37.2% off), Second Markdown (prices ending in .04 or .03, averaging 38.8% off), Final Markdown (prices ending in .02 or .01, averaging 60.8% off), and Penny Pricing ($0.01). Not all products pass through every stage.
What does .06 mean on a Home Depot price?
A price ending in .06 at Home Depot (e.g., $24.06) typically indicates a first markdown clearance item. This is usually the initial clearance price, averaging around 37% off the original retail price. It signals the item has been marked down for the first time and may see further reductions.
How long does each markdown stage last at Home Depot?
Based on our data, items spend an average of 114.4 days at first markdown pricing, 119.5 days at second markdown, and 128.2 days at final markdown. The transition from first to second markdown takes about 17.3 days on average, while the jump from first to final markdown averages 94.3 days.
Do all Home Depot clearance items become penny deals?
No. Out of 14,171 tracked products, only 7 were observed at penny pricing ($0.01). Most items sell or are removed from inventory before reaching this final stage. Penny deals are rare and typically found by scanning items rather than by shelf tags.
How can I tell what markdown stage a Home Depot item is in?
Look at the cents ending of the price. Prices ending in .06 typically indicate first markdown. Endings of .04 or .03 suggest second markdown. Prices ending in .02 or .01 usually mean final markdown. You can also scan items with the Home Depot app to check current pricing relative to the original price.