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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>

Just as it dominates our economy, Big Tech now dominates Fortune’s annual ranking of corporate reputation.

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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Global business is back. After limping through a worldwide financial crisis and economic slowdown, the 500 largest companies ranked by revenues shattered all sorts of performance records in 2013: They racked up combined revenues of $31.1 trillion, up 2.5% from 2012, and profits soared 27% to nearly $2 trillion. China’s 95 companies (up from 89 last year) posted $5.8 trillion in revenues. The U.S. has four fewer companies on the list than last year but remains (for now) the country leader, with 128 corporations on the list—including No. 1 Wal-Mart Stores—reporting $8.6 trillion in revenues. 

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, welcome to The Home Depot first quarter 2026 earnings call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Isabel Janci. Please go ahead.

Thank you, Christine, good morning, everyone. Welcome to Home Depot's first quarter 2026 earnings call. Joining us on our call today are Ted Decker, Chair, President, and CEO, Ann-Marie Campbell, Senior Executive Vice President, Billy Bastek, Executive Vice President of Merchandising, and Richard McPhail, Executive Vice President and Chief Financial Officer. Following our prepared remarks, the call will be open for questions. Questions will be limited to analysts and investors. As a reminder, please limit yourself to one question with one follow-up. If we were unable to get to your question during the call, please call investor relations at 770-384-2387.

Before I turn 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 under the federal securities laws, including 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 the factors identified in the release in our most recent annual report on Form 10-K and in our other filings with the Securities and Exchange Commission. 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 and our website. Let me turn the call over to Ted.

Thank you, Isabel, and good morning, everyone. Sales for the first quarter were $41.8 billion, an increase of 4.8% from the same period last year. Comp sales increased 0.6% from the same period last year, and comps in the U.S. increased 0.4%. Adjusted diluted earnings per share were $3.43 in the first quarter compared to $3.56 in the first quarter of last year. Our results were in line with our expectations. In the U.S., our Northern and Western divisions had positive comps as customers engaged in outdoor projects when weather was favorable. In local currency, Mexico had positive comps, while Canada was negative. The underlying demand in our business was relatively similar to what we saw throughout fiscal 2025, despite greater consumer uncertainty and housing affordability pressure.

Our teams are operating at a high level, we remain focused on executing our strategy of driving our core and culture, delivering a frictionless, interconnected experience, and winning the Pro. Spring is our biggest season, we feel great about our store readiness, product assortment, and value proposition. As Ann-Marie will detail in a moment, our associates are providing excellent customer service. We're also moving more store tasking to our Merchandising Execution Team, our Orange Apron associates can spend even more time engaged with customers.

As Billy Bastek will share, our merchants are providing exceptional value in product innovation through strategic supplier partnerships, which delivered strong event performance. Last week, we completed the acquisition of Mingledorff's, the leading wholesale distributor of heating, ventilation, and air conditioning equipment, serving residential and commercial customers through 42 locations in five states across the Southeastern U.S.

Mingledorff's brings an extensive product portfolio, a robust distribution network, and established customer relationships that are highly complementary to SRS's existing business. In addition, Mingledorff gives us an incredible opportunity to penetrate the national market for HVAC parts and supplies, leveraging the power of our enterprise to create a superior value proposition for the pro customer. HVAC distribution represents an addressable market of approximately $100 billion and increases our total addressable market to $1.2 trillion. SRS can now serve more pros and win greater share of wallet in this highly fragmented market. As a reminder, pro represents a $700 billion market opportunity. We know we have the right to win in this space as we continue developing differentiated capabilities to better serve residential pro customers.

In addition to our 2,360-plus store network and 325 customer-facing warehouses, SRS is a best-in-class specialty distribution platform with over 1,300 branches. Combined, we now command a fleet of approximately 16,000 delivery assets in a professional sales force of over 5,000 associates. What we are building is unique and not easy to replicate. We are confident our comprehensive product offering, capabilities and services will deliver an exceptional experience for pros, leading to sustained growth and outsized market share gains. As always, I'd like to thank our associates and supplier partners for doing an incredible job serving our customers this quarter. With that, let me turn the call over to Ann-Marie.

