Home Depot (Home Depot (HD)) reported first-quarter fiscal 2026 results on Tuesday that beat Wall Street's expectations on both the top and bottom lines. But beneath the headline numbers, the home improvement giant's business is feeling the weight of a sluggish housing market and cautious consumers.
Sales came in at $41.77 billion, up 4.8% from a year ago and ahead of the $41.53 billion analysts had penciled in. Comparable sales — a key retail metric — rose 0.6% overall, with U.S. stores up 0.4%. Foreign exchange rates gave a small boost, contributing about 55 basis points to that growth.
Net earnings, however, slipped 4.2% to $3.29 billion, or $3.30 per diluted share, compared with $3.43 billion, or $3.45 per share, a year earlier. Adjusted diluted EPS came in at $3.43, down from $3.56 but still above the $3.41 analysts expected.
Operating income fell 3% to $4.98 billion, and the operating margin narrowed to 11.9% from 12.9% (12.3% on an adjusted basis, versus 13.2% last year). Gross margin also took a hit, dropping to 33.0% from 33.8%, while selling, general, and administrative expenses rose 5.7% to $7.96 billion.
CEO Ted Decker described the quarter as in line with expectations, noting that underlying demand was similar to what the company saw throughout fiscal 2025. But he acknowledged the headwinds: "Despite greater consumer uncertainty and housing affordability pressure," the business held up.
CFO Richard McPhail told CNBC that homeowners remain financially resilient and are still engaging with the retailer. But he added that consumers are delaying spending on larger home-improvement projects, citing geopolitical tensions, weak consumer confidence, and a sluggish housing market. Translation: people are still buying paint and lightbulbs, but they're putting off the kitchen remodel.
Customer transactions dipped 0.9% to 391.1 million, though the average ticket rose 2.3% to $92.76 — suggesting that when customers do buy, they're spending a bit more. Operating cash flow improved to $6.03 billion from $4.33 billion a year ago, while capital expenditures totaled $844 million. The company ended the quarter with $1.60 billion in cash and about $53.5 billion in total debt.
Looking ahead, Home Depot reaffirmed its fiscal 2026 guidance. The company expects total sales growth of 2.5% to 4.5%, which implies sales between $168.80 billion and $172.09 billion (analysts are looking for $171.26 billion). Comparable sales are expected to range from flat to up 2%. On the earnings front, the retailer sees adjusted EPS of $14.69 to $15.28, versus the $15.06 consensus, and GAAP EPS of $14.23 to $14.80, compared with estimates of $14.73. Home Depot also plans to open about 15 new stores this year.
Shares were down 0.21% in premarket trading Tuesday at $299.18, not far from their 52-week low of $296.88. The market seems to be taking the results in stride — the beat was nice, but the housing market's shadow looms large.
