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WMA-2024-Home-Depot

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WMAC 2023-Home Depot

The corporations on our annual list of the world’s largest companies delivered a record $41 trillion in aggregate revenues.

G500-2023-Home Depot

Rising inflation, tighter consumer budgets, and slower housing market activity didn’t stop the home improvement retail chain from raking in $157 billion in sales in the 2022 fiscal year, a 4% increase from the previous year. 
<ul> 
 	<li>In February 2023, the company announced that it would raise its starting wage to $15 an hour for its workers in the U.S. and Canada, following some of its retail competitors in taking similar steps.</li> 
 	<li>Edward “Ted” Decker, who had been named CEO of Home Depot in March 2022, became chairman on Oct. 1, 2022. Decker replaced Craig Menear in both posts.</li> 
</ul>

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F500 2023-Home Depot

Rising inflation, tighter consumer budgets, and slower housing market activity didn’t stop the home improvement retail chain from raking in $157 billion in sales in the 2022 fiscal year, a 4% increase from the previous year. 
<ul> 
 	<li>In February 2023, the company announced that it will raise its starting wage to $15 an hour for its workers in the U.S. and Canada, following some of its retail competitors in taking similar steps.</li> 
 	<li>Edward “Ted” Decker, who had been named CEO of Home Depot in March 2022, became chairman on Oct. 1, 2022. Decker replaced Craig Menear in both posts.</li> 
</ul>

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WMAC 2022-24-Home Depot

Aggregate sales hit $37.8 trillion last year—an increase of 19%, the highest annual growth rate in the list’s history.

G500 2022-43-Home Depot

Despite dealing with supply-chain problems and shortages, Home Depot brought in over $150 billion in sales in the 2021 fiscal year, as the company proved a resource for new and existing homeowners looking to redecorate and renovate. More recently, as lockdown DIY projects have trailed off and inflation has surged, Home Depot’s fortunes have wavered; its stock declined more than 30% in the first six months of 2022. In a bid to enhance its e-commerce experience, the company has partnered with Walmart for delivery services and created a new executive role to oversee and streamline online orders.

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F500 2022 Home Depot

Despite dealing with supply-chain problems and shortages, Home Depot brought in over $150 billion in sales in the 2021 fiscal year, as the company proved a resource for new and old homeowners looking to redecorate and renovate. More recently, as lockdown DIY projects have trailed off and inflation has surged, Home Depot’s fortunes have wavered; its stock declined about 27% in the first four months of 2022. In a bid to enhance its e-commerce experience, the company has partnered with Walmart for delivery services and created a new executive role to oversee and streamline online orders.

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WMAC 2021-19-Home Depot

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G500-2021-041-Home Depot

Home Depot made a number of moves that could have hampered business in 2020, including eliminating spring sales events and limiting the number of shoppers in stores, at least at the start of the outbreak. But making shoppers and employees comfortable paid off for the home-improvement giant, whose sales rose 20% to hit $132 billion as consumers enhanced their homes with DIY projects during lockdowns. Home Depot is set up well for the next phase: Consumers are starting to gravitate toward investing in the bigger projects executed by contractors and handymen, who are behind 45% of Home Depot’s sales.

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F500-2021-18-Home Depot

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G500-2020-059-Home-Depot

The home improvement leader has continued to best its competitors—including Lowe’s. Credit both the ongoing effort to spruce up store brands and new technology tools that let store workers see a fuller picture of a shopper’s spending history as it offers opportunities for upselling. The company's e-commerce operation grew more than 20% last year. Home Depot has also gingerly expanded its assortment, dipping its toes into home furnishings and decor, to get more spending from each shopper visit. While the housing market could be heading for bumpy times in a recession, Home Depot appears to be gathering the tools it needs to keep outperforming rivals.

This year's Fortune 500 marks the 66th running of the list.

F500-2020-026-Home-Depot

The home improvement leader has continued to best its competitors—including Lowe’s. Credit both the ongoing effort to spruce up store brands and new technology tools that let store workers see a fuller picture of a shopper’s spending history and offering them insights for upselling. The company's e-commerce operation grew more than 20% last year. Home Depot has also gingerly expanded its assortment, dipping its toes into home furnishings and decor, to get more spending from each shopper visit. While the housing market could be heading for bumpy times in a recession, Home Depot appears to be gathering the tools it needs to keep outperforming rivals.