Thanks, Ted. Good morning, everyone. We continue to focus on elevating the shopping experience across all stores and online by optimizing fulfillment options. To do this, we are simplifying processes in our stores, removing friction from the customer experience, increasing associate engagement, and taking actions to drive more loyalty with the Pro. Late last year, we began to transition more store tasking to our Merchandise and Execution Team. Today, we have transitioned over 1,000 stores. By creating distinct selling and tasking teams in our stores, we've been able to redistribute tasking in our store segment while our Orange Apron associates focus on driving deeper engagement and better customer service. We expect to complete this transition in all stores by the end of fiscal 2026.

As you know, we've been on a journey to remove friction from the shopping experience, and we are continuously evolving the way we operate to deliver a more seamless experience. When customers place an order online to complete their project, they expect the right products delivered on time and complete. Over the last several quarters, we've leaned into faster delivery for customers using our proprietary model, which leverages all of our assets to drive speed, what we call ship from best location. This has resulted in tremendous growth in deliveries out of our stores. In order to enhance our ability to serve this interconnected purchase more effectively, we're focused specifically on ensuring we have the right leadership and technology capabilities in place to simplify the operational demand on our stores and improve the speed and experience for our customers.

Last quarter, we told you about our Operations Experience Manager, whose responsibilities include driving uniform operational processes and enhancing the interconnected fulfillment experience. We're evolving our sourcing logic and have begun to route orders to the optimal store for fulfillment based on distance, inventory availability, and speed of delivery, which improves the likelihood of a successful delivery. While early, these efforts are enabling us to drive better outcomes for customers, and we've seen a reduction in cancellations, an improvement in fulfillment time, greater customer satisfaction scores, and improvements in likelihood to shop again scores. To drive loyalty with the pro, we continue to lean into tools to simplify their day-to-day, geared at speed and ease when they shop with us online, in store, and through job site delivery. In previous quarters, we have talked about the project planning tool and other AI-enabled tools for pros.

We now have all of these tools under a single easy-to-use workspace that functions as a project management tool for Pros' day-to-day workflow. Within the workspace, Pros can access the project planning tool to organize and stage delivery for large jobs, build material lists more effectively through our AI-powered material list builder, track deliveries real time, and view purchase history. They can also share access with their teams, which results in better visibility and collaboration. Additionally, we have made it easier for Pros to schedule and manage complex deliveries within the Pro digital workspace. Through complex order scheduling, Pros can provide us with job site preferences and business hours, enabling us to complete their delivery on time inside the exact window the Pro is looking for.

Our on-time and complete performance has never been better, and our customer satisfaction scores for deliveries, both from store and our supply chain assets, are at record highs. In closing, I'm excited about all that we're doing to drive exceptional shopping experience. Our associates continue to go above and beyond to serve our customers, and I wanna thank them for all that they do. With that, let me turn the call over to Billy.

Thank you, Ann-Marie, good morning, everyone. I wanna start by also thanking all of our associates, supplier, and supply chain partners for their ongoing commitment to serving our customers and communities. As you heard from Ted, our performance during the first quarter was in line with our expectations and where we experienced favorable weather, we had great engagement in spring-related projects. In the first quarter, nine of our 16 merchandising departments posted positive comps, including storage, power, hardware, plumbing, electrical, bath, indoor garden, paint, and kitchens. During the first quarter, our comp average ticket increased 2.2% and comp transactions decreased 1.3%. Big-ticket comp transactions for those over $1,000 were positive 0.8% compared to the first quarter of last year. We were pleased with the performance we saw in portable power and patio. However, larger discretionary projects remain under pressure.

During the first quarter, pro posted positive comps and outperformed DIY. We saw strength in DIY across many spring-related categories, including live goods, outdoor power equipment, patio, grills, and storage. For pro, we saw strength across many pro heavy categories like power, pipe and fittings, water heaters, fasteners, and paint. The investments we are making are resonating with our pros as we see increased engagement. For example, we have made significant progress with the pro who paints and continue to see share gains with this customer.

Our expanded assortment of products and partnerships with Behr and PPG, as well as enhanced digital capabilities through One Paint, combined with improved job site delivery capabilities, are helping to remove friction from their experience. Turning to total company online comp sales. Sales leveraging our digital platforms increased over 10% compared to the first quarter of last year.

