HD

Walmart Inc. (NASDAQ:WMT) disappointing sales and The Home Depot, Inc. (NYSE:HD) strength among budget-conscious do-it-yourselfers indicate middle-class consumers are growing more tight-fisted, Reuters reported, even as wealthier shoppers keep supporting luxury brands like Ralph Lauren. Walmart's fiscal second-quarter comparable sales grew 3.4% excluding the impact of pharmacy-related items, while Walmart, TJ Maxx owner TJX, and Home Depot all warned shoppers remain "selective" as U.S. retail sales in July posted their first monthly decline in nine months. Basket sizes shrank at Walmart and Target as shoppers continued visiting stores but spent less per trip. IG Group analyst Angeline Ong said, "Even Walmart, which has been supported by more affluent households trading down, isn't able to keep average spending growth rising." Walmart Inc. (NASDAQ:WMT)'s sales growth, while decelerating, is still positive and reflects genuine trade-down demand. Comparable sales grew 3.4% even as growth cooled. Ong's comment that more affluent households are trading down to Walmart points to Walmart gaining a customer segment it did not previously serve as heavily, a structural tailwind even during a broader spending slowdown. The Home Depot, Inc. (NYSE:HD) is benefiting directly from consumers' shift toward smaller, more deliberate purchases rather than losing out to it. Home Depot's strength is among budget-conscious do-it-yourselfers. It suggests homeowners are substituting professional contractor work with DIY projects to save money, a behavior shift that funnels spending toward Home Depot's core business rather than away from it. Consumers are not retreating from spending altogether, only becoming more selective about where it goes, which favors well-positioned retailers over the category as a whole. eToro's Lale Akoner said households are "becoming much more deliberate about where their money goes," not cutting spending broadly, meaning retailers that consistently deliver value, as Walmart and Home Depot have positioned themselves to do, are better placed to capture that more deliberate spending than competitors relying on broad discounting alone. Shrinking basket sizes point to a demand problem that price cuts alone are not solving. Shoppers continued visiting Walmart and Target but spent less per trip, and McDonald's discounted menu items failed to draw customers this quarter even in an otherwise expensive menu, according to Reuters, evidence that promotional pricing is losing its power to offset consumers' underlying caution. Walmart Inc. (NASDAQ:WMT)'s growth deceleration is happening despite, not because of, favorable positioning. Even with more affluent households trading down to Walmart, a dynamic that should be adding incremental sales, the company still could not sustain rising average spending growth. It shows the pressure on household budgets is broad enough to offset even Walmart's trade-down tailwind. The Home Depot, Inc. (NYSE:HD)'s strength is linked to a specific, cautious consumer behavior, DIY substitution, that shows broader economic pullback rather than confidence. Consumers choosing to do home projects themselves instead of hiring professionals is typically a sign of tightened discretionary budgets. It means Home Depot's current strength may show the same underlying consumer caution pressuring Walmart, just channeled into a different purchase decision. Both retailers are operating in the same cautious consumer environment, but the read on each differs. Walmart gains when wealthier households trade down to cut costs, while Home Depot wins when shoppers switch to do-it-yourself projects. However, slowing growth at both stores shows that broader budget pressures force Americans to spend far more selectively. While we acknowledge the potential of WMT as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock. READ NEXT: Warren Buffett "Blew It" on Alphabet (GOOGL) And Made It Berkshire's Third-Biggest Bet and Sony Group (SONY) and Taiwan Semiconductor (TSM) Are Betting $4.7 Billion on the "Eyes" of AI Machines. Disclosure: None. This article is originally published at Insider Monkey.

Williams-Sonoma, Inc. WSM posted second-quarter fiscal 2026 adjusted earnings of $2.10 per share, up 5% year over year and above the Zacks Consensus Estimate of $2.05 by 2.4%. Net revenues rose 6.7% to $1.96 billion and beat the consensus mark of $1.91 billion by 2.5%.Comparable brand revenues increased 6.2%, with every major brand posting positive growth. Broad-based brand gains and supply-chain efficiencies supported the quarter, while tariff costs weighed on merchandise margins. Our model predicted consolidated comps growth of 4% for the fiscal second quarter.However, WSM shares lost about 5% following the earnings release, likely reflecting investor concerns about profitability. Non-GAAP gross margin and operating margin contracted year over year, as lower merchandise margins, primarily due to tariff-related costs, pressured results. Investor sentiment may also have been tempered by the company’s outlook, which assumes that current tariffs will remain in place and oil prices will stay elevated for the remainder of fiscal 2026, potentially sustaining cost pressures. Pottery Barn remained the largest revenue contributor, generating $770.8 million in the quarter. Comparable brand revenues for Pottery Barn increased 5.1% from the year-ago period compared with 1.1% growth in the prior-year quarter.West Elm delivered $496.3 million of revenues, with comps up 6.4% compared with 3.3% a year ago. Williams Sonoma, including Williams Sonoma Home, generated $268.8 million and posted 7.6% comparable growth compared with 5.1%. Pottery Barn Kids and Teen recorded $297.4 million in revenues, while comps rose 3.5%. The Other category contributed $126.4 million. Non-GAAP gross profit totaled $891.6 million, with gross margin of 45.5%, down 160 basis points (bps) year over year. Lower merchandise margins reduced the rate by 230 bps, primarily because of tariff costs. Supply-chain efficiencies contributed 30 basis points of benefit, while occupancy leverage added 40 bps. Our model predicted a 180-bps year-over-year decline in the gross margin to 45.3% for the fiscal second quarter.Non-GAAP selling, general and administrative expenses were $553.2 million, up 3.1% year over year. The SG&A rate fell 100 bps to 28.2%, helped by 120 basis points of employment expense leverage. Higher general and advertising expenses each added 10 bps. Williams-Sonoma, Inc. price-consensus-eps-surprise-chart | Williams-Sonoma, Inc. Quote Non-GAAP operating income was $338.5 million, up from $328.06 million a year ago. The adjusted operating margin was 17.3%, down 60 bps from 17.9% in the prior-year quarter as gross-margin pressure offset expense leverage. We anticipated the adjusted operating income to drop 3.9% year over year and the operating margin to contract 140 bps to 16.5% for the fiscal second quarter.On a GAAP basis, operating income was $448.8 million and operating margin reached 22.9%. During the quarter, WSM recognized $167.8 million of tariff refund income as a reduction to cost of goods sold, partly offset by $47.5 million of vendor concessions and a $10.00 million employee recognition cost. The company excluded these items from non-GAAP results. It also excluded $6.4 million of interest income tied to the tariff refund. Cash and cash equivalents were $1.03 billion at Aug. 2, 2026, compared with $985.8 million a year earlier. Merchandise inventories were $1.45 billion, up 1.0% year over year, net of $29.3 million of deferred tariff refund income recorded as a reduction of inventory. The deferred amount is expected to be recognized as a reduction to cost of goods sold in the third quarter.For the first 26 weeks of fiscal 2026, net cash provided by operating activities totaled $695.9 million, up from $401.7 million in the year-ago period. WSM repurchased $287.8 million of common stock and paid $175.4 million in dividends over the same period. Purchases of property and equipment were $116.4 million. Williams-Sonoma raised its fiscal 2026 guidance after strong year-to-date performance. The company now expects annual net revenues to increase 4.7% to 7.2%, with comparable brand revenue growth of 4.0% to 6.5%. Non-GAAP operating margin is projected to be between 17.8% and 18.2%.The outlook assumes currently imposed tariffs remain in place for fiscal 2026, including Section 232 tariffs and existing and newly announced Section 301 tariffs. It also assumes oil prices stay elevated for the rest of the year and no benefit from tariff refunds or related interest. WSM expects annual interest income of approximately $25 million and an effective tax rate of approximately 26% on a non-GAAP basis. Its long-term targets remain mid-to-high single-digit annual net revenue growth and an operating margin in the mid-to-high teens. Williams-Sonoma currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.The Home Depot, Inc. HD has delivered solid second-quarter fiscal 2026 results, with the top and bottom lines surpassing the Zacks Consensus Estimate. Adjusted earnings were $4.92 per share, up 5.1% year over year from $4.68. The figure topped the Zacks Consensus Estimate of $4.71.Home Depot reaffirmed its fiscal 2026 outlook, calling for total sales growth of 2.5-4.5% and comps growth of flat to 2%. The company anticipates earnings per share to be flat to up 4% from $14.23 in the year-ago quarter. Meanwhile, adjusted earnings per share are also projected to be flat to up 4% from the $14.69 reported in the year-ago quarter.Lowe’s Companies, Inc. LOW reported second-quarter fiscal 2026 adjusted earnings of $4.40 per share, up 1.6% year over year, surpassing the Zacks Consensus Estimate of $4.22. Revenues rose 8.3% to $25,956 million but missed the consensus estimate of $26,135 million.Lowe’s expects fiscal 2026 total sales of $92 billion compared with its prior range of $92-$94 billion. Comparable sales are projected to be flat, versus the previous expectation of flat to up 2%. The revision reflects first-half operating results and current demand trends.Wayfair W reported second-quarter 2026 earnings of 95 cents per share, which beat the Zacks Consensus Estimate of 94 cents. Net revenues for the second quarter of 2026 rose 7.5% year over year to $3.52 billion, surpassing the Zacks Consensus Estimate of $3.47 billion by 1.41%.For the third quarter of 2026, Wayfair expects revenues to grow in the high single digits year over year. Adjusted EBITDA margin is guided in the 6% to 7% range for the third quarter. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Williams-Sonoma, Inc. (WSM) : Free Stock Analysis Report Lowe's Companies, Inc. (LOW) : Free Stock Analysis Report The Home Depot, Inc. (HD) : Free Stock Analysis Report Wayfair Inc. (W) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