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Wal-Mart stayed on top as its sales crept closer to half-a-trillion dollars. Apple moved into the top five. And UnitedHealth Group continued its steady climb. 

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Home Depot is the world’s largest home improvement retailer, operating almost 2,500 superstores in all 50 U.S. states. Home Depot sells items including appliances, tools, and hardware in its stores and online. As of 2026, it employed 472,000 associates, who are known for wearing distinctive orange uniform aprons. To expand beyond stores and e-commerce, Home Depot has invested billions in professional builder and contractor businesses. In 2024, it acquired SRS Distribution, a large distributor of building products. The deal was valued at $18.25 billion and is the largest in the retailer’s history.

Q2 2027

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Home Depot (HD): Company Profile, Stock Price, News, Rankings

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Home Depot

home depot

Greetings, and welcome to The Home Depot First Quarter twenty twenty five Earnings Conference Call. At this time, all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Isabelle Janci.

Thank you, Christy, and good morning, everyone. Welcome to Home Depot's first quarter twenty twenty five earnings call. Joining us on our call today are Ted Decker, Chair, President and CEO Anne Marie Campbell, Senior Executive Vice President Billy Bastik, Executive Vice President of Merchandising and Richard McVale, Executive Vice President and Chief Financial Officer. Following our prepared remarks, the call will be opened for questions. Questions will be limited to analysts and investors.

And as a reminder, please limit yourself to one question with one follow-up. If we are unable to get to your question during the call, please call Investor Relations at (770) 384-2387. Before

the call over to Ted, let me remind you that today's press release and the presentations made by our executives include forward looking statements as defined in the Private Securities Litigation Reform Act of 1995. These statements are subject to risks and uncertainties that could cause actual results to differ materially from our expectations and projections. These risks and uncertainties include, but are not limited to, these factors identified in the release and in our most recent annual report on Form 10 ks and other filings with the SEC. Today's presentation will also include certain non GAAP measures, including but not limited to adjusted operating margin, adjusted diluted earnings per share and return on invested capital. For a reconciliation of these and other non GAAP measures to the corresponding GAAP measures, please refer to our earnings press release on our website.

Thank you, Isabelle, and good morning, everyone. Sales for the first quarter were $39,900,000,000 up 9.4% from the same period last year. Comp sales declined 0.3% from the same period last year and comps in The U. S. Increased 0.2%.

Adjusted diluted earnings per share were $3.56 in the first quarter compared to $3.67 in the first quarter last year. Our first quarter results were in line with our expectations despite unfavorable weather in February and unplanned pressure from foreign exchange rates. In local currency, Canada posted comps below the company average while Mexico posted positive comps. The momentum in the business during the back half of fiscal twenty twenty four continued into the first quarter. Our customers engaged across smaller projects and in our spring events.

Our associates remain focused in the quarter and we feel great about our store readiness and product assortment as spring continues to break across the country. Let me take a moment to comment on our global sourcing strategy. Today more than 50% of our purchases are sourced in The United States. Over the last several years we have worked diligently with our vendors to further diversify our global supply chain. During that period, the vast majority of our supplier partners developed diversified sourcing strategies across several countries including The United States.

As a result, we now have tremendous sourcing flexibility. We are already taking action and anticipate that twelve months from now no single country outside of The United States will represent more than 10% of our purchases. Our team has effectively navigated many economic cycles. We believe we have the best merchants, supply chain and finance teams with exceptional tools to help us understand cost impacts by country at the skewed level. We also have robust product and project elasticity models at the market level.

We have strategic vendor partners who understand the need to deliver the right value proposition to our customers. We remain bullish on the fundamentals of home improvement and are confident we are best positioned to win. We operate in a highly fragmented addressable market of approximately $1,000,000,000,000 and our consumer the homeowner remains healthy. For most people their home is their biggest asset and home prices continue to rise. This has led to record levels of home equity giving our customers confidence to invest in their homes.