This is the fourth quarter in a row with double-digit year-over-year growth, driven by our ongoing investments across our interconnected platforms. Delivering the best interconnected experience is a key component of our strategy. We are continuously improving our site and leveraging technology to do that. Whether it is better search functionality, more relevant recommendations, and easier and faster fulfillment options to name a few. As Anne mentioned, our faster delivery speeds are resonating with customers and driving greater engagement.

While we are pleased with the progress we are making, we remain relentlessly focused on getting better each and every day because we know that as we remove friction from the experience, we see incremental customer engagement leading to greater sales across all points of interaction. During the first quarter, we 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 events. We are pleased with the results we saw, particularly in categories like power tools, outdoor power equipment, live goods, and patio. In fact, our power categories posted a first quarter record for sales led by portable power and outdoor power equipment.

We know that demand for cordless outdoor power equipment has never been stronger, and our lineup of battery power tools across RYOBI, Milwaukee, DeWalt, and Makita is unmatched. This quarter, I'm excited to announce that Ram Board will be exclusive to The Home Depot in the big box retail channel. This product is engineered to withstand the toughest conditions at the job site, and that's why Ram Board has been the go-to for pros for heavy-duty floor protection for over 25 years.

As we look forward to the second quarter, we are ready to continue delivering the best spring assortment across all of 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. We have all the outdoor essentials for your patio, whether it's a new patio set or grill to enhance your outdoor living space. 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, let me turn the call over to Richard.

Thank you, Billy. Good morning, everyone. In the first quarter, total sales were $41.8 billion, an increase of $1.9 billion or 4.8% from last year. During the first quarter, our total company comps were positive 0.6%, with comps of positive 0.7% in February, positive 2% in March, and negative 0.5% in April. Comps in the U.S. were positive 0.4% for the quarter, with comps of positive 0.4% in February, positive 2% in March, and negative 0.8% in April. Additionally, foreign exchange rates positively impacted total company comps by approximately 55 basis points for the quarter.

In the first quarter, our gross margin was 33%, a decrease of approximately 75 basis points from the first quarter of last year, which was in line with our expectations and reflects a change in mix as a result of the GMS acquisition. During the first quarter, operating expense as a percent of sales increased approximately 20 basis points to 21.1% compared to the first quarter of 2025. Our operating expense performance was in line with our expectations. Our operating margin for the first quarter was 11.9% compared to 12.9% in the first quarter of 2025. In the quarter, pre-tax intangible asset amortization was $171 million.

Excluding the intangible asset amortization in the quarter, our adjusted operating margin for the first quarter was 12.3% compared to 13.2% in the first quarter of 2025. Interest and other expense for the first quarter increased by $13 million to $604 million. In the first quarter, our effective tax rate was 24.9% compared to 24.4% in the first quarter of fiscal 2025. Our diluted earnings per share for the first quarter were $3.30 compared to $3.45 in the first quarter of 2025. Excluding intangible asset amortization, our adjusted diluted earnings per share for the first quarter were $3.43, a decrease of approximately 3.7% compared to the first quarter of 2025.

During the first quarter, we opened 12 new stores, bringing our total store count to 2,361. At the end of the quarter, merchandise inventories were $27.3 billion, up approximately $1.5 billion compared to the first quarter of 2025, and inventory turns were 4.2 times, down from 4.3 times last year. Turning to capital allocation. During the first quarter, we invested approximately $845 million back into our business in the form of capital expenditures. During the quarter, we paid approximately $2.3 billion in dividends to our shareholders. Computed on the average of beginning and ending long-term debt and equity for the trailing 12 months, return on invested capital is 25.4%, down from 31.3% in the first quarter of fiscal 2025.

Now, I will comment on our outlook for fiscal 2026. As you heard from Ted, our performance during the 1st quarter was in line with our expectations. The underlying demand during the quarter was relatively similar to what we experienced throughout fiscal 2025. As a result, we are reaffirming our fiscal 2026 guidance. We expect to continue to grow our market share and for our comp sales to range between flat to 2% growth, with total sales growth of between approximately 2.5% and 4.5%, reflecting the contribution of the GMS acquisition, new stores, branches and tuck-in acquisitions. For the year, we expect SRS to deliver mid-single-digit % organic sales growth. We plan to open approximately 15 new stores and 40 to 50 new SRS locations. Our gross margin is expected to be approximately 33.1%.

