The Home Depot, Inc. (HD) Q4 2026 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call summary reveals mixed signals: while product development and market strategy show promise with AI tools and stable demand, financial performance is marred by declining EPS and cautious guidance. The Q&A section further highlights uncertainties in tax impacts and margin pressures. Despite positive shareholder return plans, these factors balance out to a neutral sentiment, suggesting limited stock movement.
Key Financial Performance
Sales for fiscal 2025 $164.7 billion, an increase of 3.2% from the same period last year. Reasons for change include stable underlying demand and storm activity in January providing a sales benefit.
Comp sales Increased 0.3% year-over-year, with U.S. comps up 0.5%. Reasons include stable demand and storm-related sales benefits.
Adjusted diluted earnings per share (fiscal year) $14.69 compared to $15.24 in the prior period, a decrease of 3.6%. Reasons include lack of storm activity in the third quarter and ongoing consumer uncertainty.
Adjusted diluted earnings per share (Q4) $2.72 compared to $3.13 in the prior year, a decrease of 13.1%. Reasons include lack of storm activity in the third quarter and ongoing consumer uncertainty.
Total sales (Q4 2025) $38.2 billion, a decrease of $1.5 billion or approximately 3.8% from last year. Reasons include the absence of the 53rd week in fiscal 2024 and natural deleverage from top-line results.
Gross margin (Q4 2025) 32.6%, a decrease of approximately 20 basis points from the fourth quarter last year. Reasons include a change in mix due to the GMS acquisition.
Operating margin (Q4 2025) 10.1% compared to 11.3% in Q4 2024. Adjusted operating margin was 10.5% compared to 11.7% in Q4 2024. Reasons include natural deleverage and lapping the 53rd week.
Diluted earnings per share (Q4 2025) $2.58, a decrease of 14.6% compared to Q4 2024. Reasons include the absence of the 53rd week and natural deleverage.
Merchandise inventories $25.8 billion, up approximately $2.4 billion versus last year. Reasons include higher inventory costs and the acquisition of GMS.
Return on invested capital 25.7%, down from 31.3% in Q4 2024. Reasons include lower earnings and higher invested capital.
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Operating Highlights
Innovative Products: Introduced new outdoor power equipment like RYOBI 40-volt lawn mower and Milwaukee 18-volt string trimmer, focusing on cordless technology.
Digital Platforms: Online sales increased by 11% in Q4 2025, with enhancements like real-time delivery tracking for bulky items.
Market Share Growth: Gained market share in home improvement and Pro-heavy categories like gypsum, wire, and plumbing.
Geographic Expansion: Opened 12 new stores in 2025, with plans for 15 new stores and 40-50 SRS locations in 2026.
Customer Experience: Improved customer satisfaction scores every quarter and enhanced Pro loyalty program.
Operational Efficiency: Transitioned tasking to MET teams, increasing labor productivity in pilot stores.
Pro Ecosystem: Focused on enhancing Pro capabilities, including project management and delivery, leading to higher Pro sales.
Capital Allocation: Invested $3.7 billion in capital expenditures in 2025 and increased annual dividend to $9.32 per share.
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Risk or Challenges
Consumer Uncertainty and Housing Pressure: Ongoing consumer uncertainty and pressure on housing are impacting sales and demand stability. This includes concerns over inflation, job security, and higher financing costs, which are reducing housing affordability and turnover.
Lack of Storm Activity: The lack of storm activity in the third quarter negatively impacted sales, as storm-related demand is a significant driver for certain product categories.
Discretionary Spending Pressure: Larger discretionary projects remain under pressure, indicating reduced consumer spending on high-ticket or non-essential items.
Inventory Management Challenges: Merchandise inventories increased by $2.4 billion, reflecting higher inventory costs and acquisitions, which could lead to potential overstock or inefficiencies.
Operating Margin Decline: Operating margins decreased year-over-year, reflecting higher operating expenses and natural deleverage from top-line results.
Economic and Housing Market Dynamics: The current mortgage rate environment and significant increase in home prices since 2019 have reduced housing affordability and turnover, directly impacting home improvement demand.
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Guidance & Outlook
Total Sales Growth: Expected to grow approximately 2.5% to 4.5% in fiscal 2026.
Comparable Sales Growth: Projected to range between flat to 2% growth in fiscal 2026.
Adjusted Diluted Earnings Per Share: Anticipated to increase approximately flat to 4% compared to fiscal 2025.
SRS Organic Sales Growth: Expected to grow mid-single digits in fiscal 2026.
New Store Openings: Plan to open approximately 15 new stores and 40 to 50 new SRS locations in fiscal 2026.
Gross Margin: Expected to be approximately 33.1% in fiscal 2026.
Operating Margin: Projected to be approximately 12.4% to 12.6%, with adjusted operating margin of approximately 12.8% to 13% in fiscal 2026.
Capital Expenditures: Planned to be approximately 2.5% of sales for fiscal 2026.
Market Share: Expected to grow market share in any environment by strengthening competitive position and delivering the best customer experience in home improvement.
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Shareholder Return Plan
Dividends Paid in Fiscal 2025: Approximately $9.2 billion
Quarterly Dividend Increase: Increased by 1.3% to $2.33 per share, equating to an annual dividend of $9.32 per share
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Key Q&A
Q:What are some of the initiatives Home Depot is focusing on to improve the Pro experience in 2026?
