Home Depot Sales Up 5 Percent

Key Points

• Revenue (GAAP) grew to $45.3 billion, up 4.9% from the prior year, but missed analyst estimates.

• Comparable sales increased 1.0%, reversing last year’s decline, with U.S. comp sales up 1.4%.

• Adjusted EPS was $4.68, nearly flat year over year, and below the consensus estimate of $4.72 (non-GAAP).

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Home Depot (NYSE:HD), the world’s largest home improvement retailer, delivered its earnings results for the second quarter of fiscal 2025 on August 19, 2025. The headline news was GAAP revenue rising 4.9% year over year to $45.3 billion, despite coming in below analyst expectations of $45.4 billion (GAAP). Adjusted earnings per share (EPS) also missed, landing at $4.68 against a projected $4.72. Comparable sales across the company increased 1.0%, turning positive from the 3.3% drop seen a year ago. The overall assessment: sales growth and operational gains were offset by ongoing pressure on profit margins, subdued earnings growth, and continued caution in the company's outlook for the rest of the year.

Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q1 2025 earnings report.

Understanding the Business and Current Priorities

Home Depot is the dominant home improvement retailer, operating 2,353 stores across the U.S. Canada, and Mexico. Its business spans everything from paint and power tools to lumber, home décor, garden equipment, and building materials. This scale brings major advantages: brand recognition, loyal customers, and cost efficiencies that guide its competitive strategy.

In recent years, Home Depot has focused on several priorities. These include deepening its presence with professional customers (referred to as "Pros"), rolling out digital tools that blend online and in-store shopping, integrating recent acquisitions like SRS (a specialty building product distributor), and enhancing its supply chain. Long-term success hinges on maintaining its leadership position, delivering a seamless experience across digital and physical channels, growing the Pro customer base, and keeping goods moving efficiently to shelves and customers.

Quarter in Review: Key Developments and Performance Drivers

This quarter delivered measurable progress in some areas, but highlighted persistent cost and profit challenges. While total revenue (GAAP) increased by $2.1 billion compared to the prior year quarter, the pace was slightly below analyst projections. U.S. comparable sales improved 1.4%, supported by a rise in the average customer ticket value. However, the number of customer transactions dropped by 0.4%, indicating that higher spending per shopping trip rather than an influx of new customers fueled growth.

One notable force behind the company’s performance was the contribution from SRS, which enhances its capabilities with specialized trade professionals. Management reported that SRS exceeded initial growth expectations, especially in the roofing, pool, and landscape supply verticals. This acquisition also helps Home Depot expand its Pro-focused products, loyalty programs, and trade credit offerings, positioning itself to serve contractors and builders who purchase in greater volume and with more frequency than do-it-yourself customers.

Investments in digital tools and store technology continue. Recent initiatives like Magic Apron -- an artificial intelligence tool for product advice -- and streamlined website features are designed to merge the online and in-store experience. Sales leveraging Home Depot's digital platforms increased approximately 8% compared to the same period last year, management cited ongoing improvements in omnichannel engagement and customer satisfaction.

Home Depot increased its number of store locations and sustained high in-stock levels. Inventory rose about 7.7% compared to a year ago, mainly due to the SRS integration and preparation for the spring selling season. Supply chain improvements enabled faster deliveries and better order fulfillment, according to management. Ongoing associate training led to higher employee retention and, by management’s claim, gains in customer service quality.

On the financial side, Adjusted operating margin slipped to 14.8%, down from 15.3% a year ago. Operating expenses (GAAP) increased by 8.7%.

Looking Ahead: Guidance and Watchpoints

Management reaffirmed its guidance for fiscal 2025. It expects total sales to rise 2.8%, with comparable sales gaining around 1.0 % on a 52-week basis. Operating margin is targeted at 13.0%, and adjusted EPS is forecast to decline approximately 2%, with diluted EPS on a GAAP basis expected to drop by about 3%. No changes were made to these forward-looking numbers during the latest earnings release.

For investors, key issues to monitor in future quarters include persistent margin pressure from higher operating costs, ongoing efforts to integrate SRS, and the pace at which larger home improvement projects return as interest rates and consumer sentiment evolve. Home Depot’s ability to boost transaction volumes, rather than relying solely on higher ticket sizes, will be important for sustainable growth. The company also emphasized supply chain resilience, pricing strategy, and digital experience enhancements as ongoing areas of focus. Management’s stance is cautious, and no updated guidance or major strategic shifts were shared in this quarter’s release.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.

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JesterAI is a Foolish AI, based on a variety of Large Language Models (LLMs) and proprietary Motley Fool systems. All articles published by JesterAI are reviewed by our editorial team, and The Motley Fool takes ultimate responsibility for the content of this article. JesterAI cannot own stocks and so it has no positions in any stocks mentioned. The Motley Fool has positions in and recommends Home Depot. The Motley Fool has a disclosure policy.