Further, we expect operating margin of approximately 12.4%-12.6% and adjusted operating margin of approximately 12.8%-13%. Our effective tax rate is targeted at approximately 24.3%. We expect net interest expense of approximately $2.3 billion. We expect our diluted earnings per share and adjusted diluted earnings per share to both increase approximately flat to 4% compared to fiscal 2025. We plan to continue investing in our business with capital expenditures of approximately 2.5% of sales for fiscal 2026. We believe that we will continue to grow market share as a result of our competitive advantages and ongoing investments by delivering the best customer experience in home improvement. Thank you for your participation in today's call. Christine, we are now ready for questions.

Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions. Thank you. Our first question comes from the line of Scot Ciccarelli with Truist. Please proceed with your question.

Good morning, guys. Thanks for the info. While this may not be an exact science, is there a way to size up how much of your business is typically exposed to these bigger ticket projects? It sounds to me like many of your individual categories are posting positive comps with the big ticket project bucket as the primary jet drag, but in theory, that bucket continues to shrink over time, so you start to get a mixed benefit. Is there a way to size up the exposure there?

Hey, Scot. Yeah, we don't disclose that, but as you can imagine, we look at all our transactions in sales by ticket size, you know, 0-$20, $20-$50, et cetera, up including over $1,000. Then we also look at items per basket in each of those sales cohorts, then also breadth of departments that are represented in those baskets. As you can imagine, the larger baskets with more items in that basket also tend to have a broader number of departments represented in that basket if it's a larger project. That's where we can see clearly that, you know, the large cross-category project is muted. It's a great question on what specifically that represents as a sales dollar. I don't have that.

Our next question comes from the line of Seth Sigman with Barclays. Please proceed with your question.

Hey, good morning, everyone. If you step back, your business has stabilized in the last couple of quarters. You've moved to slightly positive comps, but it does feel like there are a lot of aspects of demand that are still stuck.When you look at existing home sales, those 4 million HELOCs seem to have plateaued again. Guidance does imply a slight improvement in comps as we move through the year. I don't think the shape of the year has changed relative to your initial expectations, but how do you think about that and what those drivers could be to get you back to a slightly better comp as you move through the year? Thank you.

Yeah, we are not looking at a marked improvement in underlying demand. We are looking at a higher comp in the second half of the year, and that is solely driven by a return to normal storm activity.

Okay, understood. You know, if we think about some of the Pro initiatives with the business up just slightly, it can be difficult to see some of the stories underneath that. Specifically on the Pro, can you talk about, you know, how are you benchmarking your progress? How are you benchmarking your performance, perhaps across some of the key verticals to give you confidence that the strategy is working? I know it can be difficult just given the backdrop is challenging. How do you guys think about that? Thanks so much.

Maybe it's helpful if I just back up a minute and articulate, you know, what we're doing with Pro and then how we see progress. You know, we think Pro is an enormous opportunity for us. As we've said, it's an addressable market of about $700 billion. Truly, nobody has the scale or the customer reach like The Home Depot to penetrate that market. We already have, as you know, a large Pro business, and we service most Pro customers in some way or fashion. Our whole objective here is to simply win more Pro business, more products, and more purchase occasions. Our stores for 45+ years have always serviced that smaller cash and carry Pro, and larger Pros use us for infill and emergency purchases.

We believe we have the right to win more share of wallet with those larger pros as we build out the capabilities to better service their complex purchase needs. We're focused more on the residential pro in our organic efforts who buy across product categories. Think of a large remodeler or small home builder. We are gaining traction with these complex purchase occasions as we build out the necessary capabilities like a field sales force, enhanced delivery options, and trade credit. I'd say, you know, one thing we obviously look at is pro performance versus consumer. Our pro business outperformed consumer yet again this quarter. The highest comping part of our pro business was that complex purchase occasion.

That would be one way that we look at the success we're having as we build out these capabilities and gain more share.

