Home Depot Q2 Sales Rise 5.7% as Pro Demand and Delivery Improve

TradingKey - Home Depot (NYSE: HD) reported an improved operating picture for fiscal second-quarter 2026 as month of August 19 approaches. Sales grew 5.7% year over year and hit $47.9 billion while comparable sales increased 1.7% for the company and 1.3% for the US.

For this quarter, net earnings were $4.8 billion, or $4.79 per diluted share, versus last year’s results of $4.6 billion and $4.58 per diluted share respectively. Adjusted diluted EPS grew 5.1% to $4.92. The company reported that they hit their positive expectations for this quarter, as customers continued to move ahead with smaller repairs and home improvement projects.

Demand Broadened Across Categories

The quarter showed companywide comparable sales improvements. For the month of May, companywide comparable sales increased 1.2%, while for the months of June and July, they were 1.5% and 2.3%, respectively. For the US, comparable sales increased progressively from 0.5%, to 1.2% and 2.2% for the months of June and July, respectively.

The company explained that the monthly comparable sales improvements were negatively impacted by the weather and that the more consistent underlying demand was actually progressing more positively than the results shown. Similar demand trends were noted during early trading for the third quarter.

Thirteen of the sixteen merchandising departments reported positive comparable sales. Positive comparable sales were reported for the categories of electrical, plumbing, hardware, tools, paint, flooring and building materials.

Online comparable sales increased 11%, making it the fifth consecutive quarter of double-digit growth. Large discretionary home improvement projects continued to be negatively impacted by housing affordability and customer uncertainty.

Pro Customers Outperformed DIY

Professional customers had positive comparable sales and outperformed DIY customers during Q2. Specifically, The Home Depot estimates the Pro market as $700 Billion of the estimated $1.2 Trillion of the fragmented overall market for home improvement. The company is growing this business primarily with Home Depot Pro, SRS Distribution, GMS, HD Supply, and Construction Resources. SRS achieved comparable sales above the company average and posted positive sales in all of its divisions.

Management expects mid-single-digit organic sales growth of SRS for fiscal 2026. As well, Home Depot expects about $400 million in cross-selling opportunities from its Pro ecosystem for fiscal 2026. These opportunities extend beyond SRS and GMS transactions. Home Depot expects to sell more goods and services to contractors to whom the company’s retail stores sell for the first time.

Acquisitions Add Sales but Reduce Gross Margin

Home Depot acquired GMS in September 2025 and expanded its distribution of drywall and related construction products. Following new stores, additional SRS branches, and smaller acquisitions, GMS is expected to contribute to sales in fiscal 2026.

However, because GMS and Mingledorff’s have different margin profiles from our distribution businesses, their inclusion impacted Q2 gross margin by about 60 basis points. The trade-off is greater exposure to professional construction spending, a wider product offering and more capacity for product distribution.

Tariff Refunds Offset Rising Costs

In Q2, Home Depot received about $730 million in refunds for tariffs covered by IEEPA. Of this amount, about $685 million decreased the cost of goods sold and the remaining $45 million was used to pay for inventory and will appear on the income statement when these goods are eventually sold.

For Q2, a gross margin benefit of approximately 145 basis points was received. Higher expenses for fuel and energy and cost of products sold were estimated to decrease gross margin by 60 basis points. The benefit of the tariff refund was offset by another 60 basis points gross margin decrease due to the change in the type and variety of products sold. For Q2, gross margin was 33.7% (an increase of 25 basis points).

Management expected margin erosion for the rest of the year from increasing costs, so Home Depot did not increase the guidance they set earlier, which is why they maintained the original guidance for fiscal 2026.

Fiscal 2026 Guidance Remains Unchanged

Home Depot continues to expect:

• Total sales growth of approximately 2.5% to 4.5%
• Comparable sales growth of 0% to 2%
• Gross margin of approximately 33.1%
• Operating margin of 12.4% to 12.6%
• Adjusted operating margin of 12.8% to 13%
• EPS and adjusted EPS growth of 0% to 4%
• Capital expenditures of about 2.5% of total sales

Approximately 15 stores and 40 to 50 SRS branches will be opened by the end of fiscal 2026.

Capital Spending and Inventory Remain Controlled

During Q2, Home Depot projected $880 million in capital expenditures and distributed $2.3 billion in dividends.

Inventories closed the quarter with $26.8 billion, or $2 billion above the same quarter last year. The metric of inventory turnover declined slightly from 4.6 to 4.5, and return on invested capital fell from 27.2% to 24.8%.

As of the closure of the second quarter, Home Depot owned and operated 2,364 retail stores, 1,340 SRS locations, and 470,000 total employees.

Express Delivery Expands Nationwide

As of August 18, Express Delivery service has rolled out to the entire country from Home Depot’s 2,000+ stores. The service delivers thousands of products within 3 hours for a flat fee with eligible products and no required membership. Home Depot offers free same day delivery for orders of $25 placed before 4 pm as well. 

More than 65% of in stock parcel products can be delivered same day and more than 55% of in stock bulky products can be made available for delivery within two days. The need for rapid fulfillment of selling contractors is recognized more than any group.

Leadership Structure Changes Temporarily

Home Depot has recently merged some of its merchandising, online operations, customer loyalty and financial services divisions, as well as its customer technology teams. An additional division has been created, the Office for Pro Acceleration, and will be headed by CFO Richard McPhail, for the consolidation of the company’s professional services.

HD Price Chart - Source: Tradingview

During this time, Ted Decker, Home Depot’s Chairman and CEO, is on medical leave and should be back in coming months. The daily operations have been reassigned to Ann-Marie Campbell, and Richard McPhail has been charged with financial management and some of the operations of the Pro subsidiary.

HD Stock Tests Support Near $331

Home Depot traded near $337.49 on August 19 after pulling back from its August high of $358.47. On the two-hour chart, the stock is still under the resistance of the moving average between $341.41 and $342.56.

Breaking even that resistance would put $344.41 and $350.65 as new targets. A break above $350.65 would put $358.47 in focus.

The RSI of 39 indicates weak momentum, although it has not yet crossed the oversold threshold of 30. The main support is $331.19, which is the rising trendline. A break below this area would weaken the higher-lows and expose $323.12.

Bottom Line

Wider category introduction, double digit growth with online orders with improvement in services to professional customers was evident with their Q2 results. The company is framing its offerings with SRS, GMS and improved service with faster delivery, but lowered demand for major renovations and increased competition, operating costs, and acquisitions are restraining improved income.

HD is neutral to bearish below $342.56. A break of $331.19 would help define the recovery structure, while a break of $342.56 would create a streak towards $350.65. This is analysis, not investing advice.