The Home Depot, Inc. (HD) Q2 2025 Earnings Conference Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call summary presents a mixed outlook. While there are positive signs such as a slight sales growth and strategic acquisitions, the flat gross margin and decline in EPS are concerning. The Q&A reveals optimism about tax reforms and rate cuts but also highlights economic uncertainties. The lack of clear guidance on large projects and the impact of reduced promotions adds ambiguity. The overall sentiment is neutral, as positive developments are balanced by financial constraints and uncertain economic conditions.
Key Financial Performance
Sales $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%. The increase was attributed to customer engagement in smaller home improvement projects and strategic initiatives.
Adjusted diluted earnings per share $4.68 in the second quarter compared to $4.67 in the second quarter last year. The slight increase reflects stable performance and strategic investments.
Gross margin 33.4%, a slight increase compared to the second quarter of 2024. This was in line with expectations.
Operating margin 14.5% compared to 15.1% in the second quarter of 2024. The decline was due to an increase in operating expenses as a percent of sales.
Adjusted operating margin 14.8% compared to 15.3% in the second quarter of 2024. The decline was attributed to pretax intangible asset amortization.
Interest and other expense $550 million, an increase of $61 million from the second quarter of 2024, in line with expectations.
Effective tax rate 24.2% compared to 24.5% in the second quarter of fiscal 2024, reflecting a slight decrease.
Diluted earnings per share $4.58 compared to $4.60 in the second quarter of 2024. The slight decline was due to intangible asset amortization.
Merchandise inventories $24.8 billion, up approximately $1.8 billion compared to the second quarter of 2024. Inventory turns were 4.6x, down from 4.9x last year.
Return on invested capital 27.2%, down from 31.9% in the second quarter of fiscal 2024. The decline reflects changes in long-term debt and equity.
You have reached the limit. Sign up to access full content
Get started
Operating Highlights
SRS Acquisition: The acquisition of SRS has exceeded expectations, driving market-leading growth, accelerating organic ecosystem efforts, and generating revenue synergies.
Pending GMS Acquisition: The acquisition of GMS will add complementary verticals to SRS' business, broaden distribution footprint across the U.S. and Canada, and enhance product offerings for complex projects.
Battery-Powered Tools: Achieved a company sales record for battery-powered tools during the second quarter.
Paint Products: Investments in products, delivery, and loyalty have driven continued share gains in the paint category.
Market Share Growth: Investments in strategic initiatives, including technology and Pro ecosystem, have contributed to market share growth.
Geographic Expansion: The GMS acquisition will expand distribution footprint across the U.S. and Canada.
Delivery Speeds: Improved delivery times with the fastest delivery speeds in company history, including same-day and next-day options.
Order Fulfillment: Enhanced order fulfillment processes using machine learning and dedicated associates, resulting in faster and more accurate order processing.
Pro Ecosystem: Expanded capabilities for Pros, including trade credit, order management, and fulfillment options, leading to increased Pro engagement and spending.
Strategic Acquisitions: The acquisitions of SRS and pending GMS acquisition are key strategic moves to enhance capabilities and market positioning.
Technology Investments: Investments in technology have improved productivity and customer experience, including enhancements in freight flow and online order management.
You have reached the limit. Sign up to access full content
Get started
Risk or Challenges
Market Uncertainty and Volatility: The company acknowledges ongoing uncertainty and volatility in the market, which could impact customer demand and overall business performance.
Supply Chain Challenges: Despite efforts to diversify product sourcing, supply chain disruptions remain a potential risk to ensuring product availability and maintaining operational efficiency.
Economic Environment: The macroeconomic environment, including interest rate fluctuations and foreign exchange impacts, poses risks to financial performance and customer spending.
Larger Discretionary Projects: There is softer engagement in larger discretionary projects, which are typically financed by customers, potentially impacting revenue from high-ticket items.
Operating Margin Decline: Operating margin decreased from 15.1% to 14.5% year-over-year, reflecting higher operating expenses as a percentage of sales.
Inventory Management: Inventory turns decreased from 4.9x to 4.6x, indicating potential inefficiencies in inventory management.
Pending Acquisition Risks: The pending acquisition of GMS introduces risks related to integration, execution, and achieving anticipated synergies.
Customer Financing Sensitivity: Customer sensitivity to financing costs could impact sales, particularly for larger projects requiring credit.
