Home Depot Revenue Tops Estimates Despite Frozen Housing Market
Home Depot posted fiscal Q2 revenue of $47.86B and adjusted earnings per share of $4.92, beating Wall Street's estimates. CFO Richard McPhail called it a "story of share gain" but framed the broader backdrop as a housing market that remains stuck.
Comparable sales rose 1.7%, the company's strongest comp gain since fiscal Q3 2022, against an expectation of 0.9%.
"We continue to operate in what I call 'frozen housing market conditions.'"
Richard McPhail, Home Depot CFO
US existing-home sales fell 1.7% in July to a seasonally adjusted annual rate of 4.06M, and the median existing-home price rose 2% year over year. The average 30-year fixed mortgage rate sat at 6.67% as of Aug. 13.
McPhail said housing turnover has been at record lows for four years, with no sign of an inflection point.
Small projects, bigger tickets
Customers visited less often but spent more per trip. Average ticket size rose 2.8% year over year to $92.50, while comparable customer transactions declined 1%. Ticket sizes over $1K were up 2.4% year over year.
Spring outdoor categories including live goods, mulch, patio, and grills led momentum. Thirteen of 16 product categories posted positive same-store sales growth, including electrical, plumbing, and hardwood tools.
Larger discretionary projects remained under pressure. McPhail noted that consumers have the means to spend but are hesitant as projects scale up, citing worries about inflation, fuel costs, and general uncertainty.
A $730M tariff refund helped cushion margins during the quarter. Home Depot applied $685M of that amount to reduce its cost of goods sold, with the remaining $45M sitting in inventory.
McPhail said those refunds represent the vast majority of what the company expected and allowed it to maintain value despite higher fuel, energy, resin, and metal costs.
The company reaffirmed its full-year fiscal 2026 guidance, expecting total sales growth of 2.5% to 4.5% and an operating margin between 12.4% and 12.6%.
CEO absence adds a layer of uncertainty
The earnings beat arrived without CEO Ted Decker, who recently took medical leave. The company said it expects him to return in a few months and will share material developments as appropriate.
Ann-Marie Campbell, senior executive vice president of US stores and operations, is overseeing day-to-day operations. McPhail is handling financial management and the pro contractor business.
Analyst Michael Baker of D.A. Davidson said the results set a higher bar for Lowe's, which is expected to report a same-store sales increase of 0.7% when it posts quarterly results Wednesday.