Given demand aspects are stuck, what are the drivers for the implied comp improvement in the second half of the year?

The company is not looking for a marked improvement in underlying demand. The higher comp in the second half of the year is solely driven by a return to normal store activity. “we're not looking at a marked improvement in underlying demand. We are looking at a higher comp in the second half of the year, and that is solely driven by a return to normal store activity.”

How is the company benchmarking progress and performance of Pro initiatives, especially given the challenging backdrop?

The Pro business outperformed consumer yet again this quarter, and the highest comping part of their Pro business was complex purchase occasions, indicating success in building capabilities like field sales, enhanced delivery, and trade credit. “Pro performance versus consumer in our Pro business outperformed consumer yet again this quarter, and the highest comping part of our Pro business was that complex purchase occasion.”

How did weather impact Q1, particularly April, and to what extent did storm headwinds from H2 last year affect Q1 and will they dissipate?

There was great engagement in spring-related projects where weather was favorable (West in Feb/Mar, South in Mar). The last two weeks of April saw different weather patterns. Storms had a 56 basis point impact in Q1, but this will dissipate throughout the balance of the year. “we did have 56 basis points of impact in Q1, but that will dissipate throughout the balance of the year.”

Home Depot (HD) Q1 FY27 earnings call: guidance and Q&A

Earnings call· May 2026 (Q1 FY27)· Consumer Discretionary· May 19, 2026

Source: earnings call transcript

Executive summary

The Home Depot, Inc. Q1 FY27 — Results in line with expectations, Pro outperformance

The Home Depot met Q1 expectations with modest comp sales growth, driven by strong Pro performance and double-digit online sales, despite continued pressure on larger discretionary projects and a decline in adjusted EPS. Strategic acquisitions like Mingledorff's are expanding the Pro market opportunity and total addressable market. The company reaffirmed its full-year guidance, anticipating a higher comp in the second half of the year primarily due to a return to normal store activity rather than a significant improvement in underlying demand.

Highlights

Sales for the first quarter were $41.8 billion, an increase of 4.8% from the same period last year.
Comp sales increased 0.6% from the same period last year, with U.S. comps up 0.4%.
Pro business posted positive comps and outperformed DIY, with the highest comping part being complex purchase occasions.
Online comp sales increased over 10% compared to the first quarter of last year, marking the fourth consecutive quarter of double-digit growth.
The acquisition of Mingledorff's expands the total addressable market to $1.2 trillion, adding a leading HVAC distributor.

Concerns

Adjusted diluted earnings per share were $3.43, a decrease of approximately 3.7% compared to the first quarter of last year.
Gross margin was 33%, a decrease of approximately 75 basis points from the first quarter of last year, primarily due to the GMS acquisition and price investments at SRS.
Operating margin for the first quarter was 11.9% (adjusted 12.3%), down from 12.9% (adjusted 13.2%) in the prior year.
Comp transactions decreased 1.3% in the first quarter.
Larger discretionary projects remain under pressure due to greater consumer uncertainty and housing affordability issues.

Guidance & targets

Category	Target	Timeline	Confidence
Full-year comp sales growth	Flat to 2% growth high materiality	FY26	High
Full-year total sales growth	Approximately 2.5% and 4.5% high materiality	FY26	High
SRS organic sales growth	Mid-single-digit percent organic sales growth medium materiality	FY26	High
New store openings	Approximately 15 new stores medium materiality	FY26	High
New SRS locations	40 to 50 new SRS locations medium materiality	FY26	High
Full-year gross margin	Approximately 33.1% high materiality	FY26	High
Full-year operating margin	Approximately 12.4% to 12.6% high materiality	FY26	High
Full-year adjusted operating margin	Approximately 12.8% to 13% high materiality	FY26	High
Full-year effective tax rate	Approximately 24.3% low materiality	FY26	High
Full-year net interest expense	Approximately $2.3 billion low materiality	FY26	High
Full-year diluted EPS and adjusted diluted EPS growth	Approximately flat to 4% compared to fiscal 2025 high materiality	FY26	High
Full-year capital expenditures	Approximately 2.5% of sales medium materiality	FY26	High

Segment performance

Segment	Revenue	YoY	QoQ	Margin
U.S. Northern and Western divisions had positive comps due to favorable weather for outdoor projects. Underlying demand was relatively similar to FY25.	—	0.4%	—	—
Mexico Comps were positive in local currency.	—	Positive comps	—	—
Canada Comps were negative in local currency.	—	Negative comps	—	—
SRS Performed in line with expectations, despite significant pressures in the roofing market. SRS took considerable market share from other distributors. Expected to deliver mid-single-digit positive organic growth for FY26. Organic sales growth: PositiveComps: Slightly negativeRoofing comps: Low single-digit negative	$4 billion	Positive total sales growth	—	—

HD operating KPIs by quarter

HD operating KPIs stated on its earnings calls, by fiscal quarter
KPI	Aug 2025 Q2 FY26	Nov 2025 Q3 FY26	This call May 2026 Q1 FY27	Jul 2026 Q2 FY27	Change vs prior quarter
Stores	2,353 During the second quarter, we opened 3 new stores, bringing our total store count to 2,353. Source: earnings call transcript	2,356 During the third quarter, we opened 3 new stores, bringing our total store count to 2,356. Source: earnings call transcript	2,361 During the first quarter, we opened 12 new stores, bringing our total store count to 2,361. Source: earnings call transcript	2,364 During the second quarter, we opened 3 new stores, bringing our total store count to 2,364. Source: earnings call transcript	+0.1%
New stores opened	3 During the second quarter, we opened 3 new stores, bringing our total store count to 2,353. Source: earnings call transcript	3 During the third quarter, we opened 3 new stores, bringing our total store count to 2,356. Source: earnings call transcript	2 We opened 2 new stores during the quarter, not 12, apologies for that. Source: earnings call transcript	3 During the second quarter, we opened 3 new stores, bringing our total store count to 2,364. Source: earnings call transcript	+50%

Operating figures the company stated on at least two of the calls shown, checked against each call's transcript. Click a figure to read the sentence. A dash means it was not stated that quarter.