Image source: The Motley Fool. Tuesday, Aug. 18, 2026 at 9:00 a.m. ET Vice President of Investor Relations and Treasurer - Isabel Janci Executive Vice President and Chief Financial Officer - Richard McPhail Senior Executive Vice President - Ann-Marie Campbell Executive Vice President of Merchandising - Billy Bastek Operator: Greetings, and welcome to The Home Depot Second Quarter 2026 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Isabel Janci. Please go ahead. Isabel Janci: Thank you, Christine, and good morning, everyone. Welcome to Home Depot's Second Quarter 2026 Earnings Call. Joining us on our call today are Richard McPhail, Executive Vice President and Chief Financial Officer; Ann-Marie Campbell, Senior Executive Vice President; and Billy Bastek, Executive Vice President of Merchandising. Following our prepared remarks, the call will be open for questions. Questions will be limited to analysts and investors. [Operator Instructions] If we are unable to get to your question during the call, please call our Investor Relations department at (770) 384-2387. Before I turn the call over to Richard, let me remind you that today's press release and presentations made by our executives include forward-looking statements under the federal securities laws, including as defined in the Private Securities Litigation Reform Act of 1995. These statements are subject to risks and uncertainties that could cause actual results to differ materially from our expectations and projections. These risks and uncertainties include, but are not limited to, the factors identified in the release and in our most recent annual report, Form 10-K and other filings with the Securities and Exchange Commission. Today's presentation will also include certain non-GAAP measures including, but not limited to, adjusted operating margin, adjusted diluted earnings per share and return on invested capital. For a reconciliation of these and other non-GAAP measures to our corresponding GAAP measures, please refer to our earnings press release on our website. Now let me turn the call over to Richard. Richard McPhail: Thank you, Isabel, and good morning, everyone. Before turning to our results, we want to touch on Ted's temporary medical leave of absence, which we announced last week. We wish Ted a quick recovery and appreciate the support that has been shown by so many Home Depot partners. We look forward to Ted's return in a few months, and we will share any material developments as appropriate. Ann and I are supported by an exceptional leadership team and a dedicated Board and together, we are wholly focused on executing our strategy and winning in our market. Turning to the quarter. Sales for the second quarter were $47.9 billion, an increase of 5.7% from the same period last year. Comp sales increased 1.7% from the same period last year and comps in the U.S. increased 1.3%. Adjusted diluted earnings per share were $4.92 in the second quarter compared to $4.68 in the second quarter last year. Our second quarter results exceeded our expectations and our teams did a great job executing throughout a dynamic environment. Our customers continue to engage in home improvement projects, and throughout the quarter, we saw broad-based demand across the business. In the U.S., our Northern and Western divisions posted positive comps and Mexico and Canada posted positive comps. While consumer uncertainty and housing affordability continue to pressure demand for larger home improvement projects, we remain focused on what we can control, our strategy of driving our core and culture, delivering a frictionless interconnected experience and winning the Pro. With that, I'll turn it over to Ann. Ann-Marie Campbell: Thanks, Richard, and good morning, everyone. Driving our core and culture is at the heart of what we do every day to deliver the best experience for our customers. To do this, we continue to invest in our store experience. Our teams are focused on ensuring on-shelf availability remains at record levels on introducing new and innovative products and deploying technology across the stores to enhance the customer experience. This, coupled with all of our investments in our associate experience through technology-enabled tools, makes it easier than ever for associates to serve customers. And we have seen greater associate engagement, better customer satisfaction scores and stronger sales. A great example of how we are building on the momentum that we are seeing is through evolution of Magic Apron. In addition to our website, now associates and customers can utilize this application in our aisles to navigate our stores more efficiently, find products within seconds and ask questions about products and projects to feel more confident in their ability to complete a home improvement project. Customers feedback has been incredibly positive. In terms of our interconnected experience, we are making progress on a multitude of initiatives including delivery. We know speed of delivery is important to our customers, and today, for in-stock parcel products, over 65% of our deliveries are same day or next day. And we're continuing to get faster. In fact, this month, we launched Express Delivery nationwide with delivery on tens of thousands of products in 3 hours or less. In addition, we've evolved our appliance delivery model to better serve direct purchases. We now stock a select assortment of appliances that can reach our customers next day in certain markets. We are seeing a sales lift in these markets and we'll continue to lean in to broaden these efforts. And we are winning with the Pro. Pro positive comp in the quarter, and we saw strong performance across all our Pro cohorts. This is being driven by the many investments we have made across our systems, capabilities for Pros, product assortment, job lot quantities, delivery, sales teams and specialized services. There is more to do, but it is evident that we are serving our Pros better than ever, and this partnership with our customers creates a sticky and lasting relationship. In closing, I'd like to thank all of our associates for their hard work this quarter. I'm pleased to announce that based on our first half results, 100% of our stores qualified for Success Sharing, our profit sharing program for hourly associates. These results were a testament to our investment across the business and our associates' focus on customer service. With that, I'll turn it over to Billy. William Bastek: Thank you, Ann. Good morning, everyone. I want to start by also thanking all of our associates, suppliers and supply chain partners for their ongoing commitment to serving our customers and communities. As you heard from Richard, our performance during the second quarter exceeded our expectations as customers continue to engage in smaller, repair and maintenance projects. In the second quarter, we saw a broader engagement with 13 of our 16 merchandising departments posting positive comps, including storage, electrical, hardware, power, plumbing, indoor garden, kitchen, paint, bath, outdoor garden, building materials, flooring and millwork. During the second quarter, our comp average ticket increased 2.8% and comp transactions decreased 1%. Big ticket comp transactions, or those over $1,000 were positive 2.4% compared to the second quarter of last year. We were pleased with the performance we saw in portable power and patio. However, larger discretionary projects remain under pressure. During the second quarter, Pro posted positive comps and outperformed DIY. We saw strength in DIY across many spring-related categories, including live goods, mulch, soils, hardscapes, storage, patio and grills. And for Pro, we saw strength across many Pro-heavy categories like portable power, decking, dimensional lumber, pipe and fittings, fastener, hand tools and concrete. Turning to total company online comp sales. Sales leveraging our digital platforms increased 11% compared to the second quarter of last year. This is the fifth quarter in a row with double-digit year-over-year growth driven by our ongoing investments across our interconnected platforms. Delivering the best interconnected experience is a key component of our strategy, and our faster delivery speeds are resonating with customers and driving greater engagement. As Ann mentioned, we have made meaningful progress with our delivery speeds. This progress extends beyond parcel products. For big and bulky products, we've also increased speed of delivery significantly. To put this in perspective, over the last 18 months, we've reduced our delivery lead times approximately 45% in the U.S., which is leading to greater conversion with our customers. And now approximately 55% of our big and bulky deliveries on products we stock are delivered within 2 days. Going forward, we will continue to further optimize fulfillment across all of our assets to better serve our customers and enhance the interconnected shopping experience. During the second quarter, we leaned into products and projects that are resonating with our customers. We focused on innovation, expanded assortments and reduced friction points, all to deliver a compelling value proposition. For example, we continue to see tremendous success in power. In fact, Q2 was a record-setting sales quarter for portable power tools. As we've mentioned before, we have built a strong competitive advantage with our extensive lineup of battery-powered platforms that allows us to continue to grow share in these categories. Another category where we continue to see strong performance is storage as we lean into our branded systems and expanded assortments. Milwaukee PACKOUT, our largest national loyalty brand for Pros has the industry's most versatile and durable modular storage system with solutions for toolboxes, organizers, racks and