You have reached the limit. Sign up to access full content
Get started
Guidance & Outlook
Fiscal 2025 Guidance: The company expects 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. Gross margin is expected to be approximately 33.4%, essentially flat compared to fiscal 2024. Operating margin is projected at approximately 13%, with adjusted operating margin at approximately 13.4%. The effective tax rate is targeted at approximately 24.5%. Net interest expense is expected to be approximately $2.2 billion. Diluted earnings per share are expected to decline approximately 3% compared to fiscal 2024, while adjusted diluted earnings per share are expected to decline approximately 2%. On a 52-week basis, adjusted diluted earnings per share would be essentially flat compared to fiscal 2024. Capital expenditures are planned at approximately 2.5% of sales for fiscal 2025.
Pending GMS Acquisition: The acquisition of GMS, a leading distributor of specialty building products, is expected to add a complementary vertical to SRS' business, broaden SRS' distribution footprint across the U.S. and Canada, and enhance capabilities in serving Pros working on complex projects. This acquisition will also enable a deeper and broader assortment of interior building products and services, as well as additional fulfillment options.
Pro Ecosystem Enhancements: The company is focused on maturing capabilities for Pros working on complex projects, including expanded assortments, fulfillment options, sales teams, account management, trade credit, and order management. Trade credit capabilities are being rolled out more broadly, with all Trade credit customers expected to seamlessly use Trade credit for in-store purchases later this year. The order management system is being enhanced to better manage Pro product deliveries and provide features like inventory reservation, order modification, and invoicing upon delivery.
Delivery and Fulfillment Improvements: The company has made significant progress in improving delivery times, achieving the fastest delivery speeds in company history for both same-day and next-day delivery. Machine learning models are being used to optimize delivery modes, and enhancements to the OFA app are enabling more efficient order fulfillment. These improvements are driving higher customer satisfaction and increased customer engagement.
Market Trends and Customer Engagement: The company anticipates continued momentum in home improvement-related projects, with strength in Pro-heavy categories like dimensional lumber, concrete, and decking, as well as seasonal product categories. However, softer engagement is expected in larger discretionary projects where customers typically use financing. The company is also preparing for the holiday season with innovative product offerings to drive traffic.
You have reached the limit. Sign up to access full content
Get started
Shareholder Return Plan
Dividends Paid: During the second quarter, we paid approximately $2.3 billion in dividends to our shareholders.
You have reached the limit. Sign up to access full content
Get started
Key Q&A
Q:What was the reason for the July improvement in sales, and how does it impact the second half comp expectations?
A:The July improvement was attributed to favorable weather in the North and broader engagement across the portfolio, with the best comps seen across most departments in nearly two years. Management expects a slight uptick in comp for the second half, aiming for a 1% full-year guidance.
Q:How could potential rate cuts and tax reforms impact the business?
A:Management believes relief on mortgage rates could help the frozen housing market and large discretionary projects. Economic uncertainty remains the primary reason for deferring large projects. The recent tax reforms, including lower taxes and increased child tax credits, are expected to boost discretionary spending.
Q:What is the outlook for large project activity recovery in the next 12 months?
A:Management is optimistic about lower taxes and interest rates improving the environment but cannot predict when rates will drop enough to unlock housing turnover and mobility. They expect better conditions compared to the current environment.
Q:What is the expected performance of AUR and pricing in the second half of the year?
A:Management expects modest price movements in some categories due to tariffs but not broad-based increases. They aim to maintain the best value for customers and focus on EDLP (Everyday Low Pricing). Promotional activity was reduced in Q2, particularly in garden-related categories.
Q:What are the expectations for comp cadence in the back half of the year?
A:Management does not anticipate a significant uptick in comp cadence, with the U.S. business expected to maintain a similar comp rate. Ticket growth in Q2 was driven by higher spend on large items and reduced promotional activity in outdoor garden categories.
Q:What is the rationale behind the GMS acquisition, and how does it compare to the SRS acquisition?
A:The GMS acquisition complements the SRS business model, focusing on drywall and ceiling as adjacent verticals. Both acquisitions align with the strategy to build a Pro ecosystem, leveraging distribution nodes and sales force to capture market share. GMS is seen as the best asset in its space, with a similar culture and operational model to SRS.
Q:What is the notable improvement in underlying demand, and is there an inflection in housing?
A:Management attributes the improvement to a healthy customer base with strong income gains, home price appreciation, and tappable equity. However, larger remodeling projects are still deferred due to high rates. The guidance assumes consistent momentum without a significant housing market turn.
Q:What are the proof points on complex projects or Complex Pro?
A:Management has seen progress in Pro ecosystem investments, including improved delivery reliability and increased spend on parcel items. Trade credit adoption is in early stages but shows potential for growth. Cross synergies with SRS are also contributing to momentum.
Q:How does Home Depot balance growth and returns in its capital allocation decisions?
