The Home Depot Inc Earnings - Q4 2025 Analysis & Highlights
The Home Depot reported modest comparable sales growth and declining earnings in fiscal 2025 amid persistent consumer uncertainty and housing market pressures, while maintaining strategic investments in the pro ecosystem, interconnected retail capabilities, and the recently acquired GMS business to drive future market share gains.
Key Financial Results
Fiscal 2025 sales totaled $164.7 billion, representing 3.2% year-over-year growth.
Comparable sales increased 0.3% for the full year, with U.S. comparable sales up 0.5%.
Fourth quarter comparable sales increased 0.4%, with U.S. comps up 0.3%.
Adjusted diluted earnings per share for fiscal 2025 were $14.69, compared to $15.24 in the prior year, representing a 3.6% decrease.
Fourth quarter adjusted diluted earnings per share were $2.72, compared to $3.13 in the prior year, a 13.1% decrease.
Gross margin for fiscal 2025 was approximately 33.3%, down 10 basis points from the prior year.
Fourth quarter gross margin was approximately 32.6%, down 20 basis points from the fourth quarter last year, primarily reflecting the GMS acquisition mix.
Operating margin for fiscal 2025 was 12.7% compared to 13.5% in 2024.
Adjusted operating margin for fiscal 2025 was 13.1% compared to 13.8% in 2024.
Fourth quarter operating margin was 10.1% compared to 11.3% in the fourth quarter of 2024.
Business Segment Results
SRS grew organic sales by a low single digit percentage and expanded market share despite pressured industry demand and lack of storms in the back half of the year.
SRS completed the GMS acquisition and several tuck-in acquisitions while opening greenfield locations across their verticals.
SRS posted low single digit negative comps in the fourth quarter, but the roofing industry experienced a 28% year-over-year decline in total shipments, representing the lowest industry volume since 2019.
Eight of 16 merchandising departments posted positive comps in the fourth quarter, including power, electrical, storage, indoor garden, hardware, plumbing, bath, and kitchen.
Pro posted positive comps and outperformed DIY in the fourth quarter, with strength across pro-heavy categories like gypsum, wire, concrete, and plumbing.
Online sales leveraging digital platforms increased approximately 11% compared to the fourth quarter of last year.
Comp average ticket increased 2.4% while comp transactions decreased 1.6% in the fourth quarter.
Big ticket transactions over $1,000 were positive 1.3% compared to the fourth quarter of last year.
Capital Allocation
Capital expenditures for fiscal 2025 totaled approximately $3.7 billion.
The company paid approximately $9.2 billion in dividends to shareholders during fiscal 2025.
The Board of Directors increased the quarterly dividend by 1.3% to $2.33 per share, equating to an annual dividend of $9.32 per share.
The company plans capital expenditures of approximately 2.5% of sales for fiscal 2026.
Management expects to return to share repurchases once the company returns to an excess cash position, anticipated sometime in the first half of 2027.
Industry Trends and Dynamics
Housing turnover has remained at historical lows since 2023, significantly reducing demand for projects and purchases associated with buying and selling a home.
The current mortgage rate environment and significant increase in home prices since 2019 have impacted housing affordability.
The roofing industry experienced a 28% year-over-year decline in total shipments in the fourth quarter, the lowest industry volume since 2019.
Underlying demand was relatively stable throughout fiscal 2025 when adjusting for storm activity.
Storm activity in January provided a sales benefit in the quarter, while the third quarter lacked storm activity.
There is a cumulative underspend in home improvement estimated at $22 billion, as people have deferred maintenance and replacement projects.
Competitive Landscape
The company is growing market share by delivering the best value proposition in home improvement.
The company is uniquely positioned to grow share of wallet with all customers through investments in core and culture, delivering a frictionless interconnected experience, and winning the pro.
Customers continue to report that associates deliver exceptional service, with customer satisfaction scores increasing every quarter in fiscal 2025.
The company's merchants continue to offer tremendous value, as evidenced by record-setting events in the quarter.
Pros utilizing the pro ecosystem of capabilities are spending more with the company, with continued growth in the Pro Xtra loyalty program.
Macroeconomic Environment
Customers report concerns over general economic uncertainty, including inflation, growing job concerns, and higher financing costs.