many more. These modular units provide our Pros with easy access to all their tools at their job sites and at their homes. And in appliances, we recognize that in the current environment, there is a growing shift towards direct purchases which is why we have been making advancements in our supply chain capabilities more easily and quickly get product to the customer. As a result of our investments, we are now able to provide next-day delivery coverage on key SKUs to nearly 60% of the population. We are encouraged with the positive performance we are seeing in these markets, and we'll continue to expand population coverage and SKUs throughout the year. In addition, we are expanding our relationship with USG across our business. The Home Depot will be the exclusive launch partner for USG's newest innovation, ultralight tough gypsum panels in the big-box retail channel, further solidifying our leadership as the go-to retailer for Pro preferred building materials. This product stands out as the lightest and most durable half-inch panel in the market. We're also accelerating growth with another key Pro exclusive. RUCO joint treatments. RUCO has driven strong Pro loyalty with us for decades, and we are excited to expand their product lineup across our stores. As we look ahead to the third quarter, our merchandising organization remains focused on being our customers' advocate for value. This means continuing to provide a broad assortment of best-in-class products that are in stock and available for our customers when they need it. With that, I'd like to turn the call back over to Richard. Richard McPhail: Thanks, Billy. I'll now spend a few minutes on our financial update for the quarter. In the second quarter, total sales were $47.9 billion, an increase of $2.6 billion or 5.7% from last year. During the second quarter, our total company comps were positive 1.7% with comps of positive 1.2% in May, positive 1.5% in June, and positive 2.3% in July. Comps in the U.S. were positive 1.3% for the quarter, with comps of positive 0.5% in May, positive 1.2% in June and positive 2.2% in July. In the second quarter, we received IEEPA tariff refunds, which reduced our cost of goods sold by $685 million. While these refunds were received in the second quarter, they are being used to offset unplanned and rising cost pressures throughout the year. In the second quarter, our gross margin was 33.7%, an increase of approximately 25 basis points from the second quarter of last year, which was primarily driven by the benefit from the IEEPA tariff refund, largely offset by incremental cost pressures related to fuel, energy and other product input costs as well as a change in mix as a result of the GMS acquisition. Our underlying gross margin performance was in line with our expectations. During the second quarter, operating expense as a percent of sales increased approximately 45 basis points to 19.4% compared to the second quarter of 2025. Our operating expense performance was in line with our expectations. Our operating margin for the second quarter was 14.3% compared to 14.5% in the second quarter of 2025. In the quarter, pretax intangible asset amortization was $178 million. Excluding the intangible asset amortization in the quarter, our adjusted operating margin for the second quarter was 14.7% compared to 14.8% in the second quarter of 2025. Interest and other expense for the second quarter decreased by $26 million to $524 million. In the second quarter, our effective tax rate was 24.5% compared to 24.2% in the second quarter of fiscal 2025. Our diluted earnings per share for the second quarter were $4.79 compared to $4.58 in the second quarter of 2025. Excluding intangible asset amortization, our adjusted diluted earnings per share for the second quarter were $4.92, an increase of 5.1% compared to the second quarter of 2025. During the second quarter, we opened 3 new stores, bringing our total store count to 2,364. At the end of the quarter, merchandise inventories were $26.8 billion, up approximately $2 billion compared to the second quarter of 2025 and inventory turns were 4.5x, down from 4.6x last year. Turning to capital allocation. During the second quarter, we invested approximately $880 million back into our business in the form of capital expenditures. And during the quarter, we paid approximately $2.3 billion in dividends to our shareholders. Computed on the average of beginning and ending long-term debt and equity for the trailing 12 months, return on invested capital was 24.8%, down from 27.2% in the second quarter of fiscal 2025. Now I will comment on our outlook for fiscal 2026. Our performance during the second quarter exceeded our expectations. We are encouraged with the underlying demand we see in the business, and we are reaffirming our fiscal 2026 guidance. We expect to continue to grow our market share and for our comp sales to range between flat to 2% growth, with total sales growth of between approximately 2.5% and 4.5%, reflecting the contribution of the GMS acquisition, new stores, new branches and tuck-in acquisitions. For the year, we expect SRS to deliver mid-single-digit percent organic sales growth. We plan to open approximately 15 new stores and 40 to 50 new SRS branches. Our gross margin is expected to be approximately 33.1%. Further, we expect operating margin of approximately 12.4% to 12.6% and adjusted operating margin of approximately 12.8% to 13%. Our effective tax rate is targeted at approximately 24.3%. We expect net interest expense of approximately $2.3 billion. We expect our diluted earnings per share and adjusted diluted earnings per share to both increase approximately flat to 4% compared to fiscal 2025. We plan to continue investing in our business with capital expenditures of approximately 2.5% of sales for fiscal 2026. We believe that we will continue to grow market share as a result of our competitive advantages and ongoing investments by delivering the best experience in home improvement. Thank you for your participation in today's call. And Christine, we are now ready for questions. Operator: [Operator Instructions] Our first question comes from the line of Chuck Grom with Gordon Haskett. Charles Grom: Billy, I was hoping you could comment on the broadening of the category strength in the quarter. I think you called out 13 areas. I guess, double-click on where you're seeing the strongest parts of the business and the outlook in the back half? William Bastek: Yes. Thanks, Chuck, for the question. Yes, as I mentioned in the prepared remarks, we saw 13 categories of our 16 positive comp. And we had -- if you think about the core of our business, electrical, plumbing, hardware, tools, both in-store and online. We had great performance online. I mentioned the double-digit positive comps. Those businesses were even greater than the online comp. But really the middle of the store and to put that in context, if you look at our top 20 businesses across the store that drove a positive performance, only 3 of those 20 were actually in the seasonal business. So we feel really good about what's happening in the middle of the store and certainly a much broader-based impact, as we mentioned in the prepared remarks. Charles Grom: Okay. That's great. And then, Richard, just on the tariff refund of $685 million. Can you speak to how much of that was for inventory that flowed through the P&L in 2Q versus how much was flowed through the P&L in prior quarters? And I guess are you expecting any more refunds to help you in the back half of the year? And then when we think about next year and the lap of that $685 million, how should we think about that in terms of the gross margin impact? Richard McPhail: Yes. Great. Thanks for the question. So let me just -- let me give you some numbers to clarify the tariff refunds and then we'll talk about how this works through the year, and then into next year. So we received $730 million in tariff refunds during the quarter. We received all those right around the end of the month of June. And those refunds represent the vast majority of what we would expect to receive for those IEEPA refunds that we filed for. There's an immaterial amount that we expect we may receive in the back half. Of that $730 million, $685 million reduced our cost of goods sold as they applied to products that had already been sold. The remaining $45 million remains in inventory and will hit the P&L as we turn inventory through the remainder of the year. And so let's just talk about the shape of the year, how this impacts the shape of the year because your question is lapping into next year. So thinking about how they impacted the quarter. The $685 million reduction in COGS was about 145 basis point gross impact to margin. As we said in our prepared remarks, those benefits offset increased costs that we've seen in our cost base of about 60 basis points. So you can think about the net benefit of refunds in our P&L being around 85 basis points. And just to tie out the numbers on gross margin real quickly, we also had the mix impact of the GMS and Mingledorff's acquisitions have an impact of about 60. So net benefit of tariff of 85 basis points, mix impact of 60, so that gives you the year-over-year increase of about 25 basis points. So just talking about the nature of refunds, while we received those refunds in the second quarter, we've also experienced unplanned pressure from fuel, energy and other product input costs that we expect will fully offset the benefit from tariff refunds over the year. And so if you think about the shape of the P&L, while those refunds are going to go to offset costs in, call it, Q3 -- sorry, Q2 and Q3 because we book all of the refunds when we receive the cash, you are going to see a little bit of a P&L shift between Q2 and Q3. And Billy, maybe just talk about the environment we're in and how we've looked at tariffs. William Bastek: Yes. I mean you mentioned, Richard, some of the inputs, the incremental inputs to what we planned coming into the year. Certainly, we've seen incremental cost pressure related to fuel, energy, other product inputs, you can think of commodities with resin and metals. So we didn't have that in our plan as we came into the year, so those are incremental. And then the other piece I would mention that maybe gets overlooked is there's been some changes