Home Depot Q4 Earnings Call Highlights

Key Points

• Fiscal 2025 results: Home Depot posted sales of $164.7 billion (up 3.2%) with comps up 0.3%, but adjusted diluted EPS fell to $14.69 from $15.24 as prior-year results benefited from a 53rd week (Q4 sales $38.2B; Q4 EPS $2.72 vs $3.13).
• Fiscal 2026 guidance and headwinds: Management reaffirmed guidance for total sales growth of ~2.5–4.5%, comps roughly flat to +2% and adjusted EPS growth ~flat to +4%, while cautioning that housing affordability and the annualization of the GMS acquisition will pressure margins, especially in H1.
• Operational strengths and capital allocation: Professional customers and digital sales were bright spots (online comps ~+11% and Pro outperformed DIY), but big-ticket discretionary projects remain weak; the board raised the quarterly dividend 1.3% to $2.33 and paid ~$9.2 billion in dividends in FY2025.

Home Depot NYSE: HD reported fiscal 2025 sales of $164.7 billion, up 3.2% from the prior year, as the home improvement retailer pointed to relatively stable underlying demand despite ongoing pressure in housing and continued consumer uncertainty. Comparable sales rose 0.3% for the year, including a 0.5% increase in U.S. comps. Adjusted diluted earnings per share were $14.69, down from $15.24 a year ago, with management noting that fiscal 2024 included a 53rd week that boosted results.

Fourth-quarter results and regional trends

For the fourth quarter, the company reported total sales of $38.2 billion, down $1.5 billion, or about 3.8%, primarily due to lapping the prior year’s 53rd week, which CFO Richard McPhail said added roughly $2.5 billion to fourth-quarter fiscal 2024 sales. Comparable sales increased 0.4% for the quarter, with U.S. comps up 0.3%. Adjusted diluted EPS were $2.72, compared with $3.13 in the prior-year quarter.

CEO Ted Decker said results were largely in line with expectations, reflecting the “lack of storm activity in the third quarter and ongoing consumer uncertainty and pressure in housing,” while storm activity in January provided a sales benefit. Decker added that after adjusting for storms, underlying demand was “relatively stable throughout the year.”

Regionally, Decker said the Northern and Western divisions posted positive comps. In local currency, Mexico reported positive comps and Canada posted negative comps. McPhail provided additional cadence by month, with total company comps negative 0.2% in November, positive 0.1% in December, and positive 1.3% in January.

Merchandising, Pro performance, and digital growth

Merchandising EVP Billy Bastek said eight of 16 merchandising departments posted positive comps in the fourth quarter, including power, electrical, storage, indoor garden, hardware, plumbing, bath, and kitchen. The quarter reflected a 2.4% increase in comp average ticket and a 1.6% decrease in comp transactions. Bastek attributed ticket growth to “some price increases,” a mix shift to higher-ticket items, and customers continuing to trade up for innovative products.

Big-ticket comp transactions above $1,000 increased 1.3% versus the prior-year quarter. Bastek said the company was pleased with categories such as power, plumbing, and electrical, while “larger discretionary projects remain under pressure.” In Q&A, Decker reiterated that big-ticket discretionary projects remain the company’s “telltale” indicator of a meaningful change in demand and said it has “not” seen that turn yet.

Home Depot also highlighted strength with professional customers. Bastek said Pro posted positive comps in the quarter and outperformed DIY, with strength across pro-heavy categories including gypsum, wire, concrete, and plumbing. On the digital side, he said total company online comp sales increased about 11% year-over-year in the quarter.

Executives also discussed operational investments aimed at a more “frictionless” experience, including real-time delivery tracking for big and bulky deliveries and new handheld tools for drivers to stay connected with job-site needs and delivery status.

Store operations and customer experience initiatives

Senior EVP Ann-Marie Campbell said the company’s emergency response protocols were activated around Winter Storm Fern, with coordination across vendors and merchandising teams to keep essential items in stock. Beyond storm response, Campbell emphasized initiatives to improve in-store productivity and customer engagement, including transitioning tasking to the MET team so store associates have more time with customers. She said pilot stores have already shown “a meaningful increase in labor productivity,” though the transition is not complete.