A:Home Depot is focusing on maturing their sales force, order management, trade credit platform, and delivery reliability. They achieved 2 Sigma on-time and complete delivery for Pros in the past year. They are also introducing AI tools like project management and list builders, including an AI takeoff scheme for Pros to build projects efficiently. Additionally, they are improving in-store tools, outside sales, and customer communication, and enhancing online B2B sales with features like project tools.
Q:What is the purpose of the delivery handheld device recently rolled out by Home Depot?
A:The delivery handheld device allows drivers to stay connected with customer needs, track delivery status, and fulfill specific service requests on job sites. It also enables live tracking for big and bulky items, such as lumber or appliances, which has been well-received by customers.
Q:How did SRS perform in the fourth quarter of 2025, and what are the expectations for 2026?
A:SRS had low single-digit comps year-over-year in Q4 2025, outperforming the industry, which saw a 28% decline in shingle square shipments. Despite pricing pressures, SRS maintained share gains. For 2026, Home Depot expects SRS to grow organic sales mid-single digits and sees opportunities for revenue synergies with GMS and Home Depot.
Q:How did markets like Florida and Texas perform in 2025 compared to other regions?
A:Markets like Florida and Texas, which faced challenging housing turnover and home price appreciation, showed relatively stable comp performance across 2025. Geographies with significant storms in 2024 faced tough comparisons in 2025. Overall, Home Depot observed consistent underlying demand comp across the country, with no significant regional differences based on price or turnover.
Q:What factors could influence Home Depot's flat to 2% comp outlook for 2026?
A:Factors that could strengthen the outlook include improved affordability (rising incomes, lower mortgage rates), tax stimulus, and tariff adjustments. Challenges include consumer uncertainty, low housing turnover, potential home price declines, and price elasticity. The first half comps are expected to be slightly lower than the second half due to storm activity comparisons.
Q:What is Home Depot's approach to capital allocation given the current housing market conditions?
A:Home Depot prioritizes reinvesting in the business with a high bar for returns, followed by returning capital to shareholders through dividends. They plan to resume share repurchases once they return to an excess cash position, expected in the first half of 2027. They remain committed to investing in their core business, interconnected portfolio, and Pro ecosystem.
Q:How is Home Depot addressing consumer behavior and spending trends?
A:Home Depot has observed consistent customer engagement without significant trade-down behavior, except in specific categories like appliances. They noted a shift towards repair rather than replacement due to low housing turnover. They continue to focus on creating value for customers and leveraging events like Black Friday to drive sales.
Q:What progress has Home Depot made with Pro trade credit, order management, and pricing capabilities?
A:Home Depot has made significant progress, with continued investments in Pro trade credit to bring it to store level, pilots for pricing capabilities, and improvements in delivery reliability. They are also working on order consolidation and B2B investments like e-procurement and construction management software integration.
Q:What is the outlook for big-ticket sales in 2026?
A:Big-ticket sales are expected to reflect a 3% increase in retail prices, with negative transactions offsetting ticket growth. Big-ticket comp transactions grew 1.3% in Q4 2025, driven by maintenance and repair categories like plumbing and electrical. The outlook for 2026 is similar, with continued focus on replacement cycles and innovation.
Q:How is Home Depot managing inventory levels?
A:The year-over-year increase in inventory is primarily due to the addition of GMS inventory, higher costs from tariffs, and increased inventory levels to support accelerated delivery speed. Home Depot believes their inventory position and in-stocks are well-positioned for 2026.
Q:Review of Unclear Management Responses
A:Management avoided providing a direct answer or lacked clarity on the following: 1) Specific details on the expected impact of tax stimulus on 2026 performance, as they provided a wide range of potential outcomes without committing to a clear estimate. 2) The exact timeline for completing the rollout of Pro trade credit and pricing capabilities across the enterprise. 3) The potential long-term impact of aggressive pricing in the roofing category on Home Depot's gross margin rate. 4) The expected timing and extent of recovery in big-ticket discretionary projects, as management only indicated it as a telltale for market improvement without providing specific projections.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Act VP
Analyst Conference
Apron associate
Black Friday
Conference share
DIY strength
Depot brand
Fern community
Friday event
Investor Analyst
Milwaukee
RYOBI
addition
core culture
division
engagement sale
experience Pro
experience manager
fulfillment experience
grower
lack storm
lineup
loyalty
merchandising
need
process
proposition home
sale digit
sale share
share market
shopping experience
spring
storage
storm activity
volt
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The earnings call summary indicates a decline in revenue, net earnings, operating margin, comparable sales, and cash flow from operations, reflecting a negative financial performance. The absence of discussions on strategic initiatives, risks, and returns further adds to uncertainty. Given these factors, the sentiment is negative, likely leading to a stock price decline of -2% to -8%.
The Home Depot, Inc. (HD) Q4 2026 Earnings Call Transcript
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The earnings call summary reveals mixed signals: while product development and market strategy show promise with AI tools and stable demand, financial performance is marred by declining EPS and cautious guidance. The Q&A section further highlights uncertainties in tax impacts and margin pressures. Despite positive shareholder return plans, these factors balance out to a neutral sentiment, suggesting limited stock movement.
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The earnings call reflects a negative sentiment due to several factors: softer-than-expected results, increased capital expenditures, and challenges in demand recovery without housing activity or interest rate reductions. The Q&A session highlighted concerns about EBIT shortfall, lack of storm activity impacting sales, and unclear management responses on margin improvement. Despite some positive initiatives, the overall outlook appears cautious with pressures from consumer uncertainty and supply chain issues, leading to a negative prediction for the stock price movement.
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