in tariffs incrementally relative to our planning process coming into the year, Section 101 expired in July, it was updated in February, expired in July and replaced with the Section 301 piece. So those were actually also incremental to what we had forecasted coming into the year. So we're doing a great job of offsetting that. The merchant is doing a great job with our supply chain teams, but those are incremental pressures that we did not have as part of our outlook for 2026. Richard McPhail: And so Chuck, just to get back to your question, because we expect the tariff refunds to be fully offset by the incremental cost pressure that Billy called out. We've reaffirmed our guidance for the year. And so while you might see some timing -- some lapping next year on a quarterly basis that we'll need to take you through, there shouldn't be a lap from an annual perspective when we head into 2027. Operator: Our next question comes from the line of Scott Ciccarelli with Truist. Scot Ciccarelli: Two questions. First, just one more clarification on the comments on the cost pressures. Are we to assume an incremental 60 basis points of pressure in 3Q and 4Q at least relative to initial plan? And then second, while higher rates, which obviously we're seeing in the markets right now, certainly don't help. Based on your internal models, do higher rates actually hurt here? Or do you think most of the damage has already been done? Richard McPhail: Sure. Thank you, Scott. I think you should think about this, and the way we're thinking about it is, tariff refunds are going to offset costs in really a period sort of over Q2 and Q3. And I think what we would expect to see is that our gross margin rate in the fourth quarter will likely be right around flat compared to last year. So this is sort of a Q2 and Q3 dynamic, which obviously just has a little complication of the timing of the receipt of the refunds. With respect to rates, I think we -- as we've said over the past few years, housing turnover, just as one -- kind of one point in the economy that we watch has been at historical lows. It has never been lower as a percentage of the housing stock and every time we've seen it hit the sort of 3% of the housing stock changing hands over history, it's always bounced up relatively quickly. We've seen housing turnover at these low levels for 4 years now. So I don't think that we've seen much volatility from the recent increase in rates. We do know that when we see step downs, we begin to see a little bit of life come into housing, but there's just no sign of an inflection point at this moment. Operator: Our next question comes from the line of Seth Sigman with Barclays. Seth Sigman: Wishing Ted a quick recovery from our side, too. I wanted to ask about the gap between total comps and Home Depot U.S. comps. It looks like it was the widest gap in a couple of years. Can you talk a little bit more about that? And perhaps separating SRS, what's happening there? Is that business back to positive in terms of comps and then also just the international performance? Richard McPhail: Great. Yes. Look, we were really pleased to see -- so that gap between total company comp and the U.S. First, it reflects FX benefit of about 25 basis points. But we also had fantastic performance internationally and at SRS. Ann, maybe let's talk about what we're seeing internationally. Ann-Marie Campbell: Yes. No, both Canada and Mexico outcomped the company, which was fantastic. And I know we called out Canada last quarter, but it was great to see the acceleration in Canada. And for the half, they just had a fabulous quarter and half, with a positive comp in transactions and positive comp in units, which is fantastic. And Mexico has just been on this great run, and they continue to be on a great run, and we are just continuing to see great results from that team as well. So this was just not a U.S. performance this was across the company. So really proud of the entire team, not only in the U.S., but Canada as well and Mexico. Richard McPhail: Absolutely. And SRS comped above the company average this quarter. They were positive comp in all verticals, and it looks like they're taking significant share. So we couldn't be more pleased with that acquisition and how we're all working together. Seth Sigman: Okay. Great. And then as we think about the comp guidance for the full year, I think it implies a pretty wide range of scenarios for the back half. The midpoint looks like it would be similar to the first half but below the Q2 trend despite easier comparisons. So I guess, how are you thinking about the scenarios and anything else, any other building blocks to think about the comps for the second half of the year? Richard McPhail: Sure. Well, look, we are really encouraged by the performance by our teams this quarter and exceeded our expectations for the quarter. We have had a start to Q3 that's really consistent with the demand we saw in the second quarter. But we know what the environment is out there. We have a lot of volatility. As Billy said, we've got unplanned cost pressure that's significant in the market, and we have frozen housing conditions. And so with all of that, we're focused on controlling what we can control. We do think that the range remains appropriate. We think that, obviously, the further we go into the year, the extremes of the range become less likely, but we're focused on controlling what we can control. Operator: Our next question comes from the line of Michael Lasser with UBS. Michael Lasser: We're all trying to figure out how much of the Home Depot's performance in the second quarter was a reflection of the actions that the company is taking and idiosyncratic to The Home Depot versus reengagement from the consumer in home improvement. And so with that being said, if you could slice and dice it maybe two simplistic ways. One is your comp accelerated from the first to the second quarter by 110 basis points, again, simplistically. How much of that do you think was accelerated market share gains versus the home improvement market accelerating a touch from the first to the second quarter? And second, are you seeing evidence of the consumer reengaging through things like app downloads, increased quotes through the bid room and/or more usage of the Magic Apron that gives you some degree of confidence that the bottom has been reached in home improvement demand and it's going to get better from here? Richard McPhail: Thanks, Michael. So look, Ann and Billy are going to bring this to life. But the headline here for us this quarter is that our teams took share in a difficult environment. We're confident the investments that we've made are positioning us like no one else in the market and when we look out at the broader market, all the data that we see, what we hear from other constituents in the market is that there is -- there remains tremendous pressure on our sector and on anyone connected with housing. So when we look at our results with that overlay, we're confident we're taking share. And it really -- it all starts in the stores. And so Ann, maybe let's just talk about what we're doing. Ann-Marie Campbell: Yes. No, thanks. Michael, we're seeing customers respond just so positively to the initiatives we're driving to further empower our associates and deliver great customer service. And to be honest, it's simple, but it's important. It starts with the right product on the shelves in the quantities and specification the customer wants. And we have been on this journey to improve our on-shelf availability and it remains at record levels. And why is that so important for us? Because it's is kind of foundational to driving great customer service. And for me and for the team, a high level of operational reliability, especially as stores play a more important role in delivery and fulfillment of our interconnected experience. But when you think about connectivity with our digital assets, it's better and faster fulfillment option. It's about having the best products and brands that customers want. And Billy and team have just been laser-focused on driving innovation across the board and their continuous effort, it's just been fantastic. So Billy, innovation wins every day and your merchants are just fabulous. William Bastek: Well, we appreciate that. No, Michael, it's a good question. We ask ourselves that a lot. We're probably tougher critics on ourselves than anybody actually. But there's a number of different factors. I would go back to my prepared remarks. I mean, we are really pleased with our results, and we saw great strength across our entire business. And there's certainly -- there's still a lot of pressure, obviously, on larger projects, discretionary finance projects. I mean that's a continued narrative that we're still seeing in the business. But we just announced Express Delivery today nationwide across all stores that Ann talked about. And a number of different things I mentioned big and bulky, and a lot of those come from out of our stores. So our store associates, our supply chain associates are doing an incredible job, and we're just trying to meet customers where they are and it all starts in the middle of that store. And so we're really thrilled with the performance and the work that the teams are doing and hats off to the merchant group and all the work they're doing with our vendor partners. Ann-Marie Campbell: And you called out, Michael, Magic Apron and Jordan is in the room. And I think that is a really important enabler when we think about taking friction out of the experience, both for the associate and customer. So Jordan, the team have just had just fantastic feedback across the board. So you want to kind of lean into just the Magic Apron component? Jordan Broggi: Yes, absolutely. I mean, Michael, you referenced online and to Billy's comments, online grew 11% in the quarter, and we had an increase in traffic and an increase in conversion. You referenced the app. The app was our highest growth surface on all of our digital surfaces, and that was exciting. And that's ahead of the planned refresh that we told you we've got coming in the back half, which is great. And then on Magic Apron, we're getting millions of questions per month now on Magic Apron that has continued to grow. It's been a great tool for our customers. We've had great