Product announcements

Product	Type	Timeline	Details
Ram Board	launch	This quarter

Deals & partnerships

Mingledorff's acquisition

Completed the acquisition of Mingledorff's, a leading wholesale distributor of heating, ventilation, and air conditioning (HVAC) equipment. It serves residential and commercial customers through 42 locations in 5 states across the Southeastern United States, bringing an extensive product portfolio and robust distribution network complementary to SRS' existing business.

Risks & headwinds

Consumer uncertainty and housing affordability pressure Ongoing

Larger discretionary projects remain under pressure.

Mitigation:Focus on executing strategy of driving core and culture, delivering frictionless interconnected experience, and winning the Pro.

Higher interest rates and slow housing market Ongoing

Not quantified directly, but linked to a slow housing market.

Mitigation:Working through this period of moderation by controlling what can be controlled and taking market share.

Potential cost pressures from fuel prices, commodity input costs, and new tariffs Ongoing

Not quantified.

Mitigation:Manage cost and price to maintain value position; potential offset from tariff refunds (immaterial amount received to date, but claims filed).

Storm impact on Q1 comps Q1 FY27, dissipating throughout the balance of the year.

56 basis points negative impact on Q1 comps.

Mitigation:Impact is expected to dissipate naturally.

Q&A highlights

Can you size up the business's exposure to bigger ticket projects, given that individual categories are positive but large projects are a drag?

The company does not disclose the exact size of big-ticket project exposure but tracks transactions by ticket size, items per basket, and breadth of departments. Larger baskets with more items and departments are clearly muted.

“we don't disclose that. But as you can imagine, we look at all our transactions in sales by ticket size, $0 to $20, $20 to $50, et cetera, up, including over $1,000.”

asked by Scot Ciccarelli · answered by Edward Decker

2 min read 7 chapters

Detailed narrative

Pro Strategy & Market Expansion

Home Depot is aggressively pursuing the $700 billion Pro market opportunity, leveraging its scale and existing customer base. The recent acquisition of Mingledorff's, a leading HVAC distributor, expands the total addressable market to $1.2 trillion and strengthens the SRS platform, particularly in the $100 billion HVAC parts and supplies market.

The combined entity now boasts 16,000 delivery assets and over 5,000 sales associates, creating a unique and hard-to-replicate offering for Pros, with an expected $400 million cross-sell run rate this year.

Enhanced Customer Experience & Fulfillment

The company is optimizing its interconnected shopping experience by transitioning store tasking to Merchandising Execution Teams (MET) in over 1,000 stores, with full transition expected by end of FY26. This allows Orange Apron associates to focus on customer engagement. New sourcing logic routes online orders to the optimal store for fulfillment based on distance, inventory, and speed, improving delivery times, reducing cancellations, and boosting customer satisfaction scores.

Pro Digital Workspace & Loyalty

To drive Pro loyalty, Home Depot launched a unified Pro Digital Workspace, integrating tools like product planning, an AI-powered material list builder, delivery tracking, and purchase history. This platform also facilitates complex order scheduling, enabling Pros to specify job site preferences and business hours for on-time deliveries, leading to record-high customer satisfaction scores for deliveries and increased engagement.

Q1 Performance & Category Trends

Q1 sales were $41.8 billion, up 4.8%, with comp sales up 0.6% (U.S. up 0.4%). Nine of 16 merchandising departments posted positive comps, including storage, power, hardware, plumbing, electrical, bath, indoor garden, paint, and kitchens. Pro sales outperformed DIY, with strength in Pro-heavy categories like power, pipe and fittings, water heaters, fasteners, and paint, indicating successful engagement with Pro customers.

Online Growth & Spring Event Success

Online comp sales grew over 10% for the fourth consecutive quarter, driven by ongoing investments in interconnected platforms, better search, recommendations, and faster fulfillment options. The annual Spring Black Friday and Spring Gift Center events saw strong performance, particularly in power tools, outdoor power equipment, live goods, and patio, with power categories achieving a Q1 record for sales.

Gross Margin & Operating Expense Dynamics

Gross margin for Q1 was 33%, a 75 bps decrease YoY, primarily due to the GMS acquisition and strategic price investments at SRS, particularly in the roofing market, which saw a 28% drop in shipments in Q4 FY25. Operating expense as a percentage of sales increased 20 bps to 21.1%.

Adjusted operating margin was 12.3%, down from 13.2% last year, reflecting the integration of acquired businesses and market pressures.

Economic Outlook & Consumer Resilience

Management noted that underlying demand in Q1 was similar to FY25, with the core customer remaining resilient despite consumer uncertainty and housing affordability pressures. While large discretionary projects are muted, customers are engaged in smaller projects. The company anticipates a higher comp in H2 FY27 due to a return to normal store activity, not a marked improvement in underlying demand, and is focused on taking market share.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.