Earnings Call Insights: The Home Depot, Inc. (HD) Q2 2025
Management View
- Edward P. Decker, Chairman, President & CEO, reported “Sales for the second quarter were $45.3 billion, up 4.9% from the same period last year. Comp sales increased 1% from the same period last year, and comps in the U.S. increased 1.4%. Adjusted diluted earnings per share were $4.68 in the second quarter compared to $4.67 in the second quarter last year.” Decker emphasized continued momentum in smaller home improvement projects and the “strongest” performance in over two years, attributing growth to investments in technology, the Pro ecosystem, and faster delivery options.
- Decker highlighted the strategic impact of the SRS acquisition, stating it “has exceeded our expectations, driving market-leading growth, accelerating our organic ecosystem efforts and driving revenue synergies.” He also detailed the pending acquisition of GMS to further strengthen the specialty building products vertical and expand SRS’ footprint.
- Ann-Marie Campbell, Senior Executive Vice President, noted the rollout of enhancements to the OFA app for more efficient online order fulfillment and underscored double-digit lift in spend by customers using faster delivery options.
- William D. Bastek, Executive Vice President of Merchandising, said “12 of our 16 merchandising departments posted positive comps,” with strength in both Pro and DIY segments. Online sales increased approximately 12% year-over-year, and the company achieved a sales record for battery-powered tools.
- Richard V. McPhail, EVP & CFO, stated, “In the second quarter, total sales were $45.3 billion, an increase of $2.1 billion or approximately 4.9% from last year… Our diluted earnings per share for the second quarter were $4.58 compared to $4.60 in the second quarter of 2024. Excluding intangible asset amortization, our adjusted diluted earnings per share for the second quarter were $4.68, a slight increase compared to the second quarter of 2024.”
Outlook
- McPhail reaffirmed fiscal 2025 guidance: “We expect total sales growth to outpace sales comp with sales growth of approximately positive 2.8% and comp sales growth of approximately positive 1% compared to fiscal 2024. Our gross margin is expected to be approximately 33.4%. Further, we expect operating margin of approximately 13% and adjusted operating margin of approximately 13.4%.”
- Adjusted diluted earnings per share are expected to decline approximately 2% compared to fiscal 2024, with a flat outlook on a 52-week basis. Guidance does not factor in the pending GMS acquisition or changes in the interest rate environment.
Financial Results
- The company reported merchandise inventories of $24.8 billion, up approximately $1.8 billion year-over-year, with inventory turns at 4.6x versus 4.9x last year.
- Capital expenditures in the quarter were approximately $915 million, and $2.3 billion was paid in dividends.
- Return on invested capital was 27.2%, down from 31.9% in the prior-year quarter.
- Gross margin for the quarter was 33.4%, and operating margin was 14.5%.
Q&A
- Zachary Robert Fadem, Wells Fargo: Asked about July improvement and second half comp drivers. Decker responded that “those comps got markedly stronger as the months went on through the quarter…helped by a little weather” and that for the year, “we’re looking at just a slight uptick in comp to have that 1% for the full year.”
- Fadem inquired about rate cuts and tax reform as catalysts. Decker replied, “some relief on mortgage rates, in particular, could help…the #1 reason for deferring the large project is general economic uncertainty.”
- Steven Emanuel Zaccone, Citi: Queried about recovery in large project activity and pricing. Decker noted uncertainty around rates but optimism due to tax clarity and potential lower rates. Bastek explained, “over 50% of our products are sourced domestically and wouldn’t be subject to any tariffs…there’ll be some modest price movement in some categories, but it won’t be broad-based.”
- Christopher Michael Horvers, JPMorgan: Probed about back half comp cadence and GMS rationale. Decker said, “there’s not a big uptick necessary to meet our guide” and explained the strategic fit of GMS as “adjacent complementary verticals to that SRS business model.”
- Simeon Ari Gutman, Morgan Stanley: Asked about underlying demand and Pro project momentum. McPhail highlighted healthy customers and persistent deferral of large remodeling projects, adding, “our guidance for the remainder of the year…doesn’t assume any improvement in the outlook for larger projects.”
Sentiment Analysis
- Analysts focused on sustainability of recent improvement, catalysts for larger projects, pricing impacts from tariffs, and integration of acquisitions. Tone was generally neutral, with some cautious optimism but persistent questions about macro headwinds and recovery timing.
- Management maintained a confident tone during remarks, often emphasizing “the strongest performance in over 2 years” and “we feel really good about our ability” to hit guidance. In Q&A, management provided detailed explanations but acknowledged uncertainty, particularly around larger projects and macroeconomic variables.
- Compared to the previous quarter, there was slightly more optimism regarding broad-based sales engagement and acquisition benefits, but analysts continued to probe for evidence of inflection in larger project demand.
Quarter-over-Quarter Comparison
- Guidance for 2025 was reaffirmed, unchanged from Q1, with a focus on 2.8% total sales growth and 1% comp sales growth.
- Strategic focus has shifted toward integration of SRS and the pending GMS acquisition, with management emphasizing cross-selling and ecosystem expansion.
- The breadth of positive comps improved significantly, with 12 out of 16 merchandising departments versus 6 in the previous quarter.
- Online sales growth accelerated to 12% from 8% in Q1, and delivery speed improvements were highlighted as a driver of engagement.
- Management’s tone remained steady, but with increased emphasis on operational execution and acquisition synergies.
Risks and Concerns
- Management cited ongoing uncertainty and volatility in the macro environment, specifically calling out the deferral of large discretionary projects due to economic uncertainty and high interest rates.
- Foreign exchange rates negatively impacted comps by approximately 40 basis points in the quarter.
- Operating expense as a percent of sales increased 65 basis points to 18.9%, and return on invested capital declined year-over-year.
- Analyst concerns focused on the timing of recovery in large projects, potential impacts of tariffs, and sustainability of recent performance improvements.
Final Takeaway
The Home Depot leadership reiterates confidence in the company’s ability to deliver on its reaffirmed 2025 targets, citing continued strength in smaller projects, market share gains, and successful integration of recent acquisitions. While large-scale remodeling activity remains subdued due to persistent economic uncertainty, the company highlights broad-based positive comps, accelerating digital sales, and strategic advances in the Pro ecosystem as key drivers for sustained performance in the current environment.