feedback. And Ann's references this morning were really to a more localized version of Magic Apron that understands the store context and where you are in the store because the nature of your questions and the nature of the help that we can give you is better if we understand, hey, you're in this store, let's talk about the inventory that's in the store first, and so on. So really excited about the engagement digitally, for sure. Richard McPhail: Jordan, while we're on it. We've made a lot of investments and Billy called out Express. Maybe just -- we had an exciting release this morning... Jordan Broggi: Yes. So we did put out a press release this morning on Express Delivery. And I'd say there, we've been working for the past couple of years on building the fastest fulfillment in home improvement. And that's been a joint effort across merchandising stores, supply chain, technology. We've talked to you about ship from best location as being a technology that we've leveraged to really bring all of the assets together for fast delivery. As Billy referenced, we're 65% now, same day, next day on parcel that we stock, and 55% 2-day on both big and bulky. And then this morning, what we announced is Express, we've had this in some markets for several months, but we just announced a nationwide rollout. This is on homedepot.com, a customer can pay a small flat fee and get delivery within 3 hours. Now the majority of those deliveries are actually happening in less than 1 hour. And so we'll continue to work that promise time down to customers in the months ahead, but super excited about that. You could be a homeowner working in the yard, you need one more bag of seed or one more bag of fertilizer to finish, get a quick delivery. You could be a Pro on the job site, needs some plumbing or other products. And we're really excited about what that does for customers to add on to our broader delivery speed efforts. Michael Lasser: Thanks for all that helpful information. My follow-up question is on the gross margin. There's some discussion in the market this morning around did Home Depot miss the consensus profitability forecast for the second quarter if one were to exclude the tariff refund. So with that being said, Richard, if you could walk us through the factors that led to 117 basis points of gross margin pressure, excluding the tariff refund in the second quarter, that would be super helpful to mention what is going to be ongoing versus what is one-time in nature? Richard McPhail: Sure. Look, Michael, so I first want to talk about our consistent ability to deliver results and maintain stable gross margin. And we'll come back to that. But if you look at 2025 -- let's take 2025 as an example, we had a significantly different cost environment during the year than we expected when we entered 2025. And if you look at our results, we hit our gross margin plan on the button if you put acquisition mix impact aside. And I'd say, in fact, the history of Billy and his team over the last 5-or-so years is that we've had unprecedented volatility in our cost environment and yet we have delivered year after year after year. What tariff refunds allowed us to do was offset increased costs in our environment, and it allowed us to maintain value in the market. If you think about it, tariff refunds are a market-borne benefit, they're not unique to The Home Depot. And so you would expect when you see market-borne benefits or market-borne pressures, we are using those benefits to offset costs and the market is seeing that in the form of values that have been maintained through the quarter in the face of a pressured cost environment. So just going through the -- you called out the math, I'll just call it around 120 basis point pressure. 60 basis points of that is in the form of increased cost that we were able to offset with tariff refunds. And then the other 60 basis points was simply the mix impact of GMS and Mingledorff's. Recall that we acquired GMS in September of '25. And so that's just a lap of GMS not being on our books in Q2 of last year. So I'm confident and Billy is confident, had we not had tariff refunds, we would have exceeded our expectations for the quarter regardless. It just came in a different form. Billy, anything to add on that? William Bastek: No. Operator: Our next question comes from the line of Kate McShane with Goldman Sachs. Katharine McShane: We wanted to focus our question on ticket. We know this is one of your stronger comps, but it did appear all ticket-led. Can you just speak to the dynamics within ticket? And just how much was from the same SKU inflation that you may have seen during the quarter and anything else that may have contributed during Q2? William Bastek: Yes. Thanks, Kate, for the question. There was some same SKU, AUR, as we've talked about previously on calls based on some of the cost inputs and so forth. We also saw categories, as I mentioned, refrigeration, portable power, patio, larger ticket items, you think single purchase items, not financed, but think more single purchase items that really help drive that as well. We had some intra-category mix with people trading up inside of categories. And then you've got, kind of, mix as part of that, just Q2 being the season that it is and selling more riders as one example. But really think of single purchases being the outsized impact, as I mentioned, our comps of over $2,500. Katharine McShane: Okay. And just a follow-up question to that. I know in an answer to another question, you talked about the extremes of the comp, but if that ticket were to hold for the rest of the year, and traffic were to get slightly better, wouldn't we be, kind of, at the higher end to maybe above the highest end? And what would that mean? And what would the scenario be in which you could see that? William Bastek: Well, that's certainly -- yes, Kate, that's certainly the math of it, as you mentioned, for sure. There's still so much volatility, as Richard mentioned, that we think we gave the prudent guidance and we'll be back at the end of Q3 and give a broader view for the end of the year. Operator: Our next question comes from the line of Christopher Horvers with JPMorgan. Christopher Horvers: So following up on the sort of underlying demand of the business, there are always a lot of weather impacts in the first half of the year. How do you look at the monthly performance during 2Q given the softer start where weather probably hurt, but you also accelerated stacks in July. So as we try to tease out the right underlying trend, how do you think about that? And related to that, on the SRS side. I think SRS comped below the company average in the first half, I think they were up in 2Q, down in 1Q. So given that mid-single-digit comp expectation, does the gap between the U.S. and the total comp actually widened in the back half of the year given it looks like SRS becomes more accretive to the total? William Bastek: Yes, Chris, it's Billy. Let me take the first part, and then we'll circle back on the SRS piece. As it relates to the monthly cadence and you've mentioned some of the weather pieces, there's actually just 2 really small pieces that drove that. In 2025, we typically get 1 week a year in the country that has significant heat. It's as simple as this. In 2025, that happened at the end of June. So that would have been in our period 5 number. And then in 2026, this past quarter, that happened in the July comp. So that shift in and of itself would have normalized both the June and July comps. And then I'll just go one step further as it relates to May. And obviously, you have the spring portion there that's heavily driven by the North. But week 14, which obviously would have been our first week of the quarter, we saw significantly bad weather everywhere across the country. And when you extract just that week out from May, May was literally the exact same comp performance as we had in June and July when you just do the offset for ACs. So very consistent across the board. And as I mentioned earlier, only 3 of our 20 top classes of business were seasonally related for the balance of the quarter as well. Richard McPhail: And as far as SRS goes, it's true that they have accelerated through the year. They -- in the back half of 2025, we saw the least amount of storm activity in many years, and SRS was pressured by the lack of that activity. And you could actually see that in statistics that are published out in the market. I think shingle shipments, Billy, were down 27%, 29% or something like that in the fourth quarter? William Bastek: Yes. That's right. Richard McPhail: But look, we're early in the second half, and we'll see how that all pans out. We do expect that SRS will deliver mid-single-digit organic growth for the year. But I think it's also important to point out things that we're excited about. It's not just SRS by itself, but how all of this is coming together. And look, when you talk about the Pro, it really starts in the stores. And when we think about SRS, Ann, maybe let's talk about what we're seeing within the center of QuoteCenter -- sorry, within the stores, QuoteCenter. Ann-Marie Campbell: No. Super excited about what SRS brings to the table and what we are enabling in the store. So for many of you, you know QuoteCenter is our marketplace that has historically allowed our stores to enable larger product sales through this third-party network of distributors. Now that we own SRS and GMS, to your point, Richard, our Pro and sales team have access to the SRS full catalog and now we're able to close sales within The Home Depot family, which is just fantastic, giving our customers this higher level of service capability than before. And just a couple of stats, I think, which is pretty, kind of, exciting, is that sales through the QuoteCenter facilitated by SRS is growing rapidly and the adoption is fantastic. And within the last 12 months, 90% of our stores have closed a sale through SRS. And so when you start there, and our associates in store understand the full catalog and the capability that SRS brings, it just brings confidence to that entire team, and we're able to leverage the entire ecosystem. Richard McPhail: And so it really -- it starts with the stores and then expands to really the -- all the components we've built in Pro and just specifically at SRS, again, we're