Consumer uncertainty and pressure in housing were reflected in fourth quarter results.
Mortgage rates have improved, with rates just under 6% on the 30-year mortgage as of the earnings call date.
Tariff-related pricing actions have been largely completed, with exposure in the mid-single digits and approximately 3% impact on SKU pricing.
More than 50% of the company's products are sourced domestically and have not been subject to tariffs.
Tax stimulus is not being heavily relied upon in guidance, with potential refunds ranging from $70 billion to $200 billion, which could result in approximately half a point of comp support at the midpoint.
Growth Opportunities and Strategies
The company is investing across the business to drive core and culture, deliver a frictionless interconnected experience, and win the pro.
Over 50% of online orders are fulfilled through stores, requiring reliable and repeatable picking, staging, and delivery processes.
The company has realigned store positions to better drive desired outcomes, including an Operations Experience Manager and a dedicated unified pro team with a Pro Customer Experience Manager.
The company is enhancing delivery reliability through real-time delivery tracking for big and bulky deliveries across all categories.
The company is introducing AI tools for project management and list builders for pros, including an AI take-off scheme that pre-populates project lists.
The company has improved sales force order management, trade credit platforms, and achieved two sigma on-time and complete delivery for pros.
The company is implementing job site preferences and business hours in order management tools and expanding customer communications capabilities.
Online B2B sales are outpacing overall online sales growth, driven by features such as the projects tool where tens of thousands of projects are started each week.
The company is rolling out delivery handheld devices to track delivery status and fulfill customer requests on job sites.
The company is pursuing revenue synergies between Home Depot, HD Supply, SRS, and GMS through combined customer approaches and national account structures.
The company is implementing pro referral projects on roofing leads and mapping common customers for coordinated sales approaches.
The company is expanding the Live Goods program through partnerships with national and regional growers to provide new and improved plant varieties.
The company is launching innovative spring products including cordless technology from RYOBI, Milwaukee, Makita, and DEWALT, many exclusive to The Home Depot.
Financial Guidance and Outlook
For fiscal 2026, the company expects total sales growth of approximately 2.5% to 4.5%.
For fiscal 2026, the company expects comparable sales growth of approximately flat to 2%.
For fiscal 2026, the company expects adjusted diluted earnings per share to grow approximately flat to 4%.
SRS is expected to deliver mid-single digit percent organic sales growth in fiscal 2026.
The company plans to open approximately 15 new stores and 40 to 50 new SRS locations in fiscal 2026.
Gross margin for fiscal 2026 is expected to be approximately 33.1%.
Operating margin for fiscal 2026 is expected to be approximately 12.4% to 12.6%, with adjusted operating margin of approximately 12.8% to 13%.
The effective tax rate is targeted at approximately 24.3% for fiscal 2026.
Net interest expense is expected to be approximately $2.3 billion for fiscal 2026.
The company expects second half comps to be slightly higher than first half comps, reflecting comparisons to 2025 storm activity and the absence thereof.
First half gross margin is expected to be down about 50 basis points versus last year, while second half gross margin is expected to be right around flat to last year, reflecting GMS annualization.
Operating expense as a percentage of sales is expected to be at its highest level in the first quarter of 2026.
Year-over-year EPS performance is expected to be mid-single digit percentage negative in Q1, improving through the year.
The company anticipates housing and home improvement demand pressures will persist through fiscal 2026, with no catalyst yet seen for an inflection in housing activity.
The overall home improvement market is expected to be down 1% to up 1% in fiscal 2026.
Store Operations and Customer Experience
The company opened 12 new stores during fiscal 2025, bringing the total store count to 2,359 at the end of the year.
Tenure with hourly associates reached its highest level since 2017 in fiscal 2025.
The company transitioned tasking toward the MET team to allow Orange Apron associates more time to engage with customers and drive sales, resulting in meaningful increases in labor productivity in pilot stores.
The company hosted appliance gift center and Black Friday events in the fourth quarter, with both posting record sales years.
Merchandise inventories were $25.8 billion at the end of the quarter, up approximately $2.4 billion versus last year, reflecting higher inventory costs and the GMS acquisition.
Inventory turns were 4.4 times, down from 4.7 times last year.
