The Home Depot Inc Earnings - Q2 2027 Analysis & Highlights
The Home Depot's second quarter 2026 earnings call focused on strong operational execution amid a challenging consumer environment, with management highlighting broad-based demand across merchandising categories, accelerating delivery capabilities, and Pro business momentum, while addressing cost pressures from tariffs, fuel, and energy that are being offset by strategic pricing and operational efficiencies.
Key Financial Results
Total sales reached $47.9 billion, representing 5.7% year-over-year growth from the prior year period.
Comparable sales increased 1.7% from the same period last year, with US comps increasing 1.3%.
Adjusted diluted earnings per share were $4.92 in the second quarter compared to $4.68 in the second quarter last year, representing 5.1% growth.
Gross margin was 33.7%, an increase of approximately 25 basis points from the second quarter of last year, primarily driven by the benefit from the IEEPA tariff refund of $685 million, largely offset by incremental cost pressures related to fuel, energy and other product input costs as well as a change in mix from the GMS acquisition.
Operating margin for the second quarter was 14.3% compared to 14.5% in the second quarter of 2025.
Adjusted operating margin for the second quarter was 14.7% compared to 14.8% in the second quarter of 2025.
Diluted earnings per share for the second quarter were $4.79 compared to $4.58 in the second quarter of 2025.
Merchandise inventories were $26.8 billion, up approximately $2 billion compared to the second quarter of 2025, with inventory turns of 4.5x, down from 4.6x last year.
Business Segment Results
Northern and Western US divisions posted positive comps, while Mexico and Canada posted positive comps.
13 of 16 merchandising departments posted positive comps, including storage, electrical, hardware, power, plumbing, indoor garden, kitchen, paint, bath, outdoor garden, building materials, flooring and millwork.
Comp average ticket increased 2.8% while comp transactions decreased 1%.
Big ticket comp transactions over $1,000 were positive 2.4% compared to the second quarter of last year.
Pro posted positive comps and outperformed DIY, with strength across Pro-heavy categories like portable power, decking, dimensional lumber, pipe and fittings, fasteners, hand tools and concrete.
Total company online comp sales increased 11% compared to the second quarter of last year, marking the fifth quarter in a row with double-digit year-over-year growth.
SRS comped above the company average and was positive comped in all verticals.
Over 65% of in-stock parcel product deliveries are same day or next day, and the company launched Express Delivery nationwide with delivery on tens of thousands of products in three hours or less.
Approximately 55% of big and bulky deliveries of products the company stocks are delivered within two days, representing a 45% reduction in delivery lead times over the last 18 months.
Q2 was a record-setting sales quarter for portable power tools.
Next-day delivery coverage on key appliance SKUs now reaches nearly 60% of the population.
Capital Allocation
Capital expenditures were approximately $880 million during the second quarter.
Dividends paid to shareholders were approximately $2.3 billion during the quarter.
Return on invested capital was 24.8%, down from 27.2% in the second quarter of fiscal 2025.
Industry Trends and Dynamics
Customers continue to engage in home improvement projects, with broad-based demand across the business.
Consumer uncertainty and housing affordability continue to pressure demand for larger home improvement projects.
Customers continued to engage in smaller repair and maintenance projects during the second quarter.
Larger discretionary projects remain under pressure.
Housing turnover has been at historical lows, with the company noting it has never been lower as a percentage of the housing stock, and has remained at these low levels for four years.
There is a growing shift towards duress purchases in appliances, which the company is addressing through advancements in supply chain capabilities.
Competitive Landscape
Management emphasized that the company is taking share in a difficult environment and that investments position the company like no one else in the market.
The company highlighted competitive advantages through extensive lineup of battery-powered platforms that allow continued growth share in power tool categories.
Milwaukee PACKOUT is described as the industry's most versatile and durable modular storage system and the largest national loyalty brand for Pros.
The company is the exclusive launch partner for USG's newest innovation, Ultralight Tough Gypsum Panels in the big box retail channel, further solidifying leadership as the go to retailer for Pro-preferred building materials.
Macroeconomic Environment
The company received IEEPA tariff refunds of $730 million during the quarter, with $685 million reducing cost of goods sold and $45 million remaining in inventory.
Section 101 tariffs expired in July and were replaced with section 301 tariffs, representing incremental pressures not forecasted in the original 2026 outlook.
The company has experienced incremental cost pressure related to fuel, energy, other product inputs, commodities, resin and metals.
Management noted that tariff refunds are being used to offset unplanned and rising cost pressures throughout the year.
The company expects that tariff refunds will be fully offset by incremental cost pressure from fuel, energy and other inputs.
Growth Opportunities and Strategies
The company is driving its core and culture through investments in store experience, on-shelf availability, new and innovative products, and technology deployment across stores.
Magic Apron evolution allows associates and customers to utilize the application in aisles to navigate stores more efficiently, find products within seconds, and ask questions about products and projects.
The company is making progress on interconnected experience initiatives, including delivery optimization.
Pro positive comped in the quarter driven by investments across systems, capabilities, product assortment, job lot quantities, delivery, sales teams and specialized services.
The company is expanding its relationship with USG and accelerating growth with RUCO Joint Treatments, a key Pro exclusive.
Management is focused on being customers' advocate for value by continuing to provide broad assortment of best-in-class products that are in stock and available.
The company is leveraging QuoteCenter as a marketplace that now allows stores to close sales within the Home Depot family through SRS and GMS catalogs.
90% of stores have closed a sale through SRS within the last 12 months.
The company is investing in Pro B2B experience improvements including project planning tools, AI-powered Material List Builder, search enhancements, and app improvements.
Financial Guidance and Outlook
The company is reaffirming fiscal 2026 guidance.
Comp sales are expected to range between flat to 2% growth, with total sales growth of between approximately 2.5% and 4.5%.
SRS is expected to deliver mid-single-digit percent organic sales growth for the year.
The company plans to open approximately 15 new stores and 40 to 50 new SRS branches.
Gross margin is expected to be approximately 33.1% for the year.
Operating margin is expected to be approximately 12.4% to 12.6%, with adjusted operating margin of approximately 12.8% to 13%.
Effective tax rate is targeted at approximately 24.3%.
Net interest expense is expected to be approximately $2.3 billion.
Diluted earnings per share and adjusted diluted earnings per share are expected to both increase approximately flat to 4% compared to fiscal 2025.
Capital expenditures are planned at approximately 2.5% of sales for fiscal 2026.
The company expects gross margin in the fourth quarter will likely be right around flat compared to last year.
Management expects tariff refunds to offset costs over Q2 and Q3, with the $400 million in cross-sell expected across the entire system between SRS, GMS, and Home Depot.
Leadership and Organizational Updates
The company announced that Ted is on temporary medical leave of absence, with management expecting his return in a few months.
100% of stores qualified for success sharing or profit sharing program for hourly associates based on first half results.
The company recently announced an organizational realignment designed to work smarter, move faster, and innovate more quickly.