Our next question comes from the line of Christopher Horvers with J.P. Morgan. Please proceed with your question.

Thanks. Good morning, everybody. I wanted to follow up on the cadence as well. You know, how do you think about weather as an impact in the first quarter, particularly April, there was a lot of precipitation in the north on the weekends, which I know that tends to hurt the seasonal business, and you typically talk about the bathtub effect. Could you maybe frame that out? Also, as you think about the storm headwinds from the back half of last year, you know, to what extent did that have any impact in the first quarter, and would you expect that to go away in the second quarter?

Yeah. Thanks, Christopher Horvers. It's Billy Bastek. I'll talk for a little bit about what we've seen so far in spring. As Richard McPhail covered in the comp cadence, you know, it's always a, you know, weather's always a variable, you know, throughout the first quarter. We saw great engagement, as I mentioned in my prepared remarks, you know, in the west in February and March, and certainly in the south in March as well. As we got into April, we really saw the same type of engagement into April, and in the last two weeks we saw, you know, a different weather pattern year-over-year. We saw great engagement across, you know, all of our spring categories. I mentioned, you know, we had positive comps in nine categories overall.

As we turned the corner into May and saw, you know, much more favorable weather, if you will, or consistent weather, particularly in the north, we saw that same engagement through the first couple weeks of May. Really pleased with some of the performance there. As for storms, as you mentioned, we did have 56 basis points of impact in Q1, but that'll dissipate throughout the balance of the year. You know, we'll see, you know, what that brings for us the balance of the year, but that'll continue to be less of an impact obviously, as we get through the balance of the year.

Understood. I You know, you're asked to be, you guys are, all asked to be constant economists here. The consumer had stimulus. Was curious if you thought how that impacted your business and, you know, anything in the business that you're looking at today that's saying that, well, you know, the consumer looks a bit shakier because of higher oil prices or whatever, some sort of change in project demand?

On a related question, how do you think about the symmetry of higher rates, i.e., you know, if we stay at these level of mortgage rates, do you think it's actually punitive to demand in your category, or do you think maybe, you know, given that we're at 40-year lows on existing home sales, it defers the release in the category, but it doesn't necessarily deteriorate demand going forward. Thanks so much.

Yeah, Christopher, we are probably all spending too much time in economics in the home improvement industry these days. You know, I'd start again by just reiterating, you know, our results were in line with our expectations, and the underlying demand was relatively similar to what we saw throughout 2025. That suggests that, you know, our consumer has been remarkably resilient. There's been a lot thrown at them. If you look at PCE growth year-over-year, you know, that was similar. In the first quarter, that was similar to all of last year. Employment is hanging in there. Wage growth has been reasonably strong. You look at our core customer, they're probably amongst the healthiest of all consumers, so they tend to own their homes.

They did have that 50% value pop in the value of their homes, you know, over the past several years. Their portfolios in equities have also improved. You know, our customer seems to be in reasonably good shape. They're engaged, as Billy Bastek just spoke to. While maybe not the large project, they are engaged across more departments in Q1, strengthening than we had seen previously. Again, the main thing is just this uncertainty that's holding them back for taking on large projects. Then you add to that, as you said, with the higher rates, you know, housing turnovers remain low. Industry's not expecting a lot of growth in housing turnover this year, and new construction starts and sales are also trending down.

We look at, you know, a pretty remarkably resilient core customer who's engaging with the values and the great innovation that Billy Bastek and his team are delivering. You know, we're on line with our expectations and took market share. If you look at, if you look at where others have reported to date from manufacturing sector, other distributors, even other retailers, if you look at the government retail sales data or the PFRI data, each of which were negative, you know, our being up modestly would point to customers responding to The Home Depot brand in service levels, in offering. Everything you just said is true.

If it's higher for longer, on rates, in a slow housing market, we're just gonna have to keep working our way through this period of moderation, keep focusing on controlling what we can control and take share in the marketplace.

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. Had you given any consideration to lowering your guidance in light of the rise in interest rates as well as the rise in energy prices? Should we be thinking about the low end of your outlook for the year? Can you clarify your comments around the performance of the business in May? We're all holding our collective breath to trying to understand real time what's going on with the consumer in light of all these well-documented challenges and whether that's starting to weigh on the overall spending environment. Thank you very much.