capturing significant incremental sales to homebuilders, commercial customers and remodelers across the verticals because you think about the combination of product catalog across Home Depot and SRS like Ann pointed out, and now GMS and HVAC, this expanded catalog is resonating, and our Pro customers tell us that what we're building is unique and it's truly compelling for them. Christopher Horvers: And my follow-up is, as you think about the tariff dynamics in the second quarter and how it plays out into the back half and into 2027, was there any SG&A shift into 2Q that is some of the offset to the gross margin -- negative gross margin headwind in the third quarter? And then as you get to '27, the message is we're starting clean into '27, so we're going to build off where our guide is currently. So is the message that ultimately should oil prices and energy prices stay here, we'll do something, whether it's pricing or efficiencies that will ultimately mitigate that, so it's not a divot in the out year? Richard McPhail: Thank you, Chris. So that's right. I think the most important point you made there is that we've reaffirmed guidance and our jumping off point from the end of the year is a clean jumping off point. With respect to Q2 expenses, I think we gave the indication earlier this year, expenses are going to be a little bit lumpy through the year. We had FIFA marketing expense, which wound up being an incredible campaign for us, by the way. And so I wouldn't really put much into the expense over the year, that will likely land exactly where we anticipate it would have. But look, we're accustomed to managing any cost environment, right, Billy? William Bastek: Yes. I mean this almost seems normalized a little bit from where we've been historically and certainly in 2025. I'm not sure all of the teams feel that way. But listen, we've got a great track record of being able to manage that inflationary environments, deflationary environments and feel great about our ability to be able to create value for our customers every day, the most important thing, and continuing to enhance the capabilities that we've talked about today and work towards that frictionless customer experience. Operator: Our next question comes from the line of Zhihan Ma with Bernstein. Zhihan Ma: Just a follow-up on the ticket side of things. As you start lapping some of the tariff-driven price increases from last year, but obviously, you're also facing continued cost headwinds. How do you think about AUR for the back half of the year? And is there going to be any need for price reinvestment? William Bastek: Yes. Thanks, Zhihan. I think that, that's factored into our guide for the back half of the year that Richard talked about a little bit earlier. So we don't see any changes from what we've already communicated. Zhihan Ma: And a longer-term question, you recently announced an organizational realignment. I think a couple of weeks ago, could you just share a bit of color on why the changes and then why now? Richard McPhail: Yes. Look, we're always evolving to better align our organization around our strategy. And these changes are part of what we do to evolve, they'll allow us to work smarter, move faster and innovate more quickly. Operator: Our final question comes from the line of Zach Fadem with Wells Fargo. Zachary Fadem: So my first question is on cross-sell between SRS and GMS. You've talked about $400 million for the year. My first question is how you would expect that to build through the year? What did you see in Q2? What are the expectations in the second half of the year? Richard McPhail: Well, that's the amount we expect through the year. But I think it's important, it's not just among SRS and GMS. As Ann referenced, that's cross-sell, we expect across the entire system. And it actually -- I think you need to think about Pro starting in the store and us penetrating more deeply into the wallet of that in-store Pro. And Ann, maybe just a comment on that... Ann-Marie Campbell: No. I do think that's where we start because the vast majority of our sales come from our in-store Pro and we have to win with them every day. And so we've talked about this over the past few years that we have evolved some of the things we do in-store, not only our staffing model, but we've provided tools and technology for Pro Desk to really enable a more effective experience for our associates and the Pro they serve. And we know our ability to grow the share with the Pros is by adding capabilities to win more of their complex purchases. And we're seeing traction with those Pros who interact with these capabilities. So it's not just about SRS or one component. It's about the entire ecosystem that really enables us to make a difference and helping drive momentum. And I think this is super important because Mike and team just continue to work on these capabilities. And Mike, do you want to just add some of the things that you guys are doing? Michael Rowe: Yes, sure. I mean, as Richard and Ann both pointed out, we continue to see very steady progress and success in our Pro business from the investments made in the Pro ecosystem. Notably, we see advances made in our investments in order management and delivery capabilities. This is pretty evident by us achieving the highest levels of on-time and complete for flatbed and box truck deliveries along with the customer satisfaction scoring that we're seeing -- that we saw this past quarter. And these come as a result of the investments that Ann talked about in things like self-service site instructions along with investments in capturing our Pros business hours of operations and continued advances in delivery tracking capabilities, which help around visibility and transparency. And on top of this, the investments in our B2B experience are resulting in outsized online growth with our Pros. And that includes the increasing use of our Project Planning tool, which helps us organize and stage deliveries for larger, more complex Pros. We're also seeing Pros build material lists and purchase more with the use of our AI-powered Material List Builder, and we continue to invest in search and our B2B experience along with improvements to the app, making it much more responsive and faster. So these capabilities allow us to earn a greater wallet share with the Pro. And coming all the way back to some of the specifics of your question, Zach, and Ann talked about QuoteCenter and the success that we've seen there. We've had success in the past, working with HD Supply and the purchase card that their customers use inside of our stores, and we've started to roll out the SRS purchase card as well to be able to use in our stores. And as you pointed out, with things like national production homebuilders, SRS itself leveraging GMS in terms of those relationships in the past. We've seen a lot of success with this year. Richard McPhail: So just to -- thank you, Mike, and to wrap it up. Look, the teams across Pro have never worked more tightly together. We're seeing great momentum, and we think we're building something unique in the marketplace that's never existed before, and our customers tell us it's resonating with them. And that's why we think we've seen the success we have so far this year. Zachary Fadem: Really appreciate all the color. And just a quick follow-up because I don't want to belabor the gross margin question too much, but just to iron out the confusion bridging the gap from Q2 to the second half of the year. We know tariff refund, that benefit rolls off from Q1 to -- Q2 to Q3, that roughly 60 basis points of GMS mix pressure, that also rolls off. I just -- could we help understand whether the 60 basis points of fuel and freight is transitory versus something like a freight contract that would enter the base for a year or longer? Richard McPhail: You're mostly talking about market-borne pressure incrementally, kind of across product input costs and across fuel and energy. But just maybe to answer your question specifically, since we've had a couple of questions on it, the timing of the refunds again, created a timing benefit in gross margin that you're likely going to see offset to a degree in Q3, right? So the benefit was seen in Q2, we are able to use that economic benefit to offset costs and that offset is largely a Q2 and Q3 kind of dynamic. And then, again, just to repeat it, by Q4, we expect that we will see our gross margin to be relatively flat versus last year. Operator: Ms. Janci, I'd like to turn the floor back over to you for closing comments. Isabel Janci: Thank you, everyone, for joining us today. We look forward to speaking with you on our third quarter earnings call in November. Operator: Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day. Before you buy stock in Home Depot, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Home Depot wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $429,223!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,317,883!* Now, it’s worth noting Stock Advisor’s total average return is 965% — a market-crushing outperformance compared to 212% for the S&P 500. Don't miss the latest top 10 list, available with Stock Advisor, and join an investing community built by individual investors for individual investors. See the 10 stocks » *Stock Advisor returns as of August 25, 2026. This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability. The Motley Fool has positions in and recommends Home Depot. The Motley Fool has a disclosure policy. Home Depot (HD) Q2 2027 Earnings Call Transcript was originally published by The Motley Fool

