Home Depot reported a narrow top and bottom line beat in Q1, as acquisition growth offset discretionary spending pressures. Total sales rose 4.8% year-over-year to $41.80 billion, clearing the $41.51 billion consensus, lifted by external contributions from SRS and GMS. Adjusted diluted EPS fell 3.7% to $3.43 but outpaced the $3.41 forecast, while GAAP EPS landed at $3.30. Global comparable sales edged up 0.6% on a 2.2% average ticket increase that countered a 1.3% transaction drop, alongside over 10% e-commerce growth. Gross margin contracted 75 basis points to 33.0% and operating margin dropped to 11.9% due to acquisition-related mix shifts.
Note: Home Depot FY'25 ended on February 1, 2026. Q1'26 refers to the quarter that ended on May 3, 2026.
Home Depot reaffirmed its full year 2026 outlook, projecting total sales growth of 2.5% to 4.5% and comparable store sales performance to range from flat to up 2%. The retailer targets a full year gross margin of approximately 33.1%, an operating margin of 12.4% to 12.6%, and an adjusted operating margin between 12.8% and 13.0%. Home Depot forecasts both GAAP and adjusted diluted earnings per share to track from flat to up 4% year over year against its prior year benchmarks. Additionally, capital expenditures for the fiscal year are projected at approximately 2.5% of total sales, with plans to open roughly 15 new retail locations.
Home Depot EBITDA Margin: The retailer saw a decrease in margins from 18% in 2021 tto 15.9% in 2025, due to weak comparable sales that limited operating leverage, a mix shift toward lower margin Pro and repair categories, and higher operating expenses tied to supply chain investments and acquisition integration.
Going forward, we expect the margins to decline modestly in the near term - as elevated interest rates and housing prices dampens consumer demand for large remodels and pricier projects - before growing back again to reach around 16.5% by the end of our forecast period. However, if the housing market and home improvement industry continue to strengthen, and outpace previously forecast growth estimates, and comps improve better than expected, resulting in the margins reaching 18%, there could be a 10% upside to our current price estimate.
Home Depot is the world's largest retailer of home improvement products. Home Depot has grown to 2,359 stores spanning across the U.S., Canada, and Mexico. It offers a wide range of home improvement products and installation services to individual homeowners as well as professional builders. The Home Depot stores average approximately 104,000 square feet of enclosed space, with approximately 24,000 additional square feet of outside garden area. In addition to the physical stores, consumers can buy these products through the company's dedicated website. It maintains a network of distribution and fulfillment centers, as well as several e-commerce websites in the U.S., Canada, and Mexico.
Home Depot and Lowe's are the number one and two home improvement retailers in the U.S. Home Depot outpaced Lowe's in terms of same-store sales growth, with better pricing except for 2020. Lowe's comparable sales of 26.1% managed to surpass Home Depot's comp sales of 19.7% in fiscal 2020. However, Lowe's comparable sales growth came in at 6.9%, whereas Home Depot recorded 11.4% growth in comparable sales in fiscal 2021. Continuing its growth trend, HD's comparable sales of 3.1% outpaced Lowe's -0.4% in FY 2022. In FY 2023, both companies saw negative comp sales with Lowe's comparable sales decreasing by 4.7% and Home Depot's comparable sales falling 3.2%. In FY 2024, HD's comp sales declined 1.8%. In FY 2025, HD's comp increased by about 0.3% compared to a flat growth for LOW. Both saw modest comparable-store sales gains in fiscal 2025 amid a challenging housing and consumer spending backdrop.
Still, Lowe's continues to reduce the gap with its largest competitor and gain market share in the fragmented home improvement industry, by improving sales through merchandising initiatives, enhancing profitability by improving store and operating capabilities, improving its digital penetration, and using its new loyalty program to attract more Pro customers.
Online retail has been an emerging threat to the market share of brick-and-mortar home improvement retailers like Home Depot and Lowe's. For this reason, both companies have made significant investments in online strategies, including small acquisitions and improvements in the web experience for their customers.
Home Depot’s supply chain transformation has centered on building out a market-based, interconnected distribution network designed to improve in-stock levels, reduce handling costs, and support both stores and digital fulfillment. The company’s Rapid Deployment Centers, or RDCs, are intended to aggregate purchase orders across multiple stores, receive bulk shipments from suppliers, and then quickly allocate product to individual locations. Home Depot operates roughly 18 mechanized RDCs across the U.S. and Canada. These facilities are designed for high velocity flow-through processing, and management has indicated that average turnaround time from receipt to outbound shipment to stores is about 24 hours, supporting faster replenishment and lower store-level complexity.
Stocking Distribution Centers, or SDCs, serve a somewhat different function. Home Depot operates more than 90 SDCs, which primarily replenish store inventory based on demand signals and forecasted needs. These facilities tend to hold inventory longer than RDCs and focus on case-pack and each-pick fulfillment. Processing times are generally slower than RDCs, often in the one to three day range, depending on volume and product category, which aligns with your characterization.
By centralizing purchasing, improving allocation accuracy, and reducing direct-to-store complexity, Home Depot aims to drive better in-stock performance, lower transportation and handling costs, and ultimately support operating margin expansion over time, assuming demand remains stable.
Professional demand remains a key pillar for the home improvement industry. Home Depot estimates its U.S. Pro addressable market at roughly $450 billion, at least as large as DIY, highlighting the segment’s structural importance.
In recent quarters, average ticket growth has outpaced transaction growth, with purchases above $1,000 rising at high single digit and at times double digit rates. While overall traffic has been muted, Pro sales have generally grown faster than company averages, supported by steady repair and maintenance activity. Categories such as building materials and fencing have shown relative resilience, helping offset softer discretionary DIY demand and underpinning near term industry stability.
Industry surveys, including research from the National Retail Hardware Association, suggest evolving buying patterns among U.S. home improvement consumers. Purchase decisions are increasingly driven by price, quality, and functionality rather than strict loyalty to the country of origin. As a result, retailers are expanding global sourcing to offer broader assortments and more competitive price points.
At the same time, demand for environmentally conscious products continues to rise. Categories such as water efficient plumbing fixtures, energy-efficient appliances, and LED lighting have benefited from growing consumer awareness, utility incentives, and stricter building standards. Together, these shifts are gradually reshaping the traditional home improvement product mix toward value-oriented and sustainability-focused offerings.