Yeah, Michael. Thanks. Thanks. Then Richard will follow back up. Yeah, as I mentioned, May through the first two weeks is very similar to the beginning of both February and March in terms of engagement. We saw great engagement. So much variability in the weather, you know, this time of year that, you know, weeks 12 and 13 were a little softer. We've seen great customer engagement back to what we saw in the first, you know, two periods of the quarter.

Michael, we reaffirmed our comp guidance with a range of flat-2%. You know, I'd say two comments about that. Number one, yes, the environment is different than it was three months ago. Probably a more volatile external environment to a degree, but really kind of unclear on how that will all shape out for the year. As we saw last year, we've proven the ability to manage and take share through any environment. I mean, I'm looking at Billy Bastek thinking about how he hit his gross margin rate plan last year on the button, despite the fact that we had all tariff headwinds coming at us. Yes, there's probably a little bit more uncertainty out there. Not sure how that will shake out.

We feel great about how we're positioned to manage through the rest of the year. The second comment is it's still very early. We're one quarter in. We have our largest selling weeks still ahead of us in the second quarter. We think we're positioned so well with the values the merchants have put in front of the customers and the customer service that our associates are giving. Look, we're heading into the second quarter with the intent to execute and take share.

Super helpful. My follow-up is, Ted, there's this debate in the marketplace, given the challenges with housing affordability, the rise in interest rates. Maybe we are just in a longer-lasting era where home improvement demand is gonna be slower and softer for longer. Obviously, this has already persisted for a longer period than most had anticipated. If this continues, is there a point at which you start to change either resource or capital allocation decisions? One of the debates out there is could Home will The Home Depot get back to the point at which it can buy back stock in 2027 just to provide some support to shareholders in this period of prolonged softness? Thank you so much.

Well, we've always had cycles in this business, Michael, and we're very much looking at this as a cycle. You know, we all know there was a tremendous spike in demand for a few years, followed by what we've been calling a period of moderation. The period of moderation, you know, has been extended. I think there've been some shocks in the past couple of years. You know, quite remarkable, as I said, how the consumer has been pretty darn resilient to all of that. We're still focused on our long-term strategy. We laid out at the investor conference that we're gonna focus on the core business, the interconnected offering to our customers, and winning with the pro.

We still very much are bullish on the long-term, medium, long-term prospects in U.S. housing and homeownership, and the value of the home, and the aging of the home. You know all the drivers of the long-term benefits. We're not contemplating changing, you know, how we're allocating capital, certainly to the core business and our allocation of resources to that three-pronged strategy. You know, as I said, we're focused on controlling what we can control. All indications are that the customers, pro, and consumer are responding, and we're taking share. We feel we're creating shareholder value by investing in the core business and the interconnected business and in the pro strategies. We certainly pay a healthy dividend at the moment, so there's a nice return to shareholders in that regard.

Super helpful. Thank you so much, and good luck.

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

Hey, good morning. Ted, I wanted to ask you what success looks like in the wholesale distribution business. If I can paraphrase what you said earlier, it's faster pro growth. Does that mean that if roofing and drywall businesses grow independently, that's success? Or do you need to cross-sell between them? It sounds like this complex purchase occasion, do you care if you're cross-selling across all your platforms?

Yeah. Hi, Simeon. We certainly do care. You know, I previously talked more about our organic efforts, but if you look at the pro distribution side, you know, there's always a customer within that $700 billion TAM that is a more specialized trade participant. To capture that specialty trade pro, that's why we acquired SRS. They're a best-in-class distributor, leading positions in roofing, pool, and landscape. Then they made the acquisition of GMS, which had a leading position in interior building materials. Then we're super excited about Mingledorff. We've always liked the HVAC business, and they're a leader in the five southeastern states. I mentioned, again, why do we like things like roofing and pool and landscape and HVAC.