The housing stock is aging and 55% of homes are forty years or older. And we know that as homes get older they require more maintenance and updates. We will continue investing in our business to ensure we are best positioned to gain market share particularly in periods of disruption. Our associates have never been more engaged and ready to serve our customers. You'll hear more from Ann in a moment but we remain focused on our associates because we know that if we take care of our associates they will take care of the customer and everything else will take care of itself.

We're also focused on maturing our pro ecosystem to better serve pros working on large complex projects. SRS is now managing our trade credit program and we are seeing tremendous results as we onboard pros to the program. And SRS continues to perform above our expectations as our teams work together to gain share. Despite the continued pressure and volatility across the market, our merchants, store and met teams and supplier partners and supply chain teams did an outstanding job serving our customers. I'd like to close by thanking them for their dedication and hard work and also our thoughts with those impacted by the severe storms and tornadoes yesterday.

With that let me turn the call over to Ann.

Thanks Ted and good morning everyone. As you heard from Ted, we continue to invest in our business with a focus on taking care of our associates and customers. We know that having the best customer shopping experience in home improvement makes a significant difference and drive sales. Our stores are at the heart of the Home Depot experience and our associates deep product and project knowledge differentiates us from our competitors. Customers come to the Home Depot to solve their home improvement problems and build their dreams And it is our job to consistently deliver the best interconnected shopping experience.

To do that we must be laser focused on our associates and showing that we are providing the tools they need continue to be engaged, knowledgeable and ready to serve our customers. Our business isn't unique in that it provides our customers with what we refer to as a three legged stool having the best assortment, value and exceptional customer service. And we are continuously reinforcing that with our teams. One way we do this is at our store managers meeting which we held in March. That's where we celebrate the hard work and dedication of our 2,300 plus store leaders and 200 distribution center general managers among others.

It is a fantastic event that reminds all leaders of what really matters delivering a high level of service. And we do this by creating a learning environment that empowers our associates with the knowledge and tools to have the confidence to sell. To do this, we are continuing to leverage existing tools like Pocket Guide, an application on the HD phone that provides extensive product knowledge including tutorials and how to guides. We're also investing in additional training opportunities. This quarter we launched a certification for live goods associates providing them a deeper level of localized product knowledge to drive incremental sales during our biggest selling season.

And we are introducing new tools using generative AI that leverages our internal data and deep knowledge base provide store associates quick access to operational and product knowledge via their HD phone. These tools coupled with a multitude of other investments to drive better service on shelf availability and better insights into our customers' projects help us win with all of our customers DIYs and pros. Recently, we conducted our annual Voice of the Associate survey which showed improvement scored particularly in development. It is clear that as we invest more broadly in our associates included through tools and education we continue to see record retention rates, better engagement and improved customer service. I am so excited about all we are doing for our associates to help them better serve customers and ultimately drive increased customer satisfaction and sales.

Our amazing associates continue to go above and beyond to serve our customers regardless of the external environment and I want to thank them for all that they do. With that let me turn the call over to Billy.

Ann and good morning everyone. I want to start by also thanking all of our associates and supplier partners for their ongoing commitment to serving our customers and communities. In particular and as you heard from Ted, we are well positioned to navigate the current macroeconomic environment. Our best in class merchants, supply chain and finance teams provide us with a competitive advantage and continue to position us for success. Their knowledge base and the tools that they have developed over the years provide us with visibility at the SKU level to help inform our global sourcing strategy.

And this deep business understanding coupled with the strong collaboration with our vendor partners is what enables us to move quickly to accelerate sourcing diversification. Turning to our first quarter results. As you heard from Ted, our performance during the first quarter was in line with our expectations despite unfavorable weather that impacted February. As the weather improved throughout the quarter, we experienced similar engagement compared to what we saw in the back half of fiscal twenty twenty four with customers taking on smaller home improvement related projects. However, the higher interest rate environment continues to pressure larger remodeling projects.

