Home Depot (NYSE:HD) held its first-quarter earnings conference call on Tuesday. Below is the complete transcript from the call.
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Summary
Home Depot reported Q1 2026 sales of $41.8 billion, a 4.8% increase year-over-year, with comp sales rising 0.6% overall and 0.4% in the US.
Adjusted diluted EPS for the quarter was $3.43, down from $3.56 the previous year, with operating margins impacted by the acquisition of GMS.
Strategic initiatives include the acquisition of Mingledorf to expand HVAC distribution, and the ongoing rollout of merchandising execution teams to improve in-store customer service.
The company reaffirms its fiscal 2026 guidance, expecting comp sales growth between flat to 2% and total sales growth of 2.5% to 4.5%.
Management highlighted strong engagement in spring-related projects and noted a focus on expanding their Pro customer base and services.
Full Transcript
OPERATOR
Greetings and welcome to the Home Depot first quarter 2026 earnings call. this time all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press Star0 on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Isabel Janci.. Please go ahead.
Isabel Janci (Moderator)
Thank you, Christine, and good morning, everyone. Welcome to Home Depot’s first quarter 2026 earnings call. Joining us on our call today are Ted Decker, Chair, President and CEO Ann Marie Campbell, Senior Executive Vice President, Billy Bastick, Executive Vice President of merchandising, and Richard McVail, executive vice president and Chief Financial Officer. Following our prepared remarks, the call will be open for questions. Questions will be limited to analysts and investors, and as a reminder, please limit yourself to one question with one follow up. If we were unable to get to your question during the call, please call Investor Relations at 770. Before I turn the call over to Ted, let me remind you that today’s press release and the presentations made by our executives include forward looking statements under the federal securities laws, including as defined in the Private Securities Litigation Reform Act of 1995. These statements are subject to risks and uncertainties that could cause actual results to differ materially from our expectations and projections. These risks and uncertainties include, but are not limited to, the factors identified in the release in our most recent annual report on Form 10K and in our other filings with the securities and Exchange Commission. Today’s presentation will also include certain non GAAP measures, including, but not limited to, adjusted operating margin, adjusted diluted earnings per share, and return on invested capital. For a reconciliation of these and other non GAAP measures to the corresponding GAAP measures, please refer to our earnings press release and our website. Now let me turn the call over to Tess.
Ted Decker (Chair, President and CEO)
Thank you, Isabelle, and good morning, everyone. Sales for the first quarter were $41.8 billion, an increase of 4.4.8% from the same period last year. Comp sales increased 0.6% from the same period last year and comps in the US increased 0.4%. Adjusted diluted earnings per share were $3.43 in the first quarter compared to $3.56 in the first quarter of last year. Our results were in line with our expectations. In the US Our northern and western divisions had positive comps as customers engaged in outdoor projects when weather was favorable in local currency. Mexico had positive comps while Canada was negative. The underlying demand in our business was relatively similar to what we saw throughout fiscal 2025. Despite greater consumer uncertainty in housing affordability pressure, our teams are operating at a high level and we remain focused on executing our strategy of driving our core and culture, delivering a frictionless interconnected experience and winning. The Pro Spring is our biggest season and we feel great about our store readiness, product assortment and value proposition. As Anne will detail in a moment, our associates are providing excellent customer service. We’re also moving more store tasking to our merchandising execution team so our Orange Apron Associates can spend even more time engaged with customers. As Billy will share, our merchants are providing exceptional value in product innovation through strategic supplier partnerships which delivered strong event performance. Last week we completed the acquisition of Ingledores, a leading wholesale distributor of heating, ventilation and air conditioning equipment serving residential and commercial customers through 42 locations in five states across the southeastern United States. Mingledorf brings an extensive product portfolio, a robust distribution network and established customer relationships that are highly complementary to SRS’s existing business. In addition, Mangeldorf gives us an incredible opportunity to penetrate the national market for H Vac parts and services supplies, leveraging the power of our enterprise to create a superior value proposition for the Pro customer. H vac distribution represents an addressable market of approximately $100 billion and increases our total addressable market to $1.2 trillion. Srs can now serve more pros and one greater share of wallet in this highly fragmented market. As a reminder, Pro represents a $700 billion market opportunity. We know we have the right to win in this space as we continue developing differentiated capabilities to better serve residential pro customers. In addition to our 2,360 plus store network and 325 customer facing warehouses, SRS is a best in class specialty distribution platform with over 1300 branches combined. We now command a fleet of approximately 16,000 delivery assets in a professional sales force of over 5000 associates. What we are building is unique and not easy to replicate. We are confident our comprehensive product offering capabilities and services will deliver an exceptional experience for Pros leading to sustained growth and outsized market share gains. As always, I’d like to thank our associates and supplier partners for doing an incredible job serving our customers this quarter. With that, let me turn the call over to Ann.