It is more repair, replace, remodel, as opposed to heightened exposure to new construction, that's certainly the case with HVAC. Don't forget, we're developing Construction Resources into a leading finished interior platform. We put together the organic efforts from what we're doing with The Home Depot for the cross-trade pro these specialty platforms. Again, no one has more reach into that $700 billion TAM with broader catalogs of product, you know, tremendous engagement with multiple sets of customers. I had mentioned, you know, the delivery assets and the delivery capabilities we have. First and foremost, we want these businesses, you know, The Home Depot pro business, all the SRS pro businesses, Construction Resources, to perform, you know, an exceptional level in and of their own right within their sectors, within their verticals, and we believe they are.

We look at the publicly traded comparatives to SRS. It's remarkable SRS's performance in Q1. They beat their competition in each sector by hundreds and hundreds of basis points. We have an incredibly strong, well-performing business platform. Over time, we want to absolutely cross-sell and marry our customers through, you know, CRM systems. We want to marry and provide exposure of the catalogs, also leverage our delivery assets and our strategic vendor partners. Don't forget, you know, we have to partner with our supplier partners here as, you know, we are truly the leading distributor of almost every product that we sell. We're early days on the cross-selling. It's largely manual today. It's introductions to customers through our sales forces.

It's SRS to The Home Depot. It's The Home Depot to SRS. It's SRS and GMS. GMS had more exposure to the larger new builder, they are introducing each of SRS and The Home Depot to that builder. We would say this year we're looking at something like $400 million of cross-sell run rate. That will come over the course of the year. Most of those are guaranteed contracts, including commercial sales from The Home Depot relationships that SRS will now do roofing on a number of our warehouses, we would look to double that next year. We want best-in-class platforms that increasingly cross-sell together as we leverage the power of The Home Depot enterprise in what is still a highly fragmented space.

Then, Mike, maybe you can provide some detail to what we're doing.

Yeah. To your point, Ted, we're really pleased with our sales teams, you know, rhythms working across the enterprise together as The Home Depot, SRS, GMS, HD Supply, and you've mentioned Construction Resources as well. That's evident by, you know, the success we're seeing with that cross-selling between SRS, GMS, and HD Supply and our teams on the QuoteCenter. You know, tool, we've talked about this a little bit at the investor conference. We talked about it after Q4 earnings as well. That's led to a national account structure, you know, between our companies and, you know, a great example like that you mentioned, Ted, is around just GMS and SRS themselves and that focus on the builder.

You know, the state of the pro business remains strong overall, focused on deepening that relationship, you know, with the large pro working on complex projects. We're seeing some pretty sustained momentum across those key strategic initiatives that you brought up initially, Ted, around order management, around trade credit, around some of the digital advances we're seeing. With that, sales to those large pros working on complex projects are showing stronger growth versus our overall pro growth. You know, on the digital side of things, that's paying dividends as well. This is another complex pro, where that gross demand continues to be a powerful engine for us. It's an impressive double-digit year-over-year increase, growing faster than the B2C experience. Our managed sales force, right?

Both with our outside sales and our PASAs, in the store are successfully capturing share with those highest value customers as well. Year to date, those managed accounts, both from the store and from outside sales, have generated, like I said, over and above growth on these planned or complex purchases. You know, now to your point, Ted, around getting on with our enterprise CRM efforts, our catalog efforts, and using our delivery assets to come up with the most optimal fulfillment.

If I may ask a follow-up, for Richard, if you can comment on the comp spread between your best performing markets and the weakest, whatever that spread is, has it changed much? Let's say, for example, your best is, you know, somewhere in the low single digits positive. Is the narrative weather or is it housing or anything else to it?

It is, pretty narrow still, Simeon, and it's almost completely driven by weather or weather compares.

Our next question comes from the line of Zachary Fadem with Wells Fargo. Please proceed with your question.

Hey, good morning. Following up on SRS, it looks like the business is still weighing on the comp in the ballpark of about 30 basis points. As you think through the year for SRS categories, the market share opportunities, pricing levers, and then GMS entering the base later this year, could you talk to your expectation for second half comp impact from SRS as we move through the year?