In the first quarter '6 of our 16 merchandising departments posted positive comps including appliances, plumbing, indoor garden, electrical, outdoor garden and building materials. During the first quarter our comp average ticket was essentially flat and comp transactions decreased 0.5%. Inflation from core commodity categories positively impacted our average ticket by approximately 30 basis points driven by inflation in lumber and copper. Additionally during the quarter we continued to see our customers trading up for new and innovative products. Big ticket comp transactions for those over $1,000 were positive 0.3% compared to the first quarter of last year.

We were pleased with the performance we saw in categories such as building materials, lumber and hardware. However, we continue to see softer engagement in larger discretionary projects where customers typically use financing to fund the project such as kitchen and bathroom remodels. During the first quarter pro comp sales were positive and outpaced the DIY customer. In the first quarter, we saw strength across many pro heavy categories like gypsum, decking, concrete and siding. Turning to total company online comp sales, sales leveraging our digital platforms increased approximately 8% compared to the first quarter of last year.

We continue to invest in enhancing experience and this quarter we continue to lean into marketing our speed of delivery and that is resonating with our customers. Those customers benefiting from faster delivery are engaging more and spending more with us across our categories. Additionally, during the back half of last year, we began rolling out a new feature on our website called Magic Apron, a generative AI tool that helps customers find the answers they need related to their home improvement projects. Whether summarizing product reviews or answering live questions with our proprietary expertise, Magic Apron has seen strong customer engagement contributing to growth customers have always relied on the expertise of our associates in our stores to answer questions and help them solve problems. Magic Apron is designed to bring that same expertise to the digital world leveraging our proprietary knowledge base to support our customers and give them the confidence to tackle their home improvement projects anytime, anywhere.

In the first quarter, we were extremely pleased to announce an expanded relationship with Bayer to exclusively offer Kill's branded primer products in The United States. With our new exclusive agreement, The Home Depot will become the only home improvement big box retailer to offer Kill's branded primer products including Kill's original, all purpose, Premium, Restoration and more problem solving primer products and aerosols. This new exclusive agreement will deepen our relationship with our pro customers allowing us to continue to gain share in this important space. During the first quarter, we also hosted our annual Spring Black Friday and Spring Gift Center events and saw strong performance across both events. Our merchants did a fantastic job curating the best products and we saw strong engagement with our customers throughout the event.

We're pleased with the results we saw particularly in categories like appliances, power tools, grills and paint. As we look forward to the second quarter, we are ready for spring across all our product categories. Our live goods look incredible with everything from shrubs to a variety of flowers, herbs and vegetables for every type of gardener. Our merchants partner each year with global, regional and local greeters to make sure we have the right plants with the right attributes to ensure that our customers will have success in their gardens. The innovation we continue to bring in this space helps bring gardening confidence creating brand loyalty while also putting our customers in a position to succeed in their gardens.

We're excited about spring breaking across the country and we remain ready to help our customers with all of their outdoor projects and outdoor living needs. With that, I'd like to turn the call over to Richard.

Thank you, Billy and good morning everyone. In the first quarter total sales were $39,900,000,000 an increase of $3,400,000,000 or approximately 9.4% from last year. During the first quarter our total company comps were negative 0.3% with comps of negative 3.6% in February, positive 0.6% in March and positive 1.1% in April. Comps in The U. S.

Were positive 0.2% for the quarter with comps of negative 3.3% in February, positive 1.3 in March and positive 1.8% in April. For the quarter and in local currency Mexico posted positive comps whereas Canada was below the company average. Additionally foreign exchange rates negatively impacted total company comps by approximately 70 basis points for the quarter. In the first quarter our gross margin was 33.8%, a decrease of approximately 35 basis points from the first quarter of last year reflecting a change in mix as a result of the SRS acquisition partially offset by benefits from lower shrink and supply chain productivity. During the first quarter operating expense as a percent of sales increased approximately 70 basis points to 20.9% compared to the first quarter of twenty twenty four.

Our operating expense performance was in line with our expectations. Our operating margin for the first quarter was 12.9% compared to 13.9% in the first quarter of twenty twenty four. In the quarter, pretax intangible asset amortization was $139,000,000 Excluding the intangible asset amortization in the quarter, our adjusted operating margin for the first quarter was 13.2% compared to 14.1% in the first quarter of twenty twenty four. Interest and other expense for the first quarter increased by $163,000,000 to $591,000,000 due primarily to higher debt balances than a year ago. In the first quarter, our effective tax rate was 24.4% compared to 22.6% in the first quarter of fiscal twenty twenty four.

