The Home Depot Inc Earnings - Q1 2026 Analysis & Highlights
The Home Depot reported Q1 2026 results with modest comparable sales growth, margin pressure from acquisitions, and strategic investments in Pro customer capabilities and omnichannel fulfillment, while maintaining full-year guidance amid consumer uncertainty and housing affordability challenges.
Key Financial Results
Total sales reached $41.8 billion, an increase of 4.8% year-over-year, driven by $1.9 billion in incremental sales.
Comparable sales increased 0.6% from the prior year period, with U.S. comps at positive 0.4%.
Adjusted diluted earnings per share were $3.43, compared to $3.56 in Q1 2025, representing a decrease of approximately 3.7%.
Gross margin was 33%, a decrease of approximately 75 basis points from Q1 2025, largely reflecting the GMS acquisition impact.
Operating margin was 11.9% compared to 12.9% in Q1 2025; adjusted operating margin was 12.3% versus 13.2% in the prior year.
Merchandise inventories were $27.3 billion, up approximately $1.5 billion compared to Q1 2025, with inventory turns at 4.2 times versus 4.3 times last year.
Business Segment Results
Nine of 16 merchandising departments posted positive comps, including storage, power, hardware, plumbing, electrical, baths, indoor garden, paint, and kitchens.
Comp average ticket increased 2.2% while comp transactions decreased 1.3%.
Big-ticket transactions over $1,000 were positive 0.8% compared to Q1 2025.
Pro posted positive comps and outperformed DIY, with strength in power, pipe and fittings, water heaters, fasteners, and paint categories.
Online comp sales increased over 10% compared to Q1 2025, marking the fourth consecutive quarter with double-digit year-over-year growth.
SRS delivered $4 billion in sales with positive total sales growth and positive organic sales growth, though comps were slightly negative driven by low-single-digit negative comps in roofing.
Northern and Western U.S. divisions had positive comps as customers engaged in outdoor projects during favorable weather; Mexico had positive comps in local currency while Canada was negative.
Capital Allocation
Capital expenditures were approximately $845 million during Q1 2026.
Dividends paid to shareholders were approximately $2.3 billion during the quarter.
Return on invested capital was 25.4%, down from 31.3% in Q1 2025.
The company opened 2 new stores during the quarter, bringing total store count to 2,361.
Industry Trends and Dynamics
Underlying demand was relatively similar to fiscal 2025 despite greater consumer uncertainty and housing affordability pressure.
Spring is the company's biggest season, with strong engagement in outdoor projects when weather was favorable.
Larger discretionary projects remain under pressure, though portable power and patio categories showed positive performance.
Power categories posted a first quarter record for sales, led by portable power and outdoor power equipment.
Demand for cordless outdoor power equipment has never been stronger, with lineup across RYOBI, Milwaukee, DEWALT, and Makita described as unmatched.
HVAC distribution represents an addressable market of approximately $100 billion, increasing the company's total addressable market to $1.2 trillion.
Competitive Landscape
The company is taking market share in the home improvement sector, as evidenced by positive comps while other retailers and distributors reported negative results.
SRS took considerable share from other distributors despite significant pressures in the roofing market.
The company has made significant progress with Pro painters and continues to see share gains through expanded product assortment and partnerships with Behr and PPG.
The company's competitive advantages include scale, customer reach, and a comprehensive product offering that is difficult to replicate.
No other company has more reach into the $700 billion Pro market with broader catalogs of product and engagement with multiple customer sets.
Macroeconomic Environment
Consumer has been remarkably resilient despite various economic headwinds, with PCE growth year-over-year similar to all of 2025.
Employment is hanging in there with reasonably strong wage growth.
Housing turnover remains low with industry not expecting significant growth in housing turnover this year; new construction starts and sales are trending down.
Higher interest rates and housing affordability pressure are constraining consumer spending on large projects.
Tariff environment remains volatile, with the company having made pricing adjustments that have settled into the market at approximately 3%.
Potential cost pressures are building in the form of fuel prices and other commodity input costs, though the environment is changing almost daily.
Growth Opportunities and Strategies
Acquisition of Mingledorff's, a leading HVAC distributor with 42 locations in five southeastern states, expands the company's addressable market and Pro capabilities.
SRS can now serve more Pros and win greater share of wallet in the highly fragmented HVAC market through Mingledorff's extensive product portfolio and distribution network.
The company is building a comprehensive Pro strategy focused on winning more Pro business, more products, and more purchase occasions through field sales force, enhanced delivery options, and trade credit.
Cross-selling initiatives between Home Depot, SRS, GMS, and HD Supply are generating approximately $400 million of cross-sell run rate, with plans to double that next year.
Merchandise execution teams have been transitioned to over 1,000 stores, with plans to complete transition in all stores by end of fiscal 2026, enabling Orange Apron associates to focus on customer engagement.
Operations Experience Manager role is driving uniform operational processes and enhancing interconnected fulfillment experience through optimized sourcing logic and order routing.
Pro digital workspace consolidates Project Planning tool, AI-powered Material List Builder, delivery tracking, and purchase history under a single interface for improved project management.
Complex order scheduling capability allows Pros to provide jobsite preferences and business hours for on-time and complete delivery performance at record highs.
Pro Trade Credit program is gaining traction with single and multi-family builders and large remodelers, offering 30-day payment terms upon shipment rather than point-of-sale.
Ram Board product exclusivity to The Home Depot and big box retail channel provides differentiated offering for Pro floor protection.
Financial Guidance and Outlook
Comp sales are expected to range between flat to 2% growth for fiscal 2026.
Total sales growth is expected between approximately 2.5% and 4.5%, reflecting contribution of GMS acquisition, new stores, branches, and tuck-in acquisitions.
SRS is expected to deliver mid-single-digit percent organic sales growth for the year.
Approximately 15 new stores and 40 to 50 new SRS locations are planned to open.
Gross margin is expected to be approximately 33.1% for fiscal 2026.
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 increase approximately flat to 4% compared to fiscal 2025.
Capital expenditures are planned at approximately 2.5% of sales for fiscal 2026.
Higher comp in the second half of the year is expected solely from return to normal storm activity, not from marked improvement in underlying demand.
Pro Business Strategy and Performance
Pro represents a $700 billion market opportunity, with the company focused on winning more share of wallet with larger Pros through complex purchase capabilities.
The company services most Pro customers in some way, with stores historically serving smaller cash-and-carry Pros and larger Pros using the company for infill and emergency purchases.
Complex purchase occasions are the highest comping part of the Pro business, indicating success in building out necessary capabilities.
Pro business outperformed consumer yet again this quarter, demonstrating the effectiveness of Pro-focused initiatives.
Combined delivery assets total approximately 16,000 with a professional sales force of over 5,000 associates across Home Depot, SRS, and related platforms.
Managed accounts from store and outside sales have generated over and above growth on planned or complex purchases.
Pro digital B2B experience is growing at double-digit year-over-year rates, growing faster than the B2C experience.
