Skip to content
    HD
    Earnings call· May 2026(Q1 FY27)

    HOME DEPOT Q1 FY27 earnings call HD

    May 19, 2026 Source

    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

    5

    • 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

    5

    • 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

    12
    CategoryTargetConfidence
    Full-year comp sales growth
    Flat to 2% growth
    high materiality
    High
    Full-year total sales growth
    Approximately 2.5% and 4.5%
    high materiality
    High
    SRS organic sales growth
    Mid-single-digit percent organic sales growth
    medium materiality
    High
    New store openings
    Approximately 15 new stores
    medium materiality
    High
    New SRS locations
    40 to 50 new SRS locations
    medium materiality
    High
    Full-year gross margin
    Approximately 33.1%
    high materiality
    High
    Full-year operating margin
    Approximately 12.4% to 12.6%
    high materiality
    High
    Full-year adjusted operating margin
    Approximately 12.8% to 13%
    high materiality
    High
    Full-year effective tax rate
    Approximately 24.3%
    low materiality
    High
    Full-year net interest expense
    Approximately $2.3 billion
    low materiality
    High
    Full-year diluted EPS and adjusted diluted EPS growth
    Approximately flat to 4% compared to fiscal 2025
    high materiality
    High
    Full-year capital expenditures
    Approximately 2.5% of sales
    medium materiality
    High

    Segment performance

    4
    SegmentRevenueYoYQoQMargin
    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 billionPositive total sales growth——

    Operational metrics

    20
    Total sales
    $41.8 billion4.8% from last year
    Q1 FY27

    In line with expectations.

    Total company comps
    0.6%YoY
    Q1 FY27

    In line with expectations.

    U.S. comps
    0.4%YoY
    Q1 FY27

    In line with expectations.

    Foreign exchange impact on total company comps
    55 basis pointsPositive impact
    Q1 FY27

    Positive impact for the quarter.

    Gross margin
    33%Decrease of approximately 75 basis points from Q1 FY26
    Q1 FY27

    In line with expectations, reflects a change in mix as a result of the GMS acquisition.

    Operating expense as a percent of sales
    21.1%Increased approximately 20 basis points to Q1 FY26
    Q1 FY27

    In line with expectations.

    Operating margin
    11.9%Compared to 12.9% in Q1 FY26
    Q1 FY27

    Reported GAAP operating margin.

    Adjusted operating margin
    12.3%Compared to 13.2% in Q1 FY26
    Q1 FY27

    Excluding intangible asset amortization.

    Interest and other expense
    $604 millionIncreased by $13 million
    Q1 FY27

    Compared to Q1 FY26.

    Effective tax rate
    24.9%Compared to 24.4% in Q1 FY26
    Q1 FY27

    Reported effective tax rate.

    Diluted earnings per share
    $3.30Compared to $3.45 in Q1 FY26
    Q1 FY27

    Reported GAAP diluted EPS.

    Adjusted diluted earnings per share
    $3.43Decrease of approximately 3.7% compared to Q1 FY26
    Q1 FY27

    Excluding intangible asset amortization.

    Merchandise inventories
    $27.3 billionUp approximately $1.5 billion compared to Q1 FY26
    End of Q1 FY27

    Inventory balance at quarter end.

    Inventory turns
    4.2xDown from 4.3x last year
    Q1 FY27

    Inventory efficiency metric.

    Capital expenditures
    $845 million
    Q1 FY27

    Investment back into the business.

    Dividends paid
    $2.3 billion
    Q1 FY27

    Paid to shareholders.

    Return on invested capital
    25.4%Down from 31.3% in Q1 FY26
    TTM

    Computed on the average of beginning and ending long-term debt and equity for the trailing 12 months.

    Online comp sales
    Over 10%YoY
    Q1 FY27

    Fourth consecutive quarter with double-digit year-over-year growth.

    Cross-sell run rate (SRS/HD)
    $400 million
    FY27

    Expected cross-selling between Home Depot and SRS relationships, aiming to double next year.

    Storm impact on Q1 comps
    56 basis pointsNegative impact
    Q1 FY27

    Impact on comp sales, expected to dissipate through the year.

    Industry KPIs

    7
    MetricValueDetails
    Sg a OPEX ratio21.1%% of sales
    Comparable sales0.6%%
    Store count growth2,361stores
    Gross margin drivers33%%
    Tariff refund claimsImmaterial amount to dateUSD
    Pro vs diy performancePositive comps
    Inventory position markdown risk$27.3 billionUSD

    Product announcements

    1
    ProductTypeDetails
    Ram Boardlaunch

    Deals & partnerships

    1
    Mingledorff'sacquisition

    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

    4
    Consumer uncertainty and housing affordability pressureOngoing

    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 marketOngoing

    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 tariffsOngoing

    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 compsQ1 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

    10

    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 read7 chapters

    Detailed Narrative

    01

    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.

    02

    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.

    03

    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.

    04

    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.

    05

    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.

    06

    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🌐.

    07

    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.

    AI-generated summary of the company’s earnings call. Not investment advice.