Our diluted earnings per share for the first quarter were $3.45 compared to $3.63 in the first quarter of twenty twenty four. Excluding intangible asset amortization, our adjusted diluted earnings per share for the first quarter were $3.56 a decrease of approximately 3% compared to the first quarter of twenty twenty four. During the first quarter, we opened three new stores bringing our total store count to 2,350. At the end of the quarter, merchandise inventories were $25,800,000,000 up approximately $3,300,000,000 compared to the first quarter of twenty twenty four and inventory turns were 4.3 times down from 4.5 times last year. Turning to capital allocation.

During the first quarter we invested approximately $800,000,000 back into our business in the form of capital expenditures. And during the quarter we paid approximately $2,300,000,000 in dividends to our shareholders. Computed on the average of beginning and ending long term debt and equity for the trailing twelve months return on invested capital was 31.3% down from 37.1% in the first quarter of fiscal twenty twenty four. Now I will comment on our outlook for fiscal twenty twenty five. Excluding the unplanned FX rate pressure, our performance during the first quarter was in line with our expectations.

The customer engagement we saw in the back half of twenty twenty four continued into the first quarter and through the first two weeks of the second quarter. In addition, we are confident that we will be able to effectively navigate the environment as it stands today. As a result, we are reaffirming our fiscal twenty twenty five guidance. We expect total sales growth to outpace sales comp with sales growth of approximately 2.8 and comp sales growth of approximately positive 1% compared to fiscal twenty twenty four. Our gross margin is expected to be approximately 33.4% essentially flat compared to fiscal twenty twenty four.

Further, we expect operating margin of approximately 13% and adjusted operating margin of approximately 13.4%. This primarily reflects natural deleverage from sales and continued investments across the business as well as reflecting the mix impact from the SRS acquisition. Our effective tax rate is targeted approximately 24.5%. We expect net interest expense of approximately $2,200,000,000 We expect our diluted earnings per share to decline approximately 3% compared to fiscal twenty twenty four when comparing the fifty two weeks in fiscal twenty twenty five to the fifty three weeks in fiscal twenty twenty four. And we expect our adjusted diluted earnings per share to decline approximately 2% compared to fiscal twenty twenty four.

On a fifty two week basis adjusted diluted earnings per share would be essentially flat compared to fiscal twenty twenty four. We plan to continue investing in our business with capital expenditures of approximately 2.5 of sales for fiscal twenty twenty five. We believe that we will grow market share in any environment by strengthening our competitive position with our customers and delivering the best customer experience in home improvement. Thank you for your participation in today's call. And Christine, we are now ready for questions.

Thank you. We will now be conducting a question and answer session. Session. Our first question comes from the line of Christopher Horvers with JPMorgan. Please proceed with your question.

lot of noise out there with the weather, which you called out, perhaps some CNN effect given the news cycle. So want to get more insights on how you would characterize the overall demand environment. Do you think there was any uncertainty impact to sales trends in 1Q that could actually be understating the actual momentum in the business? And then more broadly, with respect to the momentum that emerged in the back half of the last year, as we think about an environment where existing home sales is flat, wouldn't replacement cycles portend acceleration from the trends that you exited 2024 with especially if there's a tick up in inflation?

Hey, good morning, Chris. Thanks for that question. Let me just raise up a bit is how we see overall consumer and then drill down a little bit into that specific question. I think from the macro, the worst concerns I think have passed. We've gone from a dynamic of where we were going to have a near certain recession and stock market correction in early April to where today stock markets fully recovered recession expectations are way down in the past month.

Morning Consult just came out with their daily consumer sentiment tracking that showed significant improvement just in the last two weeks. We know unemployment remains low. TCE grew nicely in April after a very strong March print and inflation is trending down toward 2% in April. Home prices also continue to increase nationally. But as you said with interest rates and mortgage rates remaining stubbornly high, housing turnover has remained at decades long lows and starts are flat.