Walmart is spending billions on a price war, but its latest earnings call revealed the real debate is whether a new profit engine or a one-time windfall is footing the bill. While management raised its guidance for the year, the analyst Q&A kept circling a single, critical question: is the company’s aggressive new price war funded by a durable shift in its profit model, or is it a temporary sugar high from a one-time, $2.9 billion tariff refund? Who Is Paying For This Price War? The central tension is that Walmart (WMT) is using a large windfall to fund an equally large price investment, dramatically increasing its “rollbacks” to 11,000 items. The worry, put squarely to management, is what happens next year when that money is gone. The risk for investors is that the current market share gains are being bought with temporary funds, setting up a painful comparison in 2027. Management’s answer was direct and pointed to a fundamental change in the business. CEO John Furner explained that a new profit engine is kicking in, pointing to the way marketplace, advertising, and membership businesses now reinforce each other. Are The Price Cuts Actually Working? Spending billions to lower prices only works if customers respond, and the question analysts pressed on was whether there's a lag before that response shows up, or whether the investment is paying off in real time. The concern is that in a tough consumer environment, price cuts might not be enough to meaningfully change behavior, making the spending inefficient. Management's response framed the strategy as a long-term play. They acknowledged there is a "lag" before the full "cumulative benefit" of lower prices is felt. The first thing you see is a lift in units and transactions, which the company saw this quarter. The real prize, however, is durable market share gains, particularly in food. Management sounded confident that the share gains they are seeing now will stick, reinforcing the value of their everyday low price model over time. The One Number That Settles The Debate Ultimately, management made a convincing case that its new, more profitable business mix is designed to permanently fund a more aggressive price stance. They answered the “how” with hard numbers on the growth of their advertising and marketplace platforms: global advertising revenue grew 38%, with Walmart U.S. advertising (including VIZIO) also up 38% and Walmart Connect up 43%. We also took a closer look at the premium on WMT stock in a separate piece. What remains open is whether the market share gains will prove as durable as they believe once the shock of the price cuts wears off. The answer will show up in one specific metric. In its guidance, management stated that Walmart U.S. sales growth is expected to improve in the third quarter as the price investments gain traction. If that number accelerates as promised, it will be the strongest evidence yet that the new model is working. If it stalls, the questions about the temporary nature of the tariff-funded price war will only get louder. One step out from the single name: a consumer staples ETF like XLP spreads these company-specific questions across the whole consumer staples group, so no one answer can sink you. It is still a concentrated bet on that one theme, though, which is exactly the gap the portfolio below closes. Pair Sharp Questions With Real Diversification Pressing on the questions management would rather skip is how good investors avoid nasty surprises. But it is a single-stock exercise, and even a sector ETF only widens the bet to a single theme. Real diversification means spreading across sectors, so one industry's bad year does not define yours. The Trefis High Quality (HQ) Portfolio handles that second half: about 30 quality, cash-generative companies drawn from across the market, selected on margins, cash flow, and balance-sheet strength rather than one theme's momentum, then sized and re-balanced with care. The payoff is a track record of outpacing a benchmark that combines the three major indices - the S&P 500, S&P Mid-cap, and Russell 2000. Keep asking the hard questions, without pinning your future to any single answer, or any single industry.

In August 2026, Home Depot reported second-quarter sales of US$47,861 million and net income of US$4,766 million, reaffirmed its fiscal 2026 guidance, declared a US$2.33 quarterly dividend payable on September 17, 2026, and temporarily reassigned CEO duties during Edward Decker’s medical leave. These developments, including a one-time tariff refund that supported margins and ongoing dividend continuity, have sharpened investor focus on how sustainable Home Depot’s earnings power and operational resilience may be in a challenging housing market. Next, we’ll examine how the strong earnings supported by a one-time tariff refund reshape Home Depot’s existing investment narrative and risks. The future of work is here. Discover the 37 top robotics and automation stocks leading the charge in AI-driven automation and industrial transformation. To own Home Depot, you need to believe its scale, Pro relationships and supply chain investments can keep earnings resilient even as big-ticket remodels stay under pressure. The latest quarter, helped by a US$685 million one-time tariff refund and solid sales, supports that resilience but does not materially change the near term catalyst of execution on Pro-focused growth initiatives or the key risk that larger discretionary projects remain weak in a tough housing backdrop. The reaffirmed fiscal 2026 outlook, calling for total sales growth of about 2.5% to 4.5% and flat to low single digit EPS growth, is central here because it shows management holding the line on expectations despite the tariff boost. For investors, that guidance keeps attention on whether Home Depot’s heavy spending on store upgrades, delivery and Pro ecosystem expansion can offset cost pressures and softer big-ticket demand without eroding margins further. Yet investors should be aware that persistent softness in larger remodeling projects and rising cost pressures could still... Read the full narrative on Home Depot (it's free!) Home Depot's narrative projects $187.2 billion revenue and $17.3 billion earnings by 2029. This requires 4.0% yearly revenue growth and a $3.3 billion earnings increase from $14.0 billion today. Uncover how Home Depot's forecasts yield a $370.18 fair value, a 10% upside to its current price. Two Simply Wall St Community fair value estimates for Home Depot span roughly US$279 to US$370, underscoring how far apart individual views can be. Before you decide where you stand, consider how ongoing cost pressures and cautious guidance may influence the company’s ability to convert its investments in supply chain and Pro growth into sustained earnings power. Explore 2 other fair value estimates on Home Depot - why the stock might be worth as much as 10% more than the current price! Disagree with existing narratives? Extraordinary investment returns rarely come from following the herd, so go with your instincts. A great starting point for your Home Depot research is our analysis highlighting 2 key rewards and 1 important warning sign that could impact your investment decision. Our free Home Depot research report provides a comprehensive fundamental analysis summarized in a single visual - the Snowflake - making it easy to evaluate Home Depot's overall financial health at a glance. Don't miss your shot at the next 10-bagger. Our latest stock picks just dropped: The best AI stocks today may lie beyond giants like Nvidia and Microsoft. Find the next big opportunity with these 16 smaller AI-focused companies with strong growth potential through early-stage innovation in machine learning, automation, and data intelligence that could fund your retirement. Rare earth metals are an input to most high-tech devices, military and defence systems and electric vehicles. The global race is on to secure supply of these critical minerals. Beat the pack to uncover the 28 best rare earth metal stocks of the very few that mine this essential strategic resource. We've uncovered the 12 dividend fortresses yielding 5%+ that don't just survive market storms, but thrive in them. This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Companies discussed in this article include HD. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email [email protected]

Home improvement heavyweights Home Depot HD) and Lowe’s LOW) offered investors another important read on the U.S. consumer and housing market this week after reporting their second-quarter fiscal 2026 results. The reports painted a mixed but relatively consistent picture. Consumers are still spending on their homes, particularly on smaller repairs, maintenance, and necessary projects. At the same time, elevated borrowing costs, housing affordability concerns, and historically weak housing turnover continue to restrain demand for larger discretionary renovations. Home Depot delivered better-than-expected Q2 results and maintained its fiscal 2026 outlook. Lowe’s also remained profitable and generated growth in several strategic areas, but persistent weakness among do-it-yourself (DIY) customers prompted the company to lower its full-year expectations. Home Depot reported Q2 sales of $47.86 billion, up nearly 6% from the year-ago period and topping estimates of $47.23 billion. Total comparable sales increased 1.7%, while U.S. comparable sales advanced 1.3%. Net income reached $4.8 billion, or adjusted earnings of $4.92 per share, which was up 5% YoY and comfortably exceeded EPS expectations of $4.71 by more than 4%. Management characterized demand as broad-based, with 13 of Home Depot’s 16 merchandising departments posting positive comparable sales. Customers remained active in smaller repair and maintenance projects, while the company continued to see strength from its professional customers. Digital sales were another bright spot, increasing 11% YoY. There were also some encouraging signs within big-ticket spending. Transactions above $1,000 increased  2.4% from the prior-year quarter, helped by categories such as portable power and patio. Still, management stressed that larger discretionary home improvement projects remain under pressure. Image Source: Zacks Investment Research Home Depot reaffirmed its FY26 outlook. The retailer continues to expect total sales growth of approximately 2.5% to 4.5%, with comparable sales ranging from flat to 2% growth. Adjusted earnings per share are projected to range from approximately flat to 4% growth from FY25 adjusted EPS of $14.69. The company's guidance incorporates tariff refunds received during the year, which management expects to help offset higher-than-planned fuel, energy, and other product input costs. During Q2, Home Depot received $730 million of IEEPA tariff refunds, with $685 million reducing cost of goods sold during the period. Management expects higher costs to effectively offset the benefit of those refunds over the full fiscal year, helping explain why the company maintained rather than raised its outlook despite