Campbell also described store role changes tied to interconnected fulfillment, noting that more than 50% of online orders are fulfilled through stores. She said the company established an operations experience manager role to drive uniform operational processes and improve the interconnected and fulfillment experiences. For Pros, she said the “unified Pro team,” including a Pro customer experience manager, has contributed to increased engagement, higher Pro sales, and continued growth in the Pro Xtra loyalty program.

Campbell said customer satisfaction scores increased every quarter in fiscal 2025 and hourly associate tenure is at its highest since 2017.

Margins, inventory, capital allocation, and dividend increase

McPhail said fourth-quarter gross margin was about 32.6%, down around 20 basis points year-over-year, primarily reflecting mix changes tied to the GMS acquisition. For the full year, gross margin was about 33.3%, down 10 basis points from fiscal 2024.

Operating expense deleverage also weighed on profitability. Fourth-quarter operating expenses rose about 105 basis points as a percentage of sales to 22.6%, reflecting “natural deleverage” and lapping the 53rd week. Operating margin was 10.1% in the quarter (adjusted operating margin 10.5%), compared with 11.3% (11.7% adjusted) a year ago. For fiscal 2025, operating margin was 12.7% (13.1% adjusted), down from 13.5% (13.8% adjusted) in fiscal 2024.

Home Depot ended fiscal 2025 with 2,359 stores after opening 12 new stores. Merchandise inventories were $25.8 billion, up about $2.4 billion year-over-year, reflecting higher inventory costs and the GMS acquisition; inventory turns were 4.4 times versus 4.7 times last year. In response to a question, McPhail said the year-over-year increase was “primarily” the addition of GMS inventory, also reflecting higher costs tied to tariffs and some inventory level increases to support faster delivery speed.

On capital allocation, the company spent about $3.7 billion in capital expenditures in fiscal 2025 and paid about $9.2 billion in dividends. McPhail announced the board increased the quarterly dividend by 1.3% to $2.33 per share, or $9.32 annually. Return on invested capital was about 25.7%, down from 31.3% in the prior-year period.

Fiscal 2026 outlook and key assumptions

Management affirmed preliminary fiscal 2026 guidance previously provided in December. Home Depot expects:

• Total sales growth: approximately 2.5% to 4.5%
• Comparable sales growth: approximately flat to 2%
• Adjusted diluted EPS growth: approximately flat to 4%

McPhail said housing affordability pressures remain a key headwind, citing the mortgage rate environment, higher home prices since 2019, historically low housing turnover since 2023, and customer concerns about inflation, job uncertainty, and financing costs. The company said it has not yet seen a “catalyst for an inflection” in housing activity.

Additional 2026 targets include gross margin around 33.1%, operating margin of about 12.4% to 12.6% (adjusted 12.8% to 13.0%), an effective tax rate near 24.3%, and net interest expense of approximately $2.3 billion. The company plans to open about 15 new stores and 40 to 50 new SRS locations, and expects capital expenditures of about 2.5% of sales.

Executives also discussed the expected “shape” of 2026. McPhail said comps are expected to be “slightly higher” in the second half than the first half due to storm-related comparisons. He also said the annualization of GMS is expected to pressure gross margin more in the first half (down about 50 basis points) with the second half roughly flat, contributing to an expectation that year-over-year EPS will be “mid-single digit” negative in the first quarter before improving through the year.

In Q&A, leaders also addressed tariffs, noting that more than 50% of products are sourced domestically and that the company has been working through tariff-related actions for nearly a year. Bastek said the company is “mostly done” with pricing actions related to impacts seen so far, while Decker cautioned that consumer uncertainty remains the primary risk factor weighing on larger projects.

About Home Depot NYSE: HD

The Home Depot, Inc NYSE: HD is a leading home improvement retailer that operates large-format stores and an integrated online platform offering a broad range of products and services for do-it-yourself consumers, professional contractors and businesses. The company was founded in 1978 by Bernard Marcus and Arthur Blank and is headquartered in Atlanta, Georgia. Since opening its first stores at the end of the 1970s, Home Depot has grown into a multinational retailer known for its orange-branded stores and wide assortment of home improvement merchandise.

Home Depot's core business includes the sale of building materials, lumber, tools, hardware, appliances, paint, plumbing and electrical supplies, lawn and garden products, and home décor.

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