Ann Marie Campbell (Senior Executive Vice President)
Thanks Ted and good morning everyone. We continue to focus on elevating the shopping experience across all stores and online by optimizing fulfillment options. To do this, we are simplifying processes in our stores, removing friction from the customer experience, increasing associate engagement and taking actions to drive more loyalty with the Pro. Late last year we began to transition more store tasking to a merchandising execution team. Today we have transitioned over 1000 stores. By creating distinct selling and tasking teams in our stores, we’ve been able to redistribute tasking in our stores to met. While our Orange Apron Associates focus on driving deeper engagement and better customer service. We expect to complete this transition in all stores by the end of fiscal 2026. As you know, we’ve been on a journey to remove friction from the shopping experience and we are continuously evolving the way we operate to deliver a more seamless experience. When customers place an order online to complete their project, they expect the right products delivered on time and complete. Over the last several quarters, we’ve leaned into faster delivery for customers using our proprietary model which leverages all of our assets to drive speed what we call ship from best location. This has resulted in tremendous growth in deliveries out of our stores. In order to enhance our ability to serve this interconnected purchase more effectively, we’re focused specifically on ensuring we have the right leadership and technology capabilities in place to simplify the operational demand on our stores and improve the speed and experience for customers. Last quarter we told you about our Operations Experience Manager whose responsibilities include driving uniform operational processes and enhancing the interconnected fulfillment experience. We’re evolving or sourcing logic and have begun to route orders to the optimal storage fulfillment based on distance, inventory availability and speed of delivery, real time and view purchase history. They can also share access with their teams which results in better visibility and collaborative expectations.
Billy Bastick (Executive Vice President of Merchandising)
And where we experienced favorable weather we had great engagement in spring related projects. In the first quarter, 9 of our 16 merchandising departments posted positive comps including storage, power, hardware, plumbing, electrical bath, indoor garden, paint and kitchens. During the first quarter, our comp average ticket increased 2.2% and comp transactions decreased 1.3%. Big ticket comp transactions for those over $1,000 were positive 0.8% compared to the first quarter of last year. We were pleased with the performance we saw in portable power and patio. However, larger discretionary projects remain under pressure. During the first quarter, PRO posted positive comps and outperformed diy. We saw strength in DIY across many spring related categories including live goods, outdoor power equipment, patio, grills and storage. And for Pro, we saw strength across many Pro heavy categories like power pipe and fittings, water heaters, fasteners and paint. The investments we are making are resonating with our pros as we see increased engagement. For example, we have made significant progress with the Pro who paints and continue to see share gains with this customer. Our expanded assortment of products and partnerships with Bayer and PPC as well as enhanced digital capabilities through OnePaint combined with improved job site delivery capabilities are helping to remove friction from their experience. Turning to Total Company Online Comp Sales Sales leveraging our digital platforms increased over 10% compared to the first quarter of last year. This is the fourth quarter in a row with double digit year over year growth driven by our ongoing investments across our interconnected platforms. Delivering the best interconnected experience is a key component of our strategy. We are continuously improving our site and leveraging technology to do that, whether it is better search functionality, more relevant recommendations, and easier and faster fulfillment options, to name a few. As Ann mentioned, our faster delivery speeds are resonating with customers and driving greater engagement and while we are pleased with the progress we are making, we remain relentlessly focused on getting better each and every day because we know that as we remove friction from the experience, we see incremental customer engagement leading to greater sales across all points of interaction. During the first quarter, we hosted our annual Spring Black Friday and Spring Gift center events and saw strong performance across both events. Our merchants did a fantastic job curating the best products and we saw strong engagement with our customers throughout the events. We are pleased with the results we saw, particularly in categories like Power Tools, Outdoor Power Equipment, Live Goods and patio. In fact, our power categories posted a first quarter record for sales led by portable power and outdoor power equipment. We know that demand for demand for cordless outdoor power equipment has never been stronger and our lineup of battery powered tools across Ryobi, Milwaukee, DeWalt and Makita is unmatched this quarter. I’m excited to announce that Ramboard will be exclusive to the Home Depot and the Big Box retail channel. This product is engineered to withstand the toughest conditions at the job site and that’s why Ramboard has been the go to for pros for heavy duty floor protection for over 25 years. As we look forward to the second quarter, we are ready to continue delivering the best spring assortment across all of our patio product categories. Our live goods look incredible with everything from shrubs to a variety of flowers, herbs and vegetables for every type of gardener. And we have all the outdoor essentials for your patio, whether it’s a new patio set or grill to enhance your outdoor living space. We’re excited about spring breaking across the country and we remain ready to help our customers with all of their outdoor projects and outdoor living needs. With that, let me turn the call over to Richard.