stronger-than-anticipated Q2 results. Perhaps more important than the headline numbers was Home Depot's commentary on the economic environment. Management said consumer uncertainty and housing affordability continue to restrict demand for larger projects. Housing turnover, an important driver of home improvement spending because consumers frequently renovate before or after moving, remains exceptionally weak. Home Depot noted that turnover has been stuck near historically low levels for roughly four years. The company has seen signs of housing activity improving when interest rates decline, but said there is no clear inflection point yet. That suggests a meaningful recovery in large-scale remodeling may remain dependent on improved housing affordability and greater transaction activity. That said, Home Depot's results hardly suggest the consumer has stopped spending altogether. Customers continue buying products for repairs, maintenance, and smaller projects, and professional-contractor demand has remained comparatively healthy. The distinction is important as consumers appear to be prioritizing necessity and manageable projects while delaying renovations that require significant financing or larger discretionary commitments. Lowe’s Q2 report reinforced many of the same economic themes, though its updated outlook was more cautious. The company generated Q2 sales of $25.95 billion, up 8% from a year ago but missing expectations of $26.13 billion. Comparable sales increased just 0.2%, with strength in Pro customers, home services and online sales offsetting continued pressure on discretionary DIY spending. Still, online sales jumped almost 16%. Net income was $2.4 billion, while adjusted earnings were up over 1% to $4.40 per share when excluding $96 million of pre-tax expenses related to its Foundation Building Materials and Artisan Design Group acquisitions. The adjusted quarterly EPS figure also included an 11-cent benefit from tariff refunds, with Lowe’s exceeding Q2 earnings expectations of $4.22 per share by just over 4%. CEO Marvin Ellison highlighted Lowe’s continued momentum across the Pro, online, and home-services businesses, but acknowledged persistent weakness in discretionary DIY spending. That remains particularly significant for Lowe’s given its historically greater exposure to the DIY customer. Image Source: Zacks Investment Research Unlike Home Depot, Lowe’s lowered several components of its FY26 forecast after taking first-half results and current demand trends into account. Lowe’s now anticipates total sales of approximately $92 billion (+6% growth), compared with its previous $92-$94 billion range. Comparable sales are expected to be flat versus the prior year, down from the previous expectation of flat to 2% growth. The company now projects an adjusted operating margin of approximately 11.6%, compared with its earlier 11.6%-11.8% range. Full-year adjusted EPS is now forecasted at roughly $12.25, versus the prior range of $12.25-$12.75, and would be down from $12.29 in FY25. The reduction is another indication that the home improvement recovery is developing more slowly than investors may have hoped. Lowe’s continues to gain traction with professional customers and through its digital and home-services initiatives, but those gains are not yet enough to fully counter sluggish discretionary DIY demand. Home Depot emerged from the second quarter with the stronger overall message. Sales and earnings increased, comparable sales were positive, demand broadened across merchandising categories, and management felt comfortable reaffirming its FY26 outlook despite continued housing-market and cost pressures. Lowe’s also showed underlying strengths, particularly in Pro, online and home services, but the company's decision to lower its sales, comparable-sales and earnings outlook highlights greater exposure to the continued pullback in discretionary DIY spending. For investors, the two reports reinforce the idea that the home improvement market has stabilized in several areas but hasn’t entered a broad-based recovery. A healthier housing market could eventually provide a significant catalyst, but consumer demand for large projects remains constrained by affordability and elevated financing costs. Home Depot stock currently lands a Zacks Rank #3 (Hold), while Lowe’s carries a Zacks Rank #4 (Sell). Given the stronger Q2 performance and maintained outlook at Home Depot compared with Lowe’s reduced expectations, HD appears better positioned to navigate the current home improvement environment, although both companies remain highly sensitive to the direction of interest rates, housing turnover, and consumer confidence. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Lowe's Companies, Inc. (LOW) : Free Stock Analysis Report The Home Depot, Inc. (HD) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

As Lowe's Companies, Inc. LOW prepares to unveil its second-quarter fiscal 2026 earnings on Aug. 19, before the opening bell, investors are eager to see if the company can beat market expectations. The Zacks Consensus Estimate for revenues stands at $26.14 billion, implying 9.1% growth from the prior year. Meanwhile, the consensus mark for earnings per share has fallen by a penny to $4.22 over the past seven days, which suggests a 2.5% decline from the year-ago period.LOW has a trailing four-quarter earnings surprise of 2.3%, on average. In the last reported quarter, this Mooresville, NC-based company’s bottom line outperformed the Zacks Consensus Estimate by a margin of 2.4%. Image Source: Zacks Investment Research As investors prepare for Lowe’s second-quarter results, the question looms regarding an earnings beat or miss. Our proven model does not conclusively predict an earnings beat for Lowe’s this time. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. However, that’s not the case here. Lowe’s has a Zacks Rank #4 (Sell) and an Earnings ESP of -0.91%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter. Lowe's Companies, Inc. price-consensus-eps-surprise-chart | Lowe's Companies, Inc. Quote Lowe’s second-quarter performance is likely to have benefited from sustained demand, backed by focused merchandising and promotional execution. The company entered the quarter with strength in lawn and garden and other outdoor categories and planned to keep value and innovation at the center of its offers. A broad assortment of leading brands, healthy in-stock positions and convenient delivery options may have helped Lowe’s convert seasonal traffic across stores and digital channels. Management also highlighted the continued rollout of workwear and pet assortments, which could have provided an incremental sales opportunity during the quarter.We believe continued momentum in Lowe’s Total Home strategy may also have supported the quarter. The Pro business remained a key area of strength, with small- and medium-sized professional customers continuing to engage in repair and maintenance projects despite the difficult housing backdrop. Investments in Pro Extended Aisle, localized assortments, improved fulfillment and digital tools have expanded the company’s ability to serve these customers while simplifying the purchasing process. At the same time, enhancements to online shopping, same-day delivery and the MyLowe’s loyalty platforms are likely to have encouraged customers.Home services and operational improvements may have provided another layer of support. Lowe’s continued to gain traction with installation and replacement projects, particularly in categories where customers value speed, convenience and professional service. Appliances also remained well positioned because of the company’s broad brand assortment, omnichannel capabilities and fast delivery and installation network. Productivity initiatives across stores and the supply chain — including AI-enabled associate tools, faster replenishment and efforts to improve product availability — may have helped Lowe’s maintain service levels and capture demand more efficiently. The integration of Foundation Building Materials and Artisan Design Group also offered opportunities for procurement efficiencies and cross-selling while extending Lowe’s reach with professional and construction customers.That said, Lowe’s is likely to have continued to face pressure from the broader home improvement environment. Elevated interest rates, high housing costs and subdued housing turnover have kept DIY demand under strain, particularly for larger discretionary projects, while lower-income consumers have remained cautious. These demand challenges were compounded by cost pressures, including higher transportation expenses and inflation in fuel and commodity-based products. Lowe’s, which competes with The Home Depot, Inc. HD and Floor & Decor Holdings, Inc. FND, has seen its shares decline 0.6% over the past three months against the industry’s rise of 9.6%. Shares of Home Depot and Floor & Decor Holdings have advanced 12.1% and 28%, respectively. Image Source: Zacks Investment Research Lowe’s valuation remains discounted relative to the industry. The stock currently trades at a forward 12-month P/E multiple of 16.64, below the industry average of 19.63. LOW is also trading below its own 12-month median P/E of 18.66, suggesting that the stock remains attractively valued relative to the industry and its recent historical range.Lowe’s is trading at a discount to Home Depot (with a forward 12-month P/E ratio of 21.59) and Floor & Decor (26.24). Image Source: Zacks Investment Research Lowe’s enters the second-quarter earnings release with a mixed setup. Strength in Pro, online, home services and ongoing productivity initiatives could support sales, while its relatively attractive valuation may appeal to long-term investors. However, persistent weakness in discretionary DIY demand, housing-market pressures and elevated operating costs remain meaningful concerns. More importantly, the current earnings setup does not point convincingly toward an earnings beat, which limits the case for taking an aggressive position ahead of the report. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Lowe's Companies, Inc. (LOW) : Free Stock Analysis Report The Home Depot, Inc. (HD) : Free Stock Analysis Report Floor & Decor Holdings, Inc. (FND) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research