Yeah, sure. Look, as Ted said, SRS performed in line with our expectations. Just to talk about current performance, they delivered $4 billion in sales in the quarter. They delivered positive total sales growth and positive total organic sales growth. Comps were slightly negative for SRS in total, driven by low single-digit negative comps in roofing. As Ted said, despite significant pressures in the roofing market, by all external measures, SRS took considerable share from other distributors. Now, we do expect, as their compares improve through the year, remember that Q2 and Q3 of last year had some of the lowest recorded hail and hurricane storms in history, their back half was significantly pressured.

For that reason, if we see a normal seasonal curve from SRS, we expect them to deliver mid-single digit positive organic growth for the year.

That's helpful, Richard. Wanted to follow up on the gross margin line. The guidance would imply some improvement in the year-over-year change from here. The first question is, for Q1, could you isolate the GMS impact versus core? As you think through the moving parts around the changing operating environment around us, freight, fuel, you had a Section 232 tariff change. How would these fold into the gross margin line as you move forward?

Let's take SRS and GMS for a second. We expect gross margin for the year to be at 33.1, which is consistent with our original guide. The change from last year largely reflecting the acquisition of GMS. If you look at our first quarter performance, 75 basis points below last year, the vast majority of that reflects the acquisition of GMS. There was some pressure, and we called this out on our Q4 call, and also called out that we expected some pressure from our footing in the roofing market, and price investments at SRS. Recall, the roofing market saw a 28% drop in shipments in Q4 of last year. That's the worst quarter since 2019.

As we anticipated in our earnings guide last quarter, we've maintained our stance on value to keep momentum with our customers. That made up the remainder of the gap. Beyond that, the margin profile of the core was actually very stable. As we move through the year, you're still gonna see pressure on a year-over-year basis in Q2, not quite the degree that you saw in Q1, and then improving significantly, more really sort of flattish year-over-year when you get into Q3 and Q4. As to your broader question on cost, look, obviously, as we stand today, we could see potential cost pressures building in the form of fuel prices and other commodity input costs. New tariffs have been introduced.

You know, the environment is changing almost every day. It's hard to see where all of that winds up and where it settles. We will continue, just like we did last year, to manage cost and price to maintain our position as a customer's advocate for value as we move through the year. Yes, the cost on the horizon, since we spoke last quarter, have at least moved towards a bias towards an increase.

Thanks for the thoughts, Richard. Appreciate it.

Thank you. By the way, if I could just clarify one statement. I think I got tongue-tied during my remarks. We opened two new stores during the quarter, not 12. Apologies for that.

Our next question comes from the line of Chuck Grom with Gordon Haskett. Please proceed with your question.

Hey, thanks. Good morning. Can you discuss the progress you guys are making with Pro Trade Credit and the adoption of Pro Trade Credit by pros, understanding it can take time to convert them? My follow-up with Ann-Marie on the merchandise execution teams. I think you said it's rolled out to 1,000 stores with plans for full adoption by the end of the year. Any change in basket or customer frequency as you roll out the MET teams? Thank you.

I'll start on trade credit. Look, what we're building is a value prop that has never been built before for a broader customer set than has ever been reached by any kind of conventional distribution company. We're taking our time, making sure we understand how to onboard as efficiently as possible, how to underwrite correctly, and how to really drive sales. The important part of driving adoption is making sure that we set our outside sales reps up for success because they're the ones really driving this adoption. I think from my perspective, and I'll ask Mike to weigh in on what we actually see, look, we're rolling this out steadily. We're taking our time.

As with most of the capabilities that we're enabling, we're more focused on taking continual steps forward. That's what we're doing with trade credit. Mike, maybe talk about what the customer tells us.

Yeah. I mean, we're very pleased with the trajectory of Pro Trade Credit so far. After gaining some pretty strong traction in 2025, we saw continued momentum, you know, this past quarter. What's most encouraging is that we're winning exactly where we would expect to with single and multifamily builders and with large remodelers. We're seeing strong adoption in longer lead time categories, like on windows, doors, and appliances.

A major driver for this is that pros absolutely love the fact that it's 30-day payment terms now click on shipment, rather than on point of sale, which gives them a distinct competitive advantage around working capital. Looking forward, you know, we've piloted recently the program online, with a number of customers, and we're pleased with what we're seeing there and look forward to expanding that further within the second quarter.

Home Depot (HD) Q1 2027 Earnings Call Transcript

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