So you would think you've heard us talk before with so much home equity built up, our consumer has a job increasing wages, increases of home equity are up as much as 50% since the end of twenty nineteen. Why haven't we seen the larger remodeling cycle particularly as people stay in their homes? And again, we've cited the increased engagement in Q4 of twenty twenty four and how that continued into the first quarter of twenty twenty five. But we've yet to see that large project. The large project generally requires some sort of financing.

And while there are literally trillions of dollars of equity available to be tapped in the homes, I think there's still enough macro uncertainty. And again those stubbornly high interest rates that people are painting again and working in their yards and doing smaller projects, but just have not engaged in the larger projects. Now obviously we think that that will increase. We cited last quarter that we're now a net cumulative shortfall of about $50,000,000,000 of home improvement spend on housing. So we're very much looking forward to it as much as you are when people tap their equity gain the stronger macro confidence and engage in those bigger projects.

Thank you. And then my follow ups on the SG and A line. SG and A I think grew 12% year over year this quarter. That was a pretty sizable step up from the underlying growth rate over the past few quarters. Can you talk was there anything one time in that maybe the Street missed and how are you thinking about SG and A growth as the year progresses?

Yes. Thanks Chris. So we did as we've said operating expenses can show a little bit of variability from quarter to quarter. In this case we're overlapping a legal settlement of some size in Q1 of last year. So that did have an impact.

You also have to remember we're adding the SRS expenses to our expense base that didn't exist in Q1 of last year. And so when you take that noise out, we levered expenses exactly how we would have expected to in a comp environment like this. Our operators are managing their portfolios exactly how we would hope. And frankly kicking up to

may just for a moment call out our incredible merchants and supply chain and operations teams who again show us great results in supply chain productivity and in shrink results. So for the remainder of the year, just kind of zooming back out, we've reaffirmed guidance. And let me just kind of reorient you to the year over year expectation. So year over year 24% to 25% operating margin will decline from 13.8% to 13.4% About 20 basis points of that is from what you would expect natural deleverage, right. We typically lever it around three points of comp.

So if you say at one point of comp, we've got kind of two points of deleverage headwind, two times about 10 basis points each gives you about 20 basis points of deleverage. So that's 20 of the 40. Then 15 of the 40 is the partial year over year impact of SRS. We will own SRS twelve months this year. We owned them for about seven months last year.

So that 15,000,000 is the year over year impact. Think of the fully annualized impact of SRS just mix impact being around 40 basis points to adjusted operating margin but the year over year is 15. So that's 20 from deleverage, 15 from SRS and the remaining five is caused by going from a fifty third week year to a fifty two week year. Underlying all that, we are generating fantastic productivity, which we are reinvesting in the business to put ourselves in position to take share in any environment.

Our next question comes from the line of Simeon Gutman with Morgan Stanley. Please proceed with your question.

Hey, good morning everyone. Thanks for the question. I want to follow-up on the comp guidance for the year. The April exit and then May commentary sounds good. You're close to two.

SRS will kick up, I think, some point in the second quarter. And I also think the back half was always expected to be a little bit better than the first half. So curious what if there's any added caution or just prudence in how you're setting it up, You could get to 1.5 to two. I'm not trying to get you on that but if trends that you're seeing today hold you should do a little bit better maybe than the guidance or is there some extra caution you're putting in with housing? Thanks.

Simeon, thank you for the question. We're one quarter in. The team did an awesome job of hitting our expectations but for the FX pressure which is $270,000,000 sorry $275,000,000 in the top line. Without that FX pressure we would have exceeded our own expectations. But we're at quarter end.

We feel good about the business heading into Q2. But right now we feel good about reaffirming our guidance where it is.

Okay. A follow-up on sales related to SRS. Can you talk about how much of a catalyst either order management or trade credits have been or starting to be? And then within that if you're willing to share the relative strength of SRS's businesses between roofing pool and landscape? Thanks.

Hey Simeon, we're super pleased with SRS's performance. If you just look at their growth by the three verticals they operate in, We exceeded our expectation. We believe they're taking share in each of those three verticals. So couldn't be happier with SRS. They are operating further playbook of organic growth made up of comp branch growth and opening new branches as well as tuck in acquisitions and that is active in all three verticals.