A:Home Depot prioritizes investments that drive share capture and earnings growth while exceeding the cost of capital. Recent investments, such as SRS and GMS, are capital-light with high return profiles. The company aims to position itself uniquely in the $1 trillion addressable market.
Q:What is the impact of reduced promotional activity on the P&L and future guidance?
A:Reduced promotional activity, particularly in garden categories, impacted transaction comps but aligns with the EDLP strategy. The impact of tariffs and reduced promotions is factored into future guidance, with management confident in maintaining value for customers.
Q:What are the key drivers of category performance and regional trends?
A:12 out of 16 departments posted positive comps, with strong performance in seasonal and core home improvement categories like portable power, cleaning, and interior paint. The North region showed improvement due to favorable weather, driving more traffic and projects.
Q:What are the moving parts in gross margin performance, and how is it expected to evolve?
A:Gross margin is expected to remain flat at 33.4% for the year, with no significant changes anticipated. Seasonal swings may cause slight variations, but the overall guidance remains consistent.
Q:Review of Unclear Management Responses
A:Management avoided providing specific numbers or clear timelines for the recovery of large project activity and the impact of rate cuts. They also did not detail the exact growth curve for complex Pro efforts or the incremental sales from recent investments, leaving some ambiguity in their responses.
You have reached the limit. Sign up to access full content
Get started
Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
GMS
Halloween
Inc Research
Pros project
Pros trade
Research Division
Securities
Trade credit
associate
benefit
building product
capability product
category lumber
credit account
digit lift
ecosystem
example
experience technology
fact
freight flow
fulfillment option
improvement project
job site
lift spend
lineup
location
measure
option store
order fulfillment
product delivery
product value
stock shelf
storage
success
system
ticket
tote
trade credit
vendor product
HD Transcript
The Home Depot, Inc. (HD) Q3 2025 Earnings Call Transcript
Unknown11-18
The earnings call reflects a negative sentiment due to several factors: softer-than-expected results, increased capital expenditures, and challenges in demand recovery without housing activity or interest rate reductions. The Q&A session highlighted concerns about EBIT shortfall, lack of storm activity impacting sales, and unclear management responses on margin improvement. Despite some positive initiatives, the overall outlook appears cautious with pressures from consumer uncertainty and supply chain issues, leading to a negative prediction for the stock price movement.
The Home Depot, Inc. (HD) Q3 2026 Earnings Call Transcript
Unknown11-18
The earnings call summary presents mixed signals. Financial performance shows modest growth, but operating margins declined due to increased expenses and market pressures. The GMS acquisition is promising, yet its immediate impact is negative on margins. The Q&A reveals concerns about consumer uncertainty and lack of storm activity affecting sales. However, there are positive aspects like dividend payments and potential long-term benefits from GMS synergies. The overall sentiment is neutral as positive and negative factors balance out, indicating limited stock price movement in the short term.
The Home Depot, Inc. (HD) Presents At Goldman Sachs 32nd Annual Global Retailing Conference 2025 Transcript
Neutral9-3
The Home Depot, Inc. (HD) Q2 2025 Earnings Conference Call Transcript
Unknown8-19
The earnings call summary presents a mixed outlook. While there are positive signs such as a slight sales growth and strategic acquisitions, the flat gross margin and decline in EPS are concerning. The Q&A reveals optimism about tax reforms and rate cuts but also highlights economic uncertainties. The lack of clear guidance on large projects and the impact of reduced promotions adds ambiguity. The overall sentiment is neutral, as positive developments are balanced by financial constraints and uncertain economic conditions.
HD Report
Frequently Asked Questions
Where does this earnings call transcript come from?
All transcripts are sourced directly from the official live webcast or the company’s official investor relations website. We use the exact words spoken during the call with no paraphrasing of the core discussion.
How soon is the transcript available after the earnings call ends?
Full verbatim transcripts are typically published within 4–12 hours after the call ends. Same-day availability is guaranteed for all S&P 500 and most mid-cap companies.
Is the transcript edited or altered in any way?
No material content is ever changed or summarized in the “Full Transcript” section. We only correct obvious spoken typos (e.g., “um”, “ah”, repeated 10 times”, or clear misspoken ticker symbols) and add speaker names/titles for readability. Every substantive sentence remains 100% as spoken.
Why do some answers appear as “Unclear” or “Inaudible”?
When audio quality is poor or multiple speakers talk over each other, we mark the section instead of guessing. This ensures complete accuracy rather than introducing potential errors.
Who creates the AI Summary and Key Q&A highlights shown above the transcript?
They are generated by a specialized financial-language model trained exclusively on 15+ years of earnings transcripts. The model extracts financial figures, guidance, and tone with 97%+ accuracy and is regularly validated against human analysts. The full raw transcript always remains available for verification.