Richard McVail (Executive Vice President and Chief Financial Officer)
Thank you Billy and good morning everyone. In the first quarter, total sales were $41.8 billion, an increase of $1.9 billion, or 4.8% from last year. During the first quarter, our total company comps were positive 0.6%, with comps of positive 0.7% in February, positive 2% in March, and negative 0.5% in April. Comps in the US were positive 0.4% for the quarter, with comps of positive 0.4% in February, positive 2% In March, and negative 0.8% in April. Additionally, foreign exchange rates positively impacted total company comps by approximately 55 basis points for the quarter. In the first quarter, our gross margin was 33%, a decrease of approximately 75 basis points from the first quarter of last year, which was in line with our expectations and reflects a change in mix as a result of the GMS acquisition.. During the first quarter, operating expense as a percent of sales increased approximately 20 basis points to 21.1% compared to the first quarter of 2025. Our operating expense performance was in line with our expectations. Our operating margin for the first quarter was 11.9% compared to 12.9% in the first quarter of 2025. In the quarter, pre tax intangible asset amortization was $171 million. Excluding the intangible asset amortization in the quarter, our adjusted operating margin for the first quarter was 12.3% compared to 13.2% in the first quarter of 2025. Interest and other expense for the first quarter increased by $13 million to $604 million. In the first quarter, our effective tax rate was 24.9% compared to 24.4% in the first quarter of fiscal 2025. Our diluted earnings per share for the first quarter were $3.30 compared to $3.45 in the first quarter of 2025. Excluding intangible asset amortization, our adjusted diluted earnings per share for the first quarter were $3.43, a decrease of approximately 3.7% compared to the first quarter of 2025. During the first quarter, we opened 12 new stores, bringing our total store count to 2,361. At the end of the quarter, merchandise inventories were $27.3 billion, up approximately $1.5 billion compared to the first quarter of 2025, and inventory turns were 4.2x down from 4.3 times last year. Turning to capital allocation, during the first quarter we invested approximately $845 million back into our business in the form of capital expenditures, and during the quarter we paid approximately $2.3 billion in dividends to our shareholders. Computed on the average of beginning and ending long term debt and equity for the trailing 12 months, return on invested capital is 25.4% down from 31.3% in the first quarter of fiscal 2025. Now I will comment on our outlook for fiscal 2026. As you heard from Ted, our performance during the first quarter was in line with our expectations. The underlying demand during the quarter was relatively similar to what we experienced throughout fiscal 2025. As a result, we are reaffirming our fiscal 2026 guidance. We expect to continue to grow our market share and for our comp sales to range between flat to 2% growth with total sales growth of between approximately 2.5% and 4.5%. Reflecting the contribution of the GMS acquisition., new stores, branches and tuck in acquisitions. For the year, we expect SRS to deliver mid single digit percent organic sales growth. We plan to open approximately 15 new stores and 40 to 50 new SRS locations. Our gross margin is expected to be approximately 33.1%. Further, we expect operating margin of approximately 12.4 to 12.6% and adjusted operating margin of approximately 12.8 to 13%. Our effective tax rate is targeted at approximately 24.3%. We expect net interest expense of approximately $2.3 billion. We expect our diluted earnings per share and adjusted diluted earnings per share to both increase Approximately flat to 4% compared to fiscal 2025. We plan to continue investing in our business with capital expenditures of approximately 2.5% of sales for fiscal 2026. We believe that we will continue to grow market share as a result of our competitive advantages and ongoing investments by delivering the best customer experience and home improvement. Thank you for your participation in today’s call. And Christine, we are now ready for questions.
Christine
Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press Star one on your telephone keypad. A confirmation tone will indicate your line …
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