Then in terms of how they're helping us on our pro ecosystem, the main thing they're working on right now is the trade credit program. So as we talked about the six broad capabilities of delivery and sales force and pricing and order management etcetera, credit is a key component of that ecosystem. As we started to build out that capability in house, we said, well, geez, SRS that's their business model. They have 90,000 plus accounts on trade credit. They have an extraordinarily capable set of managers and team members running that program for them.

So we just said rather than build it ourselves here in Atlanta, let's let SRS build that for us and run our credit out of Dallas, which they're doing. So we're still very early days. We're in the thousands of accounts, onboarded to a credit program with our Home Depot core pro and like every bit of our capabilities as our pros engage in the new capabilities whether it's be assigned to sales representative, engage in delivery and now in this case obtaining a line of credit, we see accelerating comp. So really happy with how this is going and look forward to increase growth as we onboard more customers. Remember we have millions of pro customers.

Not saying we're to have millions of accounts anytime soon, but we're in the low single digit thousands of onboarded accounts on our way to millions.

And just one thing on the specific verticals, we feel great about performance across all three.

Our next question comes from the line of Michael Lasser with UBS. Please proceed with your question.

Good morning. Thank you so much for taking my question. My first question is on tariffs. So a little less than 50% of your sales are coming from outside of The U. S.

They're currently anywhere from a 10% to 30% tariff on those goods. So if we assume a blended rate of 20% and the Home Depot is absorbing half of that, it would mean on average that's going to be about a 5% tariff on your cost of goods. How is the Home Depot approaching that from a pricing standpoint? And if we assume your general pricing steady, does that offset or absorb some of the productivity, supply chain and shrink benefits that would potentially accrue to shareholders over the next few years that it potentially would not materialize now given they'll need to be used to offset the price the cost increases? Thank you.

Well, good morning, Thanks the question. So listen, you hit on a couple of the things that Ted mentioned in his prepared remarks. Over 50% it's important, but over 50% of our purchases are sourced in The U. S. As you've mentioned.

And we've been working with our suppliers for years. I mean one of the hallmarks of Home Depot has always been diversification and diversifying with their supply chain. So during that time a majority of our suppliers have diversified their sourcing strategies across several countries. We've got tremendous flexibility here. I can't emphasize that enough.

We're already taking action moving quickly and we anticipate twelve months from now that no single country outside of The U. S. Will actually represent more than 10% of our purchases. And so you think about our scale, the great tremendous partnerships, I can't reiterate those enough that we have with our suppliers and you mentioned productivity, a hallmark of the Home Depot. We see in our business.

We intend to generally maintain pricing across our portfolio. We'll continue to use the portfolio approach that we've talked a lot about in the past. But we don't see broad based price increases for our customers at all going forward. It's a great opportunity for us to take share and it's a great opportunity for our suppliers to take share as well.

Just to clarify Billy, does that mean you will have to subsidize what would have been price increases with some of the other benefits that would have accrued to the gross margin otherwise?

Listen, we have a number of different levers that we have in the portfolio Michael. You mentioned a few of those. We have a number of different levers including productivity. And the other thing I would keep in mind is that if you think about our line structure today, there's items that we have that could potentially be impacted from a tariff that candidly we won't have going forward if it doesn't make sense inside the line structure. So it's a little bit less about the item in the percentages that you mentioned and more about the line structure and how we'll manage that going forward.

And there'll be some things that don't make sense that just end up going away. So if you think about it that way really a limited impact from that standpoint. And our suppliers along with our teams have done a terrific job diversifying their global supply chains and this is not new to the Home Depot. It's always been something that we've worked closely with our suppliers on. So we feel good about all the productivity and the other things that we have in our arsenal to manage that accordingly for our customers.

Got you. My follow-up question is on Ted's comment that there could be $50,000,000,000 of deferred demand in home improvement. If we just simply apply Home Depot's market share of around 25% to that number, that would be 10,000,000,000 to $15,000,000,000 of deferred demand that Home Depot could experience over the next few years, either as rates come down or as the consumer just comes in off the sidelines because a matter of time passes, why shouldn't we think about that as providing an outsized benefit to the Home Depot's sales growth over the next few years above and beyond the 3% to four percent top line growth that is inherent in your algorithm? Thank you so much.

