Home Depot Q2 Earnings Call Spotlights Pro Momentum and Cost Pressures

Home Depot Sees Broader Project Activity

Executive vice president of Merchandising William Bastek said customers remained active in smaller repair and maintenance projects, with 13 of 16 merchandising departments posting positive comparable sales.

Bastek said comparable average ticket rose 2.8% while comparable transactions declined 1%. Big-ticket transactions above $1,000 increased 2.4%, though larger discretionary projects remained pressured.

Bastek added that strength was broad across the store, with only three of the top 20 businesses driving positive performance tied to seasonal categories.

HD Leans on Pro and Digital Gains

Senior executive vice president Ann-Marie Campbell said Pro comparable sales were positive and all Pro cohorts performed well, supported by investments in assortment, delivery, sales teams and specialized services.

Executive vice president of Interconnected Retail Jordan Broggi said online sales increased 11%, with both traffic and conversion improving. He also said the Home Depot app was the company’s fastest-growing digital surface.

Broggi said more than 65% of stocked parcel deliveries now arrive the same day or the next day, while nationwide Express Delivery offers delivery within three hours for tens of thousands of products.

Home Depot Holds FY26 Outlook

Executive vice president and CFO Richard McPhail reaffirmed fiscal 2026 guidance for comparable sales growth of flat to 2% and total sales growth of approximately 2.5% to 4.5%.

McPhail maintained expectations for gross margin of approximately 33.1% and adjusted operating margin of 12.8% to 13.0%.

Adjusted earnings per share are still expected to grow approximately flat to 4% from the fiscal 2025 figure of $14.69.

HD Frames Tariff Refund as a Timing Benefit

A Gordon Haskett analyst pressed management on the $730 million of IEEPA tariff refunds received during the quarter and how the benefit should be viewed across periods.

McPhail said $685 million reduced cost of goods sold and $45 million remained in inventory. The recognized amount represented about 145 basis points of gross-margin benefit.

A UBS analyst questioned profitability excluding the refund. McPhail attributed about 60 basis points of pressure to higher costs and another 60 basis points to the acquisition mix from GMS and Mingledorff’s.

McPhail said rising fuel, energy and product input costs are expected to fully offset the refunds over the year, with fiscal fourth-quarter gross margin expected to be roughly flat year over year.

Home Depot Still Sees Housing Pressure

A Truist analyst asked whether higher interest rates were creating additional pressure on demand. McPhail said housing turnover remains at historically low levels and there is no sign of an inflection point.

The CFO said the company has seen some improvement when rates step down, but recent rate moves have not produced much volatility in demand.

Responding to a Barclays analyst, McPhail said the start of the fiscal third quarter was consistent with fiscal second-quarter demand, while volatility, cost pressure and frozen housing conditions supported keeping the guidance range intact.

HD Keeps Focus on Execution

Management’s message remained centered on controllable drivers: strengthening the core store experience, improving interconnected fulfillment and expanding capabilities for professional customers.

Campbell emphasized record on-shelf availability and technology-enabled tools for associates, while McPhail said the company remains focused on taking market share despite the difficult housing backdrop.

Home Depot’s Zacks Signals Stay Mixed

HD currently carries a Zacks Rank #3 (Hold). Its Growth Score of B is relatively favorable, while its Value Score of D and Momentum Score of D are weaker. The VGM Score of C reflects a middle-of-the-range combined style profile. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Zacks Style Scores are designed to complement the Zacks Rank, with A and B grades generally preferred. The combination gives HD a mixed near-term signal rather than the stronger setup associated with top ranks paired with favorable Style Scores. The current Zacks Rank can change as earnings estimates are revised following the just-reported results.

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