Well, that's certainly our expectation that that's exactly the type of share opportunity as we continue to dial in the core orange box business servicing the DIY in the Pro and then all the capabilities that we're building to capture more share wallet with the larger Pro that would absolutely be the outside case where we're taking more share Michael and that's exactly what we hope to do. We'll talk more about that in December at our investor conference.

Understood. Thank you so much and good luck.

Our next question comes from the line of Scot Ciccarelli with Truist. Please proceed with your question.

Good morning, guys. Thanks for the time. Last quarter, you provided some extra comments on the 17 markets where you had extra capabilities rolled out for the Complex Pro. Can we get an update on what capabilities are kind of rolled out where and then any more color on the relative performance of those markets? Thanks.

So there's Scott there are no additional markets. So we're in 17 markets with our the distinction of the 17 markets again is where we have a flatbed distribution center. Now we're delivering in all markets as we've done for years. But again the distinguish there is that we have a separate facility. We've just continued to make progress.

So the sales team continues to mature. Our pricing schemes continue to mature. Delivery our on time and complete scale delivery has never been better. And by the way that is with the consumer DIY parcel business to the big and bulky deliveries out of our stores as well as out of our multiple distribution facilities, our MDOs, market delivery operations, DFCs and our FDCs. We've never been in a better in stock in on time and complete delivery with the fastest speed of all time in delivery rates.

The last and maybe longest pole in the tent is finishing up the IT work on order management and account management. As I said, the credit program is built and we're onboarding just early days there and we'll be finishing up throughout 2025 the last initial build of the technology work to build more agile order management. And then that should only improve our on time and complete in speed metrics.

Got it. Thank you for that. And then Richard can you just comment on the expectations regarding SRS getting layered into the comp kind of mid 2Q kind of how you guys are thinking about that for the balance of the year? Thanks guys.

Yes. So we acquired we closed on the acquisition of SRS mid June last year. So they will enter our comp base shortly and we'll own them for a little more than seven months this year. Once they enter the comp base, we will report them as part of total company comp. So our U.

S. Comp that we report is principally our retail operations and reflects those. We have historically reported HD Supply for instance not in U. S. Comp but in total company comp to give you that clean look of The U.

S. Retail business. So SRS will be treated similarly. They will not be reported as part of U. S.

Comp. They will be reported as part of total company comp. We expect them so look for the quarter SRS actually exceeded our expectations. They delivered $2,600,000,000 in sales and we expect them to meet our expectations of mid single digit growth for the year and we're looking forward to continued growth with them. That acquisition is one to be proud of and we're making as Ted said a lot of progress with SRS.

Our next question comes from the line of Zhihan Ma with Bernstein. Please proceed with your question.

Hi, thank you for taking my question. So first one on inventory, which looks to be up about 15% this quarter. Can you just help us understand how much of that was driven by SRS in the base?

And has there been any pull forward of inventory? And more broadly speaking, how do you feel about your inventory positioning ahead of the summer and more forward looking into the holidays? Thank you.

Thank you. We feel great about our inventory position. We are at in stock levels as good as they've ever been, but a little bit behind the numbers. First recall, SRS was not reflected in our Q1 balance sheet last year. So the majority of the increase year over year in inventory is simply from adding the SRS inventory into our base.

We also made investments though as we saw gains from our speed initiative online and in our supply chain and we saw momentum in that part of our business and that customer experience. We began heavier load ins in our DCs to take advantage of that customer momentum. And so that the inventory position is right where we want to be really no pull forward here. And if you think about that Billy maybe you want to talk a little bit about spring and how that works.

Yes. I mean this is our Super Bowl season Q2 specifically. And so as Richard mentioned we did not pull forward any inventory. Having said all of our goods for really the seasonal, think of the first half of our business depending on where it breaks across the country has been in our DCs, in our network. It's a little bit slower as we mentioned in February that's caught back up.

Home Depot (HD) Q1 2026